Exam 3 Flashcards
Sales Promotion
Short-term incentives to encourage the purchase or sale of a product or service
Strengths of Sales Promotions
- something for nothing
- get immediate action
Highly Effective for:
- New Product
- Product Improvement
- Improving Market Position
- Increase Store Distribution
Sales Promotions are highly effective for
Highly Effective for:
- New Product
- Product Improvement
- Improving Market Position
- Increase Store Distribution
Limitations of Sales Promotions
- Short-term
- Other Promotional Tools in Conjunction
- Hurt image (for high-end)
Sales Promotions have low effect for:
- established products
- declining market share
- product categories which are common for having sales promotions
Sales Promotion Examples
- Betty Crocker: “try new betty crocker cereals! save $0.50 coupon”
- Try America Online (AOL) - “50 hours free to sign up now”
Strategic Perspective: Critical Factors (Imitation)
Competitors will imitate when there is:
- no preemption of scarce resources
- -> Solution: exclusive access
- a high degree of market dependence on the ppart of one or more competitors
- -> Multi-product firms are less likely to match a promotion, while single product firms will match promotion
- market power asymmetry
- ->when the promo initiator has high power, the competitor is less likely to retaliate or imitate
- high similarity between competitor and pioneer
- ->similarities in customers, suppliers, capabilities, etc. will lead to faster imitation
Strategic Perspective: Critical Factors (Fast Consumer Response)
Consumers’ response will be faster when:
- the product falls into the impulse purchase category
- ->spur of the moment purchases more likely to be made with a deal. self indulgent products.
- buyers can stockpile
- ->promo. product can be bought and saved for future use
General Objectives of Sales Promotion
- support sales force
- get support from channel
- increase sales to consumers
Specific Objectives of Sales Promotions
- build consumer awareness
- support shelf space
- increase use of point of purchase
- induce sampling
- supplement a media campaign
- increase size of purchase
- attract consumer away from another brand
- preempt competitor by inducing consumer stock up.
Market Development Matrix
CDI. | HIGH | LOW
BDI. | H,H | H,L
HIGH | |
LOW | L,H | L,L
| |
| |
^^MATRIX
BDI= %Brand Sales in that mkt / % US pop. in that market
CDI= % product category sales in that mkt / % US pop. in
BDI
Brand Development Index
BDI= %Brand Sales in that mkt / % US pop. in that market
CDI
Category Development Index
CDI= % product category sales in that mkt / % US pop. in that market
Market Development Matrix: Low CDI, Low BDI
- Distribution expansion (all markets)
- Add Sales Reps
- Targeted retailers
- Promotion allowances
- Mailed coupons
- Spot TV
Market Development Matrix: Low CDI, High BDI
- Promotion allowances and cents-off deals
- Newspaper coupons
- Retail display emphasis (point of purchase)
Market Development Matrix: High CDI, Low BDI
- Distribution expansion (selected markets)
- Mailed coupons
- Heavy spot TV
- Promotional allowances
- Seasonal premiums
Market Development Matrix: High CDI, High BDI
- Promotion allowance and cents-off deals
- Retail display emphasis (point of purchase)
- Seasonal premiums
- Spot TV (selected markets)
Types of Consumer Targeted Promotions
- Packaging
- In-store demonstrators
- premiums
- trading stamps
- price-off promotions
- sampling
- coupons
- money refund offers
- contests & sweepstakes
Types of Company Salespeople Targeted Promotions
- Sales Meetings
- Sales manuals
- Sales portfolios
- Product Models
- Contests and Incentives
Types of Channel (Distribution) Targeted Promotions
- Sales Meetings
- Point of Purchase Material
- Trade Shows & Exhibits
- Contests
- Push Money (incentivize sales person to push the product
- Dealer Loaders (Give dealers incentives)
- Business catalogs
- Trade Deals: buying allowance, adv. and display allowance, buy back allowance, free goods, count and recount
Tips on Strategies and Tactics for Premiums
Match fit to target audience: fit between premium offer and product. well known brand name.
Product: dog food; premium offer: Collar with name tag
Price Value Relationship: price of your product and the premium offer value should have a spread between premium’s retail price and the cost of premium offer to the consumer (30-50%). if the premium item is worth $5-15, the product price should be $1.50-5
Full Example:
Product: Iams Dog food
Premium Offer: Iams dog collar with name tag. normal dog collar premium price: $15. Iams dog collar:$5
Evaluate Sales Promotion Effectiveness
- New Buyers
- Regular Buyers
- Long Term Buyers
- percent of brand sales bought on a deal
- relationship between brand share increases and percent bought on deal
Calculating Loss/Gain of a Price Promotion
Manf. Loss/Gain= (Sales Price - Manf. Cost) x Units Sold
Retailer Loss/Gain= (Retail Price - Retail Cost) x Units Sold
Consumer Loss/Gain= (Reg. Price - Promo Price) x Units
Calculate all 3 with and without promotion to determine promotional impact
Consumer Franchise Building Activities
- advertising
- consumer sampling
- manufacturer couponing with selling message
Non-Franchise Building Activities
- Price-off Packs
- Cooperative advertising with no selling message
- Trade allowances
Everyday Low Price (EDLP)
- promising consumers a low price without the need to wait for sale price events or comparison shopping.
- saves retail stores the effort and expense needed to mark down prices in the store during sale events, as well as to market these events.
- $0.40-0.75 of every trade promotional dollar remains with the trade and is not passed to the consumer
FSI
Free Standing insert, printed ad that is placed into print media, unbound
Valassis (FSI)
created FSI’s that contain bar-coded coupons that track publication name, zip code where the publication is distributed, and date of insertion
Quality Tiers sand Effects on Price Change
- High quality brands (or national brands) offering a price cut can influence consumers to switch brands, or influence non-purchasers to buy the product
- Private label brands do not see the same gains in sales as large national brands
Internet Marketing
- internet is currently the #1 advertising media market share, with highest spending
- China, India, US, Brazil top 4 internet users
- Facebook #1 Social Media Platform, followed by Youtube, WhatsApp, FB messenger, WeChat, and Instagram
- Social media advertising is 25% of total ad revenue
Internet Marketing Advertising
- Pay to attract views
- Benefit: inherent measurability
Internet Marketing Prospect Fees
- Pays for qualified leads, visits
- Benefit: Greater Accountability
Ex: Edmunds.com for car buying.
Internet Marketing Affiliates
- Sales Commission
- Benefit: Similar to an outside sales force
Risk and Payment Scheme
Increasing Risk Down the List
Sponsorship : Fixed
Banner Ads : Impressions
Prospect Fees : Click Through
Sales Commission : Purchase
Objectives for Online Initiatives
- Acquisition
- Development
- Retention
Internet Marketing Acquisition
Achieved by
- Web advertising
- E-mail accounts
- Free Trials
- Referral Systems
- Partners (Amazon)
Internet Marketing Customer Development
- Community and personalization spending
- Affiliates expenses
- get them to spend more time on the website and have positive feelings
Internet Marketing Retention
- Customer Support
- Enhancement Spending
- Effectiveness Spending
Web Traffic Plan
- Acquiring traffic is expensive
- Retaining traffic is profitable
- Site buys 1 million banner impressions until goal is reached
Overt Deception
when you outright lie to consumers.
example: “Made in the USA” but it was actually made elsewhere
Misleading representation
intentional or accidentally misleading consumers to believe something about a product
example:
- all detergent –> actor wearing stained shirt, immerses shirt in water, add detergent, comes out clean
- ACTUALLY, shirt was washed in machine
Areas of Regulation in Marketing
- Fairness: should the product shortcomings be publicized? (fairness to competitors or consumers)
- corrective advertising
- advertising to children - Health claims
- Obscenity and Bad Taste
- type of product advertised (cigarette ads banned on tv)
- anti-trust violation - Vertical Cooperative Advertising
Corrective advertising
FTC orders corrective advertising as a penalty in addition to fines for company that violates regulations and misleads consumers to create an unfair advantage. correct claim that isn’t true.
Ad. Screening process
- Big 3 networks have large commercial clearing departments to screen ads
- Now, ⅓ of national ads are first aired on cable without much screening. cable industry trying to increase self-regulation
Puffery
legal advertising technique that uses ‘puffed up’ or exaggerated claims in general terms about a product or service that are a matter of opinion, or subjective, in nature. The claims can neither be proven nor disproven. For example, a company can claim they make the best blankets in the world.
Robinson-Patman Act
Vertical Cooperative Advertising
- payments should be made on “proportionally equal” basis. FAIRNESS AT RETAIL LEVEL IS CRITICAL.
example: P&G wants to give money to supermarkets to incentivize the purchase diapers (coupons). must give money to all supermarkets in the region, unless it creates an unfair advantage.
signal-theory
way to collude without obvious communication
Federal Food, Drug and Cosmetic Act
must have:
- labeled truth in packaging
- nutritional information
- unit pricing –> per square foot, per ounce etc.
- promotes price competition, benefits consumer - measuring advertising deception –> “Natural”, “Low-fat”
Socio-Economic Issues
Two Fundamental Premises (assumptions):
- High & Rising standard of living is a valid social goal
- Profit is an accurate measure of extent to which a business organization has succeeded in meeting consumer desires and thereby contributing to a rising standard of living
Function of Advertising
Promotion is then defensible to the extent it performs the following functions:
- motivates consumer to increase standard of living
- provide information to consumers
- provide a stimulus for firms to produce new products at 1. lowered prices, and 2. prevent monopoly and strengthen competition
Motivation to increase standard of living
- makes you want more things, shows you a path to get there
- some stimulus is required to influence buyers to attain higher incomes and to spend these on goods and services. promotion provides this impetus.
- striving for higher living is intrinsic in the US, so it’s doubtful advertising establishes this desire
- *advertising reinforces our basic desires and directs them to specific products
Provision of buying information
- advertising provides information useful in buying decisions
- advertisements can provide useful information, especially when a deliberate effort is made to discover the buyer’s evaluative criteria
New Product Development (promotions)
- buyer interest does not attain sufficient intensity in the absence of promotion to justify investment in new products
- advertising provides the stimulus, and a quick and economical way of reaching a mass market with information and persuasive communication
- competitive advertising would be wasteful unless the manufacturer can claim product differences (superiority)
Promotion Effect on Prices
- Promotion facilitates economies of scale –> lowers prices
- Advertising increases prices by adding to costs*
- Advertising encourages product differentiation – helps brand loyalty – charge higher prices
- Advertising cannot maintain consumer brand loyalty with a bad product
Effects on Competition and Market Structure
- Advertising facilitates and strengthens competition.. facilitates disseminating product improvements, incentive for innovation
- large companies drive out weaker competitors through sheer financial power
- Necessary volume of advertising creates barrier to entry (but large investments needed to do business in general; advertising is not alone)
Role of Public Relations
- Publicity
- Institutional Advertising
- To Achieve Good Public Relations
Public Relations
Establish needs and wants of publics, and match company policies and practices and communicate to publics
Company Publics
- Employees
- Customers
- Stockholders
- Suppliers
- Government
- Local Community
- Financial Community
- The Press
Developing a PR Program
- Information gathering through environmental monitoring, public relations audits, and communications audit
- Set PR objectives
- Formulate and Implement PR program such as publicity, institutional advertising, etc.
- Program effectiveness measures
Characteristics of Publicity
- Editors control time, space and content of release
- High credibility –> looks like news item
- picks up authority and prestige of media may attract top management better than ads
Clipping Service
measures returns from publicity
Corporate Advertising
make the organization favorably known, not a specific product or service
Types of Institutional Ads
- Patronage Ad –> name and activity, encourages consumers to patronize the firm
- Identification
- Goodwill ads
- Idea/Issue ad –> advocates a viewpoint
Corporate Positioning: Visibility and Credibility
Visibility Low | High
Credibility |
High Undiscovered | Unparalleled
———————————————————————————
Low Unknown | Undesireable
