Lecture 11 Flashcards
Sales Promotion
“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.”
Sales promotion involves some type of inducement that…
…provides an extra incentive to purchase the product or service.
Sales promotion is essentially an acceleration tool that is …
…designed to speed up the selling process and maximize sales volume.
Sales Promotion can be broken into two major categories:
Consumer-oriented sales promotion
Trade-oriented sales promotion
Consumer-oriented sales promotion
directed at the consumers who are final purchasers of goods and services.
Trade-oriented sales promotion
designed to motivate distributors and retailers to stock and promote a manufacturer’s product.
Reasons for Increase in Sales Promotion
Growing Power of Retailers Declining Brand Loyalty Increased Promotional Sensitivity Brand Proliferation Fragmentation of Consumer Markets Short-Term Focus of Marketers Increased Accountability Competition The Growth of Digital Marketing
Mkters also spend $150B/yr on trade sales promotion
Sales promotion spending grew from $56B in 1991 to projected $310B in 2021
Private label brands account for __ of CPG sales.
15-20%
Eg: Aldi, Trader Joe’s, Target, Costco, Amazon, etc.
The “Outdoor Adventure Sweepstakes” is an example of…
…a franchise-building promotion that contributes to the
image of the Avalanche as a rugged vehicle for the outdoors.
CFB Promotional Objectives
Communicate distinctive brand attributes
Develop and reinforce brand identity
Build long-term brand preference
CFB Techniques and Practices Can convert customers
to…
…loyal customers.
CFB Techniques and Practices
“Frequency” programs encourage patronage loyalty
Contests and, sweepstakes that increase involvement and help build equity
Premium offers that reinforce the brand image and help build equity
(CFB)
Consumer Franchise-Building Promotions
(non-FB)
Nonfranchise-Building 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
Objectives of Consumer-Oriented Sales Promotion
To Increase Consumption of an Established Brand
To Target a Specific Segment
Enhance IMC Efforts and Build Brand Equity
To Defend (Maintain) Current Customers
To Obtain Trial and Purchase
To Target a Specific Segment
To Defend (Maintain) Current Customers ‘load customers with your product’
To Increase Consumption of an Established Brand
Consumer-Oriented Sales Promotion Vehicles
Samples Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus Packs Price-off Deals Loyalty/Frequency Programs Event Marketing
Trade-Oriented Sales Promotion Vehicles
Contests, Dealer Incentives Trade Allowances Point-of-purchase Displays Training Programs Trade Shows Cooperative Advertising
Sales Promotion Vehicles
~ Sampling
Sampling Works Best When…
The products are of relatively low unit value, so samples don’t cost much
The products are divisible and can be broken into small sizes that can reflect the products features and benefits
The purchase cycle is relatively short so the consumer can purchase in a relatively short time period
Sales Promotion Vehicles
-Sampling Methods
Door-to-door Direct Mail Central Location Distribution In-store Sampling Cross-product Sampling Co-op Package Distribution With Newspaper / Magazine Event Sampling Internet Sites
Sales Promotion Vehicles
~ Coupons
The oldest and most widely used sales promotion tool
Nearly 240 Billions Distributed Each Year in the US
60 percent of consumers use coupons and 14% use them regularly
Shoppers save __ annually using coupons
$3 B
Advantages of Coupons
Appeal to Price Sensitive Consumer
Can Offer Price Break Without Retailers Coop
Can Be Effective Way to Induce Trial of New or
Existing Products
Can Be Way to Defend Market Share and Encourage Repurchase
Disadvantages of Coupons
Difficult to Determine How Many Consumers Will Use Coupons and When
Coupons Are Often Used by Loyal Consumers Who May Purchase Anyway
Declining Redemption Rates and High Costs of Couponing
Misredemption and Fraud
__ are the Most Popular Types of Coupons
FSIs
Sales Promotion Vehicles
~ Premiums
Two Types of Premiums
Free Premiums
Self-liquidating Premiums
Premium
an offer of an item of merchandise or service either free or at a low cost that is an extra incentive for customers.
Free Premiums:
Only Require Purchase of the Product
Self-liquidating
Premiums:
Require Consumer to Pay Some or All of the Cost of the Premium.
Premiums attract attention to a brand and
offer the consumer something for free
Most Successful Use of Premiums
McDonalds
Airline miles are a very popular __ incentive
Premium
American Airlines launched its Aadvantage frequent flier program in 1981 and has become the largest loyalty program of any kind with over 45 million members.
This program, as well as others such as United Airline’s Mileage Plus, have made airline miles a promotional currency as the airlines make more than $2.5 billion each year selling miles to other marketers who use them as promotional incentives.
Contests:
a promotion where consumers compete
for prizes or money on the basis of skills or ability.
Winners are determined by judging entries or
ascertaining which entry comes closest to some
predetermined criteria.
Sweepstakes/games:
a promotion where winners are determined purely by chance and cannot require a proof of purchase as a condition for entry. Winners are chosen by random selection from a pool of entries or generation of a number to match those held by game entrants.
Contests can be used to build…
brand equity.
The “Do You Know a Brawny Man?” promotion was very successful as sales volume during the promotional period grew 12.3%, which was 5 times more than the product category and Brawny’s market share increased from 10% to 11.5%. The promotion also received the Super Reggie Award from the Promotion Marketing Association as the best promotion of the year.
Sweepstakes Can Help Build…
Brand Equity
Gerber developed a __ in conjunction with
a __ __.
sweepstakes, loyalty program
Other Promotional Tools
Bonus Packs Price-off Deals Refunds and Rebates Event Marketing Frequency/ Loyalty Programs
Trade-Oriented Sales Promo
- Objectives
Obtain Distribution of New Products
Maintain Trade Support for Existing Products
Build Retail Inventories
Encourage Retailers to Display Existing Brands
Marketers target the trade with
collateral pieces that are designed to provide them with information and encourage them to stock and promote their products.
The tuna salad kit was named one of the top 10 new food products at the annual New Products Conference. Chicken of the Sea International does not do much media advertising but rather relies heavily on consumer and trade promotions to market its products.
Trade-Oriented Sales Promo
- Types of Trade-Oriented Promotions
Contests and Incentives Trade Allowances (Buying Allowances, Promotional Allowances, Slotting Allowances) Point-of-Purchase Displays Sales Training Programs Cooperative Advertising Trade Shows
Trade-Oriented Sales Promo
- Types of Cooperative Advertising
Horizontal Cooperate Advertising
Ingredient-Sponsored Coop Advertising
Vertical Cooperative Advertising
The “Intel Inside” Campaign Is an Example of…
…Ingredient-sponsored Cooperative Advertising.
The “Intel Inside” campaign has been used since 1991. This campaign is part of a cooperative advertising program as personal computer companies are reimbursed 5 percent of what they pay for Intel chips with the money to be applied to ads they run carrying the “Intel Inside” logo.
The Sales Promotion Trap
Our Firm: Cut back promotions
All Other Firms: Cut back promotions
- Higher profits for all
Our Firm: Maintain promotions
All Other Firms: Cut back promotions
- Market share goes to our firm
Our Firm: Cut back promotions
All Other Firms: Maintain promotions
-Market share goes to all other firms
Our Firm: Maintain promotions
All Other Firms: Maintain promotions
-Market share stays constant; profits stay low
In many situations there is the potential for
companies to fall into a ‘sales promotion trap’ or…
…downward spiral whereby all competitors are
making extensive use of promotions.
Abuse of Sales Promotions
- Marketers becoming too dependent on using sales promotion to produce short-term or immediate increases in sales.
- Investing in sales promotion at the expense of advertising and thus not building the long-term value of the brand franchise.
- Brands losing their perceived value from the perspective of consumers when they are purchased because of a promotional offer.
