11.1. Consumer-Oriented Promotion I Flashcards
Sales Promotion Defnition
- short term incentive used to induce the trade and/ or consumers to buy a brand and to encourage the sales force to aggressively sell
- 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
Trade promotion
- btw manufacturer and wholesaler/ retailer
=> obtaining distribution & shelfspace
=> encourage retailers to promote a brand
Consumer Promotion
btw wholesaler/ retailer and consumer
btw manufacturer and consumer
=> increase short-term sales & long term market share
=> Generate product trial
sampling
allows customer to try the product
price-off deals
- temporary price reduction or sale
- cents-off deals, price-pack deals, bonus packs
coupons
redeemable at the specified outlet
refunds or rebates
offer to return money to the customer
Premiums
tangible reward for a particular act, usually purchase
contests and sweepstakes
- create excitement by promising something for nothing
contests
require participants to compete for a prize or prizes based on skill or ability
sweepstakes
require only that participants submit their names for a drawing or other chance event
specialties
baseball caps, pens, key chains, t-shirts imprinted with brand name
point-of-purchase promotion
objectives of sales promotion
- gain trial among users
- increase repeat purchase and/ or multiple purchase
- expand brand usage by encouraging product uses in addition to usual use
- defend share against comp
- support and reinforce and advertising campaign/ theme or specific image
- increase distribution and/ or retailer/ dealer cooperation
desired effects of sales promotions
graph
rapid growth of sales promotion has been achieved because
- product managers are facing more pressure to increase their current sales
- companies face more competition
- Advertising efficiency has declined
- consumers have become more deal oriented
company factors for growth of SP
- U.S. companies focus on immediate profits
- advertising tends to work in the long-term rather than short-term
- traditional media costs have also escalated to the point where alternatives need to be considered
consumer factors for growth of SP
- consumers are less loyal to brands
- consumers are less loyal to brands
- consumers expect constant short-term price reductions
- promotion is the most effective strategy for increasing sales when products are largely undifferentiated
biggest part of budget goes to…
trade promotions
pros of promotions
- provides a means of encouraging consumer sales response
- is extremely flexible with a number of techniques to reach consumers across demographic and lifestyle categories
- functions at both the consumer and trade levels to encourage high levels of distribution and goodwill with the distribution channel
cons of promotions
- can damage brand equity by replacing image of a product with price competition
- care must be taken to coordinate various messages of adv and promotion
- some forms have become so prevalent that they no longer provide a comp differentiation
- the frequency of deals changes the consumers reference price
why is it easier to evaluate sales promotion results
- definite starting and ending points
- designed to impact sales directly
sources of sales increase
- new users
=> trial from nonusers
=> switching from comp brands - larger volume purchase
segmentation analysis - assumptions
- different market segments have differential demand for essentially the sameproduct (different elasticities of demand)
- market can be segmented
- buyers cant resell product/ service
- little or no chance of competitors underselling a firm charging higher prices
are coupons a form of price discrimination
consumer promotion sensitivity
- promotion insensitives
- on deal only consumers
- stockpiling loyalist
- stockpiling promotion sensitives
- nonstockpiling promotion sensitives
promotion insensitives
- dont respond to promotions
- may use coupons
- but cannot switch them from one brand to another
- promotions have no effect
stockpiling loyalist
- loyal to one brand
- use promotions as opportunity to stockpile
- don’t switch brands
- promotions tend to “reward” brand loyals
- sales increase is borrowed from future sales
stockpiling promotion sensitives
- loyalists who are willing to make exceptions and stockpile
- switchers who are willing to switch brands and stockpile
- promotions may have desired effect on them
- questionable if they are really “loyal” to new brand
nonstockpiling promotion sensitives
graph
on-deal-only buyers
- willing to switch brands
- but only buy on deal
- definitely not loyal to new brand
- Profit = no of units (Q) sold x profit margin (MD)
Unprofitable segments
- promotion insensitives
- stockpiling loyalists
Profitable segments
on deal only consumers
Maybe profitable segments
- nonstockpiling promotion sensitives
- stockpiling promotion sensitives
