Promotion: Managing Incentives

Question 1

Incentives

Answer 1

offer solutions short term to enhance value of the offering by providing additional benefits and reducing costs.

Question 2

3 category of costs

Answer 2

1 customer incentives (coupons loyalty programs, sweepstakes, contests, and premiums)
2 collaborators, most often channel partners (price cuts, volume discounts, allowances, and co-op advertising)
3 employees (bonuses, rewards, and contests)

Question 3

Managing incentives involves two types of decisions:

Answer 3

1 strategic decisions 5cs

2 tactical decisions 7t

Question 4

customer incentive goals:

Answer 4

1 temporarily increasing sales volume by giving target customers an additional reason to buy the offering
2 serving as a segmentation tool by selectively enhancing the value of the company’s offering for target customers

Question 5

2 types of customer incentives

Answer 5

monetary (coupons, rebates, price reductions, and volume discounts)

and non monetary (premiums, prizes, contests, and loyalty programs).

Question 6

collaborator incentives objectives 3

Answer 6

1 to gain distribution coverage
2 to encourage channel members to stock the offering at certain inventory levels
3 encourage channel members to promote the company’s offering

Question 7

Freestanding Inserts (FSI):

Answer 7

Leaflets or coupons inserted into newspapers.

Question 8

Push and Pull Promotions:

Answer 8

Push strategy refers to the practice of creating demand for a company’s offering by incentivizing channel members, who in turn push the product downstream to end users.

pull strategy refers to the practice of creating demand for a company’s offering by promoting the offering directly to end users, who in turn demand the offering from intermediaries, and ultimately “pull” it through the channel

Question 9

push strategy

Answer 9

Push strategy refers to the practice of creating demand for a company’s offering by incentivizing channel members, who in turn push the product downstream to end users.

eg. offer high margins on its products and services so that retailers have a vested interest in selling them. The manufacturer can also educate a retailer’s sales force about the benefits of its offerings and provide the retailer with promotional materials, thus facilitating the sales process

Question 10

pull strategy

Answer 10

pull strategy refers to the practice of creating demand for a company’s offering by promoting the offering directly to end users, who in turn demand the offering from intermediaries, and ultimately “pull” it through the channel

eg. manufacturer can extensively advertise its products and services to end users and promote its offerings using means such as direct mail, coupons, and contests.

Question 11

Run-of-Press Coupons:

Answer 11

Coupons that appear in the actual pages of a newspaper (rather than being inserted as a separate page).

Question 12

slippage

Answer 12

Slippage: The percentage of customers who fail to redeem a promotional offer made with the purchase.

Question 13

Trade Allowance:

Answer 13

A broad range of trade incentives, including slotting allowances, stocking allowances, and advertising allowances, offered as a reward for conducting promotional activities on behalf of the manufacturer. Trade allowances are typically implemented as a discount from the wholesale price rather than as a separate promotional payment.

Question 14

How to optimize the incentive

Answer 14

managing purchase timing
optimizing the value of the offering to different segments
responding to a competitor’s promotion

Question 15

What is this example?

The Virgin Group, Richard Branson: If you take care of your employees, your employees will take care of your customers, and your customers will take care of your shareholders.

Answer 15

Company incentives
to employees

Common company incentives include performance-based awards such as contests, monetary bonuses, employee recognition awards, free goods and services, vacation and travel incentives, prizes, sweepstakes, and games.