4550: Promotion Strategy II4550: Promotion Strategy II

Professor Campbell2/24/05

Plan for the DayPlan for the Day

• Consumer promotions– Online promotions

– Testing

• Trade promotions

• Putting promotions in perspective

Online PromotionsOnline Promotions

• Advantages+ Real-time tracking

+ Message execution+ Product movement+ Easily/fast modification

+ Data capture

+ Follow-up opportunities

+ Costs+ Reach & Frequency+ Redemption

+ Friendly target?

Online Promotions, continued...Online Promotions, continued...

• Disadvantages:– Response rate prediction

– Lack of “real” consumer interest

– Often does not build equity

• Usage

Questions for Online PromotionsQuestions for Online Promotions

• Does this NEED to be online?– (to meet objective)

• Is this something that will work better online than in traditional media?

• What does this say about the brand?

Testing PromotionsTesting Promotions

• Is the promotion offer being processed by target consumers as intended to meet communication goals?

• How does the promotion affect brand equity?– Consumers’ attributions for the

promotion need to be understood

Trade PromotionsTrade Promotions

• Promotions (ie, short-term incentive) targeted to some member of the channel of distribution– Should be based on well-defined,

specific objectives

– Should have measurable goals

Trade Promotions: ObjectivesTrade Promotions: Objectives

Trade PromotionsTrade Promotions

• Point-of purchase displays

• Trade deals/ Buying allowances– Price-offs/ Off-invoice– Free goods– Slotting allowances

• Dealer loaders

• Comarketing– Co-op Ads– Account Specific Promotions

• Market Development Funds

• Dealer contests & incentives– Push $$/Spiffs

Price-offsPrice-offs

• Advantages+Quick implementation+Evoke strong response and fast

response

• Disadvantages– Cost– Short-term impact– Does not help brand equity and can

hurt it

• Usage» Short-term competitive response

Tradeoffs among PromotionsTradeoffs among Promotions

Manufacturer Factors

Pass ThroughUnplanned CostsAbility to Forecast CostsLead TimeSource of OfferImmediacy of ImpactAdded Cost to RetailerEffect on Brand Equity

Consumer Factors

Timing of RewardConsumer EffortImpulse of Planned?# of Units can Purchase% Regular Users

Price Reductions

UnsureIncomplete PassLowShortRetailerHighShelf TalkerNegative

ImmediateLowImpulseYesModerate

Bonus Packs

YesResidual StockModerateLongManufacturerModerateHandlingDepends

ImmediateLowImpulseYesModerate

Coupons

YesMisredemptionHighModerateManufacturerLowCheckout TimeDepends

DelayedModeratePlannedNoHigh

Trial Sizes

YesResidual StockModerateLongManufacturerModerateIn-Store HandlingDepends-Neutral

ImmediateLowImpulseYesLow

Generalizations about Promotion TypesGeneralizations about Promotion Types

AdvertisingAdvertising

Franchise BuildingFranchise Building

Brand Benefit EmphasisBrand Benefit Emphasis

High Marketer ControlHigh Marketer Control

Pull StrategyPull Strategy

Longer-Term ImpactLonger-Term Impact

Investment FinancingInvestment Financing

Long Time HorizonLong Time Horizon

Image orientedImage oriented

Consumer Consumer PromotionPromotion Trade Trade

PromotionPromotionNon-franchise BuildingNon-franchise Building

Price EmphasisPrice Emphasis

Low Marketer ControlLow Marketer Control

Push StrategyPush Strategy

Short-Term ImpactShort-Term Impact

Pay-as -You-Go FinancingPay-as -You-Go Financing

Shorter Time HorizonShorter Time Horizon

Action orientedAction oriented

PromotionsPromotions

• Usage of promotions grew dramatically during the ‘80’s and early ‘90’s– 60% of consumer goods firms were spending

more on promotions than ads

– 80% of consumers made use of promotions

• Trend then began reversing– 1991 - average of 47% of budget went to

promotions

– 1995 - average of 44% of budget went to promotions

• Now appears to be increasing again– Retailer power & expectations

LimitationsLimitations

Other “Promotions”Other “Promotions”

• Because of limitations, promotion expenditures are increasingly going to non-sales promotions, e.g., event sponsorship– Global trend

– Consistent with “micro-marketing,” “relationship marketing”

Setting the Marketing Communications MixSetting the Marketing Communications Mix• Decide on target market and

marketing communications objectives – What effect do you want to have on

the consumer?

• Then decide which communications tools appear to be the best for achieving the desired effects

What can we do to Generate Trial?What can we do to Generate Trial?

What can we do to Generate Usage? What can we do to Generate Usage?

Think about Brand BuildingThink about Brand Building

• Non-Brand-Building Promos– Accelerate purchase process and

generate an immediate increase in sales

• Brand-Building Promo– Communicate brand attributes and

contribute to the development and reinforcement of brand identity

Base the marketing Base the marketing communications mix communications mix on consideration of on consideration of the communications the communications objectives and how objectives and how best to achieve thembest to achieve them

In Conclusion...In Conclusion...

• Some promotions are likely to be necessary– Consumer: may be the best route to

objectives– Trade: may be best route to objective

but also may not have much latitude

• Interest should be in incremental sales (versus short terms spikes in the sales curve)

• Promotions (like everything else!) should be considered in terms of likely effects on brand equity

Conclusion, continued…Conclusion, continued…

• Advertising and promotion work together– Prior attitude-building advertising

creates higher perceived value from a brand’s promotion

– Prior attitude-building advertising creates resistance in the consumer to other brand’s promotional activities

• Synergies among marketing communications activities can make or break the overall plan.