Ch. 14 - Sales Promotion

sales promotion

direct inducement within an action-focused marketing event that offers an extra value or incentive for the product to the salesforce, distributors, or the ulitmate consumer with the primary objective of influence customer and potential customer behaviour which may include an immediate purchase

extra incentive to buy - financial

coupon, price discount, refund or rebate

extra incentive to buy - emotionally based

contest entry, premium

extra incentive to buy - value oriented

extra amount of product, sample

extra incentive to buy - experiential

attend an event

acceleration technique

speed up the buying process and buying decisions

types of sales promotion - consumer (B-C)

designed to induce the consumer to purchase

• used by manufacturers and retailers

types of sales promotion - trade (B-B)

motivate organizations in the distribution channel to carry and merchandise a product

• directed at intermediaries (wholesalers, distributors, and retailers)

consumer sales promotions

sampling, coupons, premiums, promotional products, contest/sweepstakes, refunds/rebates, bonus packs, price discounts, event marketing

trade sales promotions

trade allowances, point of purchase displays, cooperative advertising, contests and incentives, sales training programs, trade shows

promotional PUSH strategy

persuade the trade to stock, merchandise, and promote product

• sales reps and trade advertising communicate when there are favourable relations

promotional PULL strategy

efforts directed to the ultimate consumer to create demand

• use if product has unique benefits

growth of sales promotions

• brand building

• reaching specific target audience

  • geographic, demographic, and psychographics

• promotional sensitivity

  • consumers respond favourably, consistent with economic theory

• declining brand loyalty

  • consumers loyal to coupons use or deals

  • brand switchers see no difference in products

• brand proliferation

  • new brands entering mature product categories

• short term focus

• accountability

  • quick and easy ROI

• power of retailers

• competition

• account specific marketing

account specific marketing

development of customized promotional programs for individual retail accounts by marketers

objectives of sales promotion plan - trial purchase

new product introduction, introduce to new users

objectives of sales promotion plan - repeat purchase

price promotions, coupons, or bonus packs to stock up

objectives of sales promotion plan - consumption

recipe books or calendars

objectives of sales promotion plan - brand equity

contests, sweepstakes, premiums

consumer franchise building (CFB)

communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity

non franchise building (non-FB)

accelerate purchase decision process and generate an immediate increase in sales but do little or nothing to communicate information about a brand and contribute to its identity and image

incentive characteristic

sales promotions provide consumers with an extra incentive or reward to influence their behaviour

• repurchase or brand switching

types of sales promotion activities

operant conditioning

learning theory that views the probability of a behaviour as being dependent on the outcomes or consequences associated with it

• individuals act on an aspect of environment that reinforces behaviour

• if a consumer buys a product with a sales promotion and experiences a positive outcome, likelihood that consumer will use product again increases; and vice versa

operant conditioning - schedules of reinforcement - continuous

every response is rewarded so learning is fast, but behaviour is likely to cease when reinforcement stops

operant conditioning - schedules of reinforcement - partial or intermittent

only some of the individuals responses are rewarded so learning is slower and lasts longer

operant conditioning - shaping

reinforcement of successive acts that lead to a desired behaviour pattern or response

• part of new product launches

application of shaping behaviour with sales promotion

application across product lines

• should it be run across the entire line, or on individual items?

• which specific items should the sales promotion target?

• should it run on “regular” stock or another special version?

application across geographic markets

sales promotion are run nationally or in select markets so need to consider:

• regional focus requires greater managerial commitment in planning and implementation

• achieving objectives more specifically may result in greater expense

• national accounts may not be receptive

consumer sales promotion tactics

• value of incentive

  • depends on threshold at which consumers will response and number of potential responses

• timing

  • which months, weeks, days to offer promotion

• distribution

  • how will it get to consumers; how will they get it

sampling

a variety of procedures whereby consumers are given some quantity of a product for not charge to trial

• packaged goods: relatively low unit value, products are divisible, purchase is cycle is relatively short

strengths:

• stimulates trial, incentivizes brand switching, encourages consideration among non category users

limitations:

• brand must have unique benefit to induce purchase, cost of sampling program is recovered only if it gets consumers to become regular users

sampling distribution methods

coupons

voucher providing a discount or free good

• variability in discount offered, time flexibility in terms of offer and expiration, how it’s distributed

strengths:

• appeal to price-sensitive consumers, offer price break without retailer cooperation, effective way to induce trial, encourage purchases after initial trial, encourage trial by non users, stimulate repeat purchases

limitations:

• potential they won’t reach new or current users, difficult to estimate how many customers will use and when, often used by loyal consumers who may purchase anyway, low redemption rates and high costs, mistaked in redemption and potential fraud

coupon distribution and redemption rates

premium

an offer of an item of merchandise or service either free or at a low price that is an extra incentive to purchasers

• in a product package, given at retail locations, sent to consumers who mail in a request. reflect quality of product, consistent with image and positioning (emotion-based)

strengths:

• package-carried immediately provide an extra incentive, build and reinforce a brand image, high impulse value, work with rest of IMC, encourage trade support with in-store displays

limitations:

• cost of premium and extra packaging, self-liquidating premiums re`quire consumer to pay some or all of the cost, embedded premium brand donates money to a social cause to strengthen brand, usually requires consumers to send in proofs, risk of poor acceptance

promotional products

useful and/or symbolic items that are implemented in marketing communication programs as a sales promotion or message vehicle, or a combination of both

• mostly given as a gift to company stakeholders, pens, mugs, etc.

strengths:

• high degree of target audience selectivity and coverage, repeat exposure makes high absolute cost a low relative cost per exposure, high degree of message flexibility, positive cognitive and emotional responses, both small and large companies can employ, attention processing, and involvement may vary

limitations:

• cost implications would severely curtail significant geographic distribution for most advertisers, lead time required is longer, recipients in control of whether to keep or display, company image can be damaged with poorly designed products

contest / sweepstakes

conest: consumers compete for prizes or money on the basis of skills or ability

• companies judge entries and determine winners, usually requires a purchase incentive to enter

sweepstakes: winners are determined purely by chance, it can’t require proof of purchase as condition for entry

• game of chance, popular among retailers and fast food chains

strengths:

• sales enhanced by trial and repeat purchases, involve consumers with a brand making it relevant or connecting the prizes to target audience

limitations:

• rarely contribute to consumer franchise building, numerous legal considerations affect design and administration, participation by professionals or hobbyists who don’t have intention to purchase

refunds / rebates

offers by manufacturer to return a portion of the purchase price, usually after consumer supplies proof of purchase

• consumers responsive, particularly as size of saving increase, used by makers of all types of products, may perceive savings offered through cash refund as immediate value that lowers cost of item

strengths:

• induce trial to encourage brand switching or non-category user, encourage repeat purchase, temporary price reduction in face of competition, influence purchase timing

limitations:

• not all are motivated due to delay of offer, negative relationship between use of rebated and difficulties of redemption process, consumers believe used for inferior products, consumers may delay purchase awaiting rebates

bonus packs

offer the consumer an extra amount at the regular price

strengths:

• give marketers a direct way to provide extra value, due to the simplicity of presentation, consumers prefer a bonus pack, defend against a competitor’s promotion or introduction of new brand, may result in larger purchase orders and favourable displays in store

limitations:

• usually requires additional shelf space without providing any extra profit margin to retailer, may appeal primarily to current users who would have purchases the brand anyway or to promotion-sensitive consumers who may not become loyal

price discount

reduces the price of the brand, offered right on the package through specially marked price packs. typically 10-25% affect on manufacturers profit

strengths:

• can make sure promotional discount reaches consumer rather than being kept by trade, have a readily apparent value to shoppers, attracts attention at point of purchase, encourage consumers to purchase larger quantities

limitations:

• may create pricing and inventory problems for retailers, may be interpreted by retailers and interfering with their decision-making control, appeal primarily to regular users instead of attracting non-users, subject to federal government regulations regarding labelling

event marketing and sponsorship

marketing: promotion where a company or brand is linked to an event or where a themed activity is developed for a purpose of promoting brand by creating consumer experiences

sponsorship: integrated marketing communications activity where a company develops sponsorship relations with an established event operated by another organization

trade allowance

discount or deal offered to retailers or wholesalers to encourage them to stock, promote, or display a manufacturers products

buying: price reduction on product ordered during a fixed period

• off-invoice allowance: per case or percentage discount

• free goods: extra items with volume order

promotional/display: allowances or discounts for merchandising activities away from regular shelf position, running in-store promotional programs, or including the product in the ad

slotting: fees retailers charge for providing a slot or position to accommodate the new product

strengths and limitations of trade allowances

strengths: easy to implement and well accepted, effective way to encourage resellers to buy manufacturers product, expect price reduction to pass through consumers, opportunity for specialized displays, high traffic areas

limitations: only 1/3 of discounts reach consumers, 1/3 lost in inefficiencies, 1/3 pocketed by trade

• forward buying: stock up on a product at the lower deal or off-invoice price and resell it to consumers after the marketers promotional period

• diverting: take advantage of the promotional deal and then sell the product at the low price to a store outside its area

point of purchase advertising institute

organization serving marketers and retailers worldwide with research information and examples of successful display innovations

strengths and limitations of point of purchase displays

strengths: target audience reach, deterministic benefits can be communicated just prior to purchase, attention - especially with innovative POP options, achieve coverage objectives, absolute cost and CPM are reasonable

limitations: clutter, competition, consumers in complete control of attention, frequency is limited as requires audience to be in-store, reliant on retailer for proper display and requires payment

cooperative advertising

manufacturer pays a certain percentage of the expenses a retailer or distributor incurs for advertising their product

• vertical: manufacturer pays for a portion of the ad a retailer runs (50/50)

• horizontal: sponsored in common by a group of retailers

• ingredient sponsored: supported by raw materials manufacturers