Sales Promotion Chapter 18 Ch 18: Sales Promotion 2 Sales Promotion Using incentives to create a...

Sales Promotion

Chapter 18

Ch 18: Sales Promotion 2

Sales Promotion

• Using incentives to create a perception of greater brand value

• Consumer Market– Induce household consumers to purchase a firm’s

brand

• Trade-Market– Motivate distributors, wholesalers, and retailers to

stock and feature a brand

• Business Buyer– Cultivate buyers in large corporations who make

purchase decisions


Sales Promotion Examples

Coupons

Price-off deals

Premiums

Contests

Sampling

Sweepstakes

Brand placements

Incentives

Loyalty Programs

Trade Shows

AllowancesGift Cards


Importance of Sales Promotion

• $100 billion in 2000• Growth rate: 9 – 12 percent• Reasons for growth:

– Demand for accountability– Short-term orientation– Consumer response to promotions– Proliferation of brands– Increased power of retailers– Media clutter


Objectives for Consumer-Market Sales Promotion

1. Stimulate trial purchase

2. Stimulate repeat purchases

3. Stimulate larger purchases

4. Introduce a new brand

5. Combat or disrupt competitors

6. Contribute to IMC


Consumer-Market Sales Promotion Techniques

1. Coupons 2. Price-off deals

3. Premiums 4. Contests/sweeps

5. Samples & trials 6. Phone gift cards

7. Brand placements 8. Rebates

9. Frequency programs

10.Event sponsorship

Coupons are the most widely used form of consumer sales promotion

Coupons are the most widely used form of consumer sales promotion


Coupons

• Entitles a buyer to a price reduction for a product or service

• Advantages– Give a discount to price sensitive

consumer while selling product at full price to others

– Induce brand switching– Timing and distribution can be controlled– Stimulates repeat purchases– Gets regular users to trade up within a

brand array


Coupons

• Disadvantages– Time of redemption cannot be

controlled– No way to prevent current customers

from redeeming coupons– Coupon programs require costly

administration– Fraud is a serious, chronic problem


Price-Off Deals• Offers consumer reduced price at

point of purchase through specially marked packages

• Advantages– Controllable by manufacturer– Can effect positive price comparisons– Consumers believe it increases value

of a known brand

• Disadvantage– Retailers believe it creates inventory

and pricing problems


Premiums and Advertising Specialties

• Premiums: free or at a reduced price with another purchase

• Free premiums provide item at no cost

• Self-liquidating premiums require consumers to pay most of the cost of the item

• Advertising specialties:– A message placed on a free, useful

item

Premiums attract attention to a brand and offer the consumer something for free

Premiums attract attention to a brand and offer the consumer something for free


Contests and Sweepstakes• Contests: consumers compete for prizes

based on skill or ability.• Sweepstakes: winners picked by chance• Both create excitement and interest • But . . .

– Legal and regulatory requirements are complex

– Consumers may focus on the game rather than the brand

– Difficult to get an IBP message across in a game


Samples and Trial Offers• Sampling: Giving consumer an

opportunity to use a brand on a trial basis with little or no risk

• Types of sampling– In-store Newspaper– Door-to-door On-package– Mail Mobile

• Trial offers– Used for more expensive items– Consumer tries product for a fixed time


Phone and Gift Cards• Manufacturers offer either for free

or for purchase debit cards– with phone time– or preset spending limits

• Examples include offers from Lexus, Oldsmobile, and The Gap.


Rebates• Money back offer requiring the buyer to

mail a request for money back from the manufacturer

• Often tied to multiple purchases• Many consumers fail to bother sending

the request


Frequency Programs

• Also known as continuity programs

• Offers customers discounts or free products for repeat patronage

• Common in airline, travel, and restaurant businesses


Event sponsorship

• When a firm sponsors or cosponsors an event, the brand gains credibility with the event audience

• Now the fourth most popular form of promotion in U.S.

• Most preferred venue: sporting events

Sales Promotion Directed at Trade and Business Buyers

• Objectives:Use a “push” strategy: Push the product into the distribution channel to the consumer– Obtain initial distribution– Increase order size– Encourage cooperation with consumer

market sales promotions– Increase store traffic



Trade-Market Sales Promotion Techniques

• Point-of-purchase displays• Incentives: Push money

• Allowances: Merchandise allowances, slotting fees, bill-back allowances, off-invoice allowances

• Sales Training Programs• Cooperative (Co-Op) Advertising


Business Market Sales Promotion Techniques

• Trade Shows• Business gifts• Premiums and advertising specialties• Trial offers• Frequency programs

Trial offers are very effective in the business market. Why?

Trial offers are very effective in the business market. Why?


Sales Promotion, the Internet, and New Media

• Big tech companies give away their products

• Sampling removes risk associated with consumer trial

• Internet firms use incentives to make Web sites “sticky”

• Internet is used to implement sales promotions


Risks of Sales Promotion

• Create a price orientation

• Borrow from future sales

• Alienate consumers

• Time and expense

• Legal considerations


Coordination Challenge

• Message coordination

• Media coordination

• Research conclusions-Short term effects can be dramatic-Short term effects are often not profitable-Rare for long-term effects to occur-Most power effects result from advertising and sales promotion being used together

Sales Promotion Chapter 18 Ch 18: Sales Promotion 2 Sales Promotion Using incentives to create a...

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