Sales Promotion

• To understand the role of sales promotions in a company’s integrated marketing communications program and to examine why it is increasingly important
• To examine the objectives, strategy, and tactical components of a sales promotion plan
Chapter 12 : Sales Promotion

• To examine the consumer and trade sales promotion strategy options and the factors to consider in using them
• To understand key IMC issues related to salespromotion decisions
Chapter 12 : Sales Promotion

• A direct inducement that offers an extra value or incentive to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.
• An acceleration tool, designed to speed up the selling process and maximizes sales volume.
• Can be targeted to different parties in the marketing channel.
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• The growing power of retailers
– New developments have transferred power from manufacturers to retailers
• E.g.: Optical checkout scanners, in-store computers
• Declining brand loyalty
– Loyal coupon users will look for deals instead of buying the same brand
• Increased promotional sensitivity
– Consumers respond favourably to the incentives new marketing programs are providing
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• Brand proliferation.
– Saturated markets depend on sale promotions to attract consumers to new products.
• Fragmentation of the consumer market.
– Promotions are being tailored to specific regional market.
• Short-term focus.
– Used to reach quarterly or yearly sales targets.
• Increased accountability.
– Ways to relate promotional expenditures to sales and profitability.
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• Competition.
– Development of account-specific marketing.
• Clutter.
– Promotion has to be able to catch consumers attention.
• Reaching a specific target audience.
– Certain sales promotion tools reach specific geographic, demographic, and psychographic markets.
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• Trial purchase
– Important in new brand strategies
– Attract users of a competing brand
• Repeat purchase
– Incentives such as coupons encourage repeat purchase after trial
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• Increasing consumption
– Incentives can create interest to help defend against competitors
• Support IMC program/build brand equity
– Draw attention to advertisements
– Builds relationships with consumers
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• Sales promotion strategy options
– Franchise-building Characteristic
• Communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity
– Nonfranchise-building characteristic
• Designed to accelerate the purchase decision process and generate an immediate increase in sales
– Incentive characteristic
• The incentive the consumer receives can either be immediate or delayed
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• Application across product lines
– The degree to which each sales promotion tool is applied to the range of sizes, varieties, models or products
– 3 important product decisions:
• Should the sales promotion be run on the entire line or on individual items?
• If selective applications (individual items) which items?
• Should the sales promotion be run on “regular” stock or some other special version?
• Application across geographic markets
– National or select markets
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• Value of incentive
– Economic
• Price premium
• Discount
– Non-economic
• Collectables
• Limited edition items
• Timing
• Distribution
Chapter 12 : Sales Promotion

• Sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial.
• Criteria for an effective sampling program:
– Products are of relatively low unit value
– Products are divisible
– Purchase cycle is relatively short
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• Strengths:
– Excellent way to induce a prospective buyer to try a product or service.
– Consumers experience the brand directly, gaining a greater appreciation for its benefits.
• Limitations:
– The brand must have some unique or superior benefits for a sampling program to be worthwhile.
– The benefits of some products are difficult to gauge immediately and large affordable samples may be required to encourage appreciation of the brand
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• Door-to-door sampling
• Sampling through media
• Sampling through the mail
• In-store sampling
• On-package sampling
• Event sampling
• Direct sampling
• Location sampling
• The Internet
• Creative approaches
Chapter 12 : Sales Promotion

• The oldest, most widely used, most popular and most effective sales promotion tool
• Coupons have been around since 1895
• In recent years they have become increasingly popular
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• Coupons make it possible to offer a price reduction to consumers who are price-sensitive.
• Coupons make it possible to reduce the retail price of a product without relying on retailers for cooperation.
• Coupons reduce the consumer’s perceived risk and encourage repurchase after initial trial.
• Encourage nonusers to try a brand, repeat purchase among current users, and promote new, improved product versions.
Chapter 12 : Sales Promotion

• It can be difficult to estimate how many consumers will use a coupon and when.
• It is difficult to prevent coupons from being used by consumers who already use a brand when using the coupons to attract new users.
• Low redemption rates.
• High costs.
• Coupon misrepresentation or fraud.
Chapter 12 : Sales Promotion

• Redemption of coupon by consumers for a product or size not specified on the coupon.
• Redemption of coupons by salesclerks in exchange for cash.
• Gathering and redemption of coupons by store managers or owners without the accompanying sales of the product.
• Gathering or printing of coupons by criminals who sell them to unethical merchants, who redeem them.
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• Distribution through newspaper
– freestanding inserts (FSI)
• Direct mail
• Newspapers/magazines as couponing vehicles
• Inside or outside of package
– bounce-back coupon
– cross-ruff coupon
– instant coupon
• In-store couponing
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• A premium is an offer of an item of merchandise or service either free or at a low price that is an extra incentive for purchasers.
– Free premiums
• Usually small gifts or merchandise included in the product package or sent to consumers who mail in a request along with a proof of purchase.
– Self-liquidating premiums
• Require the consumer to pay some or all of the costs of the premium plus handling and mailing costs.
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• A contest is a promotion where consumers compete for prizes or money on the basis of skills or ability. The company determines winners based on predetermined criteria and a purchase incentive is usually provided.
• A sweepstakes is a promotion where winners are determined purely by chance; it cannot require a proof of purchase or purchase incentive as a condition for entry.
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• Many sweepstakes and/or contest promotions do little to contribute to consumer building and may even detract from it.
• The sweepstakes or contest often become the dominant focus rather than the brand.
• Numerous legal considerations affect the design and administration of contests and sweepstakes.
• Participation by professionals or hobbyists who submit many entries but have no intention of purchasing the product or service.
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• Offers by the manufacturer to return a portion of the product purchase price, usually after the consumer supplies some proof of purchase.
• Consumers are usually very responsive to these offers, particularly as the size of the savings increase.
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• Strengths:
– Help create new users
– Encourage brand switching or repeat purchases
• Limitations:
– Many consumers are not motivated by a refund offer because of delay and effort
– Consumers perceive manufacturers as offering rebates to sell products that are not faring well
– When small refunds are being offered, marketers may find other promotional incentives more effective
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• Bonus packs offer the consumer an extra amount of a product at the regular price by providing larger containers or extra units.
• Bonus packs result in a lower cost per unit for the consumer and provide extra value as well as more product for the money.
Chapter 12 : Sales Promotion

• The price-off deal reduces the price of the brand.
• Typically offered right on the package through specially marked price packs.
• Can encourage consumers to purchase larger quantities, preempting competitors’ promotions and leading to greater trade support.
Chapter 12 : Sales Promotion

• Continuity or loyalty programs.
• Commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers.
• Viewed by marketers as a way to develop strong consumer loyalty.
Chapter 12 : Sales Promotion

• Event marketing is a type of promotion where a company or brand is linked to an event or where a themed activity is developed for the purpose of creating experiences for the consumers and promoting a product or service.
– An event sponsorship is an integrated marketing communications activity where a company develops actual sponsorship relations with a particular event and provides financial support in return for the right to display a brand name, logo or advertising message and be identified as a supporter of the event.
Chapter 12 : Sales Promotion

• Obtain Distribution of New Products
– trial purchase objective
• Maintain Trade Support for Established Products
– repeat purchase objective.
• Build Retail Inventories
– repeat purchase objective.
• Encourage Retailers to Display Established
Brands
– consumer sales promotion objective.
Chapter 12 : Sales Promotion

• Contests and Incentives
• Trade Allowances
– Buying, Promotional, Slotting
• Displays and Point-of-Purchase Materials
• Sales Training Programs
• Trade Shows
• Cooperative Advertising
– Horizontal, Ingredient-sponsored, Vertical
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• Budget Allocation
• Creative Themes
• Media Support
• Strategic Role
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• Figure 12-7
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• Figure 12-8
Chapter 12 : Sales Promotion