Sales Promotions Chapter 12 Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall...

Sales Promotions

Chapter 12

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 12-1

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?


Sales Promotions and Hook Fans

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Corpus Christi Hooks – Double A Affiliate of Houston Astros

Attendance – 7,000 per game Thrives on consumer promotions

30 promotional nights (72 home games)

Discounts and giveaways Sponsorships and trade promotions Whataburger Field “Postgame catch” and “Kids Day”

Fun, family entertainment

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Chapter Overview


• Consumer promotions Individuals/businesses that use

product

• Trade promotions Directed to channel members

• Possible erosion of brand equity• Can differentiate a brand• Use varies – product life cycle

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Consumer Promotions

• Coupons• Premiums• Contests and sweepstakes• Refunds and rebates• Sampling• Bonus packs• Price-offs


Coupons


• 323 billion distributed• 3 billion redeemed (0.93%)• Average value was 89 cents• Savings of $3.47 billion• Coupon usage

78% of households use 64% willing to switch brands

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Coupon Usage

• Always – 20.7%• Sometimes – 37.7%• Rarely – 17.0%• Never – 24.6%



Influencing Brand Purchases

• Sampling7.78

• Word-of-mouth7.18

• Coupons 5.91• Advertising

5.61• Contests

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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).

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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

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Types of Coupons

• Instant redemption• Bounce back• Scanner-delivered• Cross-ruffing• Response offer


Coupon Redemption Rates


• Instant redeemable 39.3%• Bounce-back 17.2%• Instant redeemable – cross ruff 17.1%• Electronic shelf 10.2%• Electronic checkout 7.8%• In-pack 5.8%• On-pack 4.7%• Direct mail 3.5%• Handout 3.1%• Free-standing inserts 1.3%

Type of coupon Percent Redeemed

Source: Santella & Associates

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Problems with Coupons


• Reduced revenues Used by brand preference

consumers (80%) “Necessary evil”

• $500 million illegally redeemed Mass cutting Counterfeiting

• Misredemption

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• Free-in-the-mail• In- or on-package• Store or manufacturer• Self-liquidating


Premiums

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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 Require skill

• Sweepstakes Random chance

• Rewards Extrinsic Intrinsic


Contests and Sweepstakes

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Goals ofContests and Sweepstakes


• Coordinate with other marketing

• Encourage customer traffic Boost sales - questionable

• Intrinsic rewards draw customers back

• Increase in brand awareness

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Refunds and Rebates

• Refunds – soft goods• Rebates – hard goods• Hassle to redeem• Now expected by consumers• Redemption rates

30% overall 65% for rebates over $50

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• In-store distribution• Direct sampling• Response sampling• Cross-ruffing sampling• Media sampling• Professional sampling• Selective sampling


Sampling

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Benefits of Sampling


• Introduce new products

• Generate interest• Generate leads• Collect information• Internet sampling• Boost sales

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Sampling Programs


• Problems Cost Distribution

• Effective sampling Component of IMC plan Stimulate trial usage Target audience of sample

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• Increase usage of product• Match or preempt competition• Stockpiling of product• Develop customer loyalty• Attract new users• Encourage brand switching


Bonus Packs

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Price-Offs

• Temporary price reduction• Stimulating sales• Reduces financial risk• Brand switching• Stockpiling

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Price-offs


• Proven to be successful Appeal of monetary savings Reward is immediate

• Problems Can have a negative impact on

profit Encourages consumers to become

more price-sensitive Potential image on brand image

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Promotion Combinations

• Overlay

• Intra-company tie-in

• Inter-company tie-in


Planning Consumer Promotions

• Types of consumers Promotion prone Brand loyal Price sensitive

• Retailer incentives Increase store traffic Increase store sales Attract 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 allowance Price discount 35% of all trade dollars

•Slotting fees•Exit fees

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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

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Trade AllowanceComplications


• Failure to pass allowances on to retail customers Only occurs 52% of the time Retailers like only one brand on-deal at a time

• Retailers can schedule and promote on-deal brands

• Forward buying Pass savings on or pocket higher margin Additional carrying costs

• Diversion Pass savings on or pocket higher margin Additional shipping costs

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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.

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Trade Incentives

• Cooperative merchandising agreement

• Premium or bonus pack

• Co-op advertising programs

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Cooperative Merchandising Agreement


• Formal agreement• Popular with manufacturers

Retailer must perform marketing functions

Manufacturer maintains control Longer-term commitments

• Benefit retailers Schedule calendar promotions

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Cooperative Advertising


• Manufacturer pays part of retailer’s ad costs

• Retailer must follow specific guidelines No competing brands

• Retailers accrue monies Amount is based on sales

• Allows retailers to expand advertising• Manufacturers gain exposure in local

markets

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Trade Shows

• Few deals finalized at trade show• International attendees want to make

deals• Increase in international trade shows• National shows being replaced by

regional and niche shows• Niche shows

Provide better prospects Lower costs

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Trade Show Attendees

• Education seekers• Reinforcement seekers• Solution seekers• Buying teams• Power buyers


Concerns of Trade Promotions


• Corporate reward structure• Used for short-term sales goals.• Tend to be used outside of IMC Plan.• Costs• Over-reliance to push merchandise.• Difficult to reduce – competitive

pressures• Potential erosion of brand image.

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Sales Promotions Chapter 12 Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall...

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