Sales Promotions Chapter 12. Chapter Objectives 1. What are the two main categories of sales...
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Transcript of Sales Promotions Chapter 12. Chapter Objectives 1. What are the two main categories of sales...
Sales PromotionsChapter 12
Chapter Objectives
1. What are the two main categories of sales promotions and how do they differ?
2. What are the advantages and disadvantages of the various types of consumer promotions?
3. What are the major categories of trade promotions and how are they used?
4. How can a marketing team tie consumer promotions to trade promotions and other elements of the promotional mix?
5. What are the potential limitations when sales promotions programs are being developed for international customers?
Chapter Overview
Consumer promotionsIndividuals that use
productTrade promotions (read on your
own)Directed to channel
membersPossible erosion of brand equityCan differentiate a brandUse varies – product life cycle
PromotionsO Sales promotion is any
initiative undertaken by an organization to promote an increase in sales, usage or trial of a product or service
O Sales promotions are varied.
Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs
Three Steps to Effective Sales Promotions
OWhen done correctly, promotions get customers out of a holding pattern by giving them an incentive to take action before a limited-time offer expires.
1. Target your effortO Promotions can spur purchases by
O established customers, O reel in new customers, O draw customers from competitors, O get current customers to buy differently,
and stimulate business during slow periods. O Rarely can one promotion accomplish all of
those objectives at once. O As a result, advertisers must decide which of
the following is most important so that they can target efforts
What do you want customers to do?
O purchase more frequently, O buy in greater volume, or O be attracted to new or different offeringsO Lure new customers into your business?O Lapsed customers to give your business
another try?O Boost business during slow hours,
weekdays or particular seasons?
2. Plan Your Incentive
OPrice savings, including discounts, coupons or added value offers
OSamples or trial offers to provide a low-risk way to try new products or services
OEvents or experiences to generate crowds, enthusiasm, sales, publicity
3. Know what you want to Achieve
O Work well when consumers are in need of a jolt to take buying action. O Set the number of sales you want to ring
up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve.
O Then determine what your desired change will mean financially to your business.
Coupons
323 billion distributed3 billion redeemed (0.93%)Average value was 89 centsSavings of $3.47 billionCoupon usage
78% of households use 64% willing to switch brands
Coupons
Influencing Brand Purchases
Sampling 7.78 Word-of-mouth 7.18
Coupons 5.91 Advertising 5.61 Contests 1.24
On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer.
Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).
Coupon Distribution Print media (90%)
FSI (88%) Direct mail On- or in-package In-store Sampling Scanner-delivered Cross-ruffing Response offer Internet Fax Sales staff
Types of Coupons
Instant redemption Bounce back Scanner-delivered Cross-ruffing Response offer
Problems with Coupons
Reduced revenuesUsed by brand preference
consumers (80%)“Necessary evil”
$500 million illegally redeemedMass cuttingCounterfeiting
Misredemption
Premiums
Free-in-the-mail In- or on-package Store or manufacturer Self-liquidating
12-18
In-Mail/Proof of Purchase
Keys to Successful Premiums Match premium to target
market Carefully select the premium Pick premium that reinforces
product and image Integrate premium with other
IMC tools Don’t use premiums to
increase short-term profits
Contests and Sweepstakes
ContestsRequire skill
SweepstakesRandom chance
Sweepstakes
Refunds and Rebates
12-26
Refunds – soft goodsRebates – hard goodsHassle to redeemNow expected by consumersRedemption rates
30% overall65% for rebates over $50
Sampling
In-store distribution Direct sampling Response sampling Cross-ruffing sampling Media sampling Professional sampling Selective sampling
Benefits of Sampling
Introduce new productsGenerate interestGenerate leadsCollect informationInternet samplingBoost sales
Sampling Programs
ProblemsCostDistribution
Effective samplingComponent of IMC planStimulate trial usageTarget audience of sample
Bonus Packs Increase usage of product Match or preempt competition Stockpiling of product Develop customer loyalty Attract new users Encourage brand switching
12-32
Bonus Pac Tie-In with Coupon & Reward Program
Disney
Price-Offs
12-35
Temporary price reduction
Stimulating sales
Reduces financial risk
Brand switching
Stockpiling
Price-offsProven to be successful
Appeal of monetary savingsReward is immediate
ProblemsCan have a negative impact
on profitEncourages consumers to
become more price-sensitivePotential image on brand
image
Planning Consumer Promotions Types of consumers
Promotion proneBrand loyalPrice sensitive
Retailer incentives Increase store traffic Increase store salesAttract new customers Increase basket size
IMC Plan
Trade Promotions
Types of trade promotions Trade allowances Trade contests Trade incentives Trade shows
For manufacturers, trade promotions Accounts for 70% of marketing budget Often 2nd largest expense Accounts for 17.4% of gross sales
Trade Allowances
Off-invoice allowancePrice discount35% of all trade dollars
Slotting feesExit fees
Slotting Fees
Retailer justification Cost to add new products to inventory Requires shelf space Simplifies decision about new products Adds to bottom line
Manufacturer objections Form of extortion Divert money from advertising and
marketing Detrimental to small manufacturers
Trade AllowanceComplications
Failure to pass allowances on to retail customersOnly occurs 52% of the timeRetailers like only one brand on-deal at a
timeRetailers can schedule and promote
on-deal brandsForward buying
Pass savings on or pocket higher marginAdditional carrying costs
DiversionPass savings on or pocket higher marginAdditional shipping costs
Trade Contests
Used to achieve sales targets.Funds known as “spiff money.”Rewards can be prizes or cash.Can be designed for various channel
members.Some organizations do not allow
trade contests because of possible conflict of interests.
Trade Incentives
Cooperative merchandising agreement
Premium or bonus pack
Co-op advertising programs
Cooperative Merchandising Agreement
Formal agreementPopular with manufacturers
Retailer must perform marketing functions Manufacturer maintains control Longer-term commitments
Benefit retailers Schedule calendar promotions
Cooperative AdvertisingManufacturer pays part of retailer’s ad
costsRetailer must follow specific guidelines
No competing brandsRetailers accrue monies
Amount is based on salesAllows retailers to expand advertisingManufacturers gain exposure in local
markets
Trade Shows
Few deals finalized at trade showInternational attendees want to
make dealsIncrease in international trade showsNational shows being replaced by
regional and niche showsNiche shows
Provide better prospectsLower costs
Trade Show Attendees
Education seekers Reinforcement seekers Solution seekers Buying teams Power buyers
Concerns of Trade PromotionsCorporate reward structureUsed for short-term sales goals.Tend to be used outside of IMC Plan.CostsOver-reliance to push merchandise.Difficult to reduce – competitive
pressuresPotential erosion of brand image.