McGraw-Hill/Irwin 16-2Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Sales Promotion
•An extra incentive to buy
•An inducement to intermediaries
•Targeted to different parties
“A direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.”
McGraw-Hill/Irwin 16-3Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Sales Promotion Vehicles
Consumer-Oriented
Samples
Coupons
Premiums
Contests/sweepstakes
Refunds/rebates
Bonus packs
Price-offs
Event sponsorship
Trade-Oriented
Contests, dealer incentives
Trade allowances
Point-of-purchase displays
Trading programs
Trade shows
Cooperative advertising
McGraw-Hill/Irwin 16-4Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Long-Term Allocations to Advertising, Trade Promotions and Consumer Promotions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Consumer Promotions
Media Advertising
Trade Promotions
Percent of total promotional dollars, 3-year moving average.
McGraw-Hill/Irwin 16-5Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Reasons for Increase inSales Promotion
•Growing Power of Retailers•Declining Brand Loyalty• Increased Promotional Sensitivity•Brand Proliferation•Fragmentation of Consumer Markets•Short-Term Focus• Increased Accountability•Competition•Clutter
McGraw-Hill/Irwin 16-6Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Sales Promotion Uses
• Introduce new products•Get existing customers to buy more•Attract new customers•Combat competition•Maintain sales in off season• Increase retail inventories•Tie in advertising and personal selling•Enhance personal selling efforts
McGraw-Hill/Irwin 16-7Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
• CFB Promotional Objectives• Communicate distinctive brand attributes• Develop and reinforce brand identity• Build long-term brand preference
• CFB Techniques and Practices• “Frequency” programs encourage repeat purchase• “Frequency” programs encourage patronage loyalty• Offers consistent with brand or store image . . .
• Reinforce brand or store identity• Define store or brand “personality”• Reveal brand or service attributes or benefits• Engage participants though active involvement
Consumer Franchise-Building(CFB) Promotions
McGraw-Hill/Irwin 16-8Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Nonfranchise-Building(non-FB) Promotions
• Non-FB Promotional Objectives• Accelerate the purchase decision process• Generate an immediate sales increase
• Non-FB Promotions . . .• Do not identify unique brand features• Do not contribute to brand identity or image• Non-FB Promotions may include . . .
• Price-off deals• Bonus packs• Rebates or refunds
• Non-FB Promotions shortcomings• Trade promotions benefits may not reach
customers• If they do, they may lead only to price reductions• Customers may “buy price” rather than brand equity
McGraw-Hill/Irwin 16-9Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Objectives of Consumer-Oriented Sales Promotion
•To Obtain Trial and Purchase
•To Increase Consumption of an Established Brand
•To Defend (Maintain) Current Customers
•To Target a Specific Segment
McGraw-Hill/Irwin 16-10Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Percentage of Promotions Vehicles Used by Package Goods Manufacturers, 1997
0%
25%
50%
75%
100%
Mon
ey b
ack
offe
rs/o
ther
ref
unds
Cou
poni
ng c
onsu
mer
dire
ct
Cen
ts-o
ff p
rom
otio
ns
Cou
poni
ng in
ret
aile
rs' a
ds
Cou
poni
ng in
sto
re
Sam
plin
g ne
w p
rodu
cts
Sam
plin
g es
tabl
ishe
d pr
oduc
ts
Pre
miu
m o
ffer
s
Ele
ctro
nic
reta
il pr
omot
ions
Sw
eeps
take
s
Inte
rnet
pro
mot
ions
Con
test
s
Pre
pric
ing
on p
acka
ge
Oth
er
McGraw-Hill/Irwin 16-11Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Percentage of Promotions Vehicles Used by Package Goods Manufacturers, 1997
0%
25%
50%
75%
100%
Mon
ey b
ack
offe
rs/o
ther
ref
unds
Cou
poni
ng c
onsu
mer
dire
ct
Cen
ts-o
ff p
rom
otio
ns
Cou
poni
ng in
ret
aile
rs' a
ds
Cou
poni
ng in
sto
re
Sam
plin
g ne
w p
rodu
cts
Sam
plin
g es
tabl
ishe
d pr
oduc
ts
Pre
miu
m o
ffer
s
Ele
ctro
nic
reta
il pr
omot
ions
Sw
eeps
take
s
Inte
rnet
pro
mot
ions
Con
test
s
Pre
pric
ing
on p
acka
ge
Oth
er
McGraw-Hill/Irwin 16-12Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Eight Sampling Media
•Door-to-door•Direct mail•Central location• In-store sample pack•Cross-product sampling•Co-op package distribution•With newspaper / magazine•Any of above with coupon
McGraw-Hill/Irwin 16-13Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
OtherMagazinesIn / On PackDirect MailNewspaper CoopNewspaper ROPFreestanding
Coupon Distribution
McGraw-Hill/Irwin 16-14Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
43%
35%
29%
25%
24%
20%
12%
11%
8%
7%
2%Gum
Candy
Carbonated Beverages
Adult Cold Remedies
Pet Food
Coffee
Sanitary Protection
Deodorants
Liquid Detergents
Ready-to-Eat Cereal
Disposable Diapers
Percent of Sales Boughtwith Coupons
McGraw-Hill/Irwin 16-15Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Coupon Fraud
•Consumers redeem without purchase
•Clerks and staff exchange for cash
•Managers/owners redeem without sale
•Criminals collect or counterfeit and sell
McGraw-Hill/Irwin 16-16Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Trade-Oriented SalesPromo Objectives
•Obtain Distribution of New Products•Maintain Trade Support for Existing
Products•Encourage Retailers to Display
Existing Brands•Build Retail Inventories
McGraw-Hill/Irwin 16-17Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Types of Trade-Oriented Promotions
•Contests and Incentives•Trade Allowances
• Buying Allowances• Promotional Allowances• Slotting Allowances
•Point-of-Purchase Displays
•Sales Training Programs•Trade Shows•Cooperative Advertising
McGraw-Hill/Irwin 16-18Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Sales Promotion Agencies
THEN• Created tactics• Do single project• Hired for specialty• Single agency contact• Inferior to ad agency• Indirect accountability
NOW• Creates strategy• Continuing service• One full-service firm• Agency team contact• Equal to ad agency• Directly accountable
McGraw-Hill/Irwin 16-19Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
All
Oth
ers
MaintainPromotions
MaintainPromotions
Cut BackPromotions
Cut BackPromotions
Our Firm
We loosemarket share
Same market share, profits
stay low
Higher profitsfor everyone
We gain inmarket share
The Sales Promotion Dilemma
McGraw-Hill/Irwin 16-20Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Promotion Targeted toReseller Salespeople
• Product or program sales e.g. . . .• Selling a specific number of cases• Selling a specific number of units• Selling a specific number of promotional programs
• New account placements e.g. . . .• Number of new accounts opened• Number of new accounts ordering a minimum amount• Promotional programs placed in new accounts
• Merchandising Efforts e.g. . . .• Establishing promotional programs• Placing display racks, counter displays, etc.
McGraw-Hill/Irwin 16-21Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Shifting Role of thePromotion Agency
1. Used to develop long- and short-term promotional strategies as well as tactics
1. Primarily used to develop short-term tactics or concepts
3. Many promotion agencies used a mix—each one hired for best task and/or specialty
2. Hired/compensated on a project-by-project basis
4. One or two contact people from agency
5. Promotion agency never equal to ad agency—doesn’t work up front in annual planning process
6. Not directly accountable for results
3. One or two exclusive promotion agencies for each division or brand group
2. Contracted on annual retainer following formal agency reviews
4. Full team or core group on the account
5. Promotion agency works on equal basis with ad agency—sits at planning table up front
6. Very much accountable—goes through a rigorous evaluation process
Traditional New and Improved
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