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Marketing Research in Sales Promotion Wenmei Dong Turgut Feyiz Jin Li Pierre Noizet Richard Yang.

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Presentation on theme: "Marketing Research in Sales Promotion Wenmei Dong Turgut Feyiz Jin Li Pierre Noizet Richard Yang."— Presentation transcript:

1 Marketing Research in Sales Promotion Wenmei Dong Turgut Feyiz Jin Li Pierre Noizet Richard Yang

2 Outline Introduction Introduction Sales Promotion Sales Promotion Why sales promotion needs MR Why sales promotion needs MR MR for promotion optimization MR for promotion optimization MR Research Measurement Tools & Models MR Research Measurement Tools & Models Conclusion Conclusion

3 What is promotion? Promotion The coordination of all seller initiated efforts to set up channels of information and persuasion in order to sell goods and services or promote an idea. Promotion MIX Advertising Advertising Direct Marketing Direct Marketing Interactive/Internet Marketing Interactive/Internet Marketing Publicity/Public Relations Publicity/Public Relations Personal Selling Personal Selling Sales Promotion Sales Promotion

4 Sales Promotion Sales promotion Marketing activities that provide extra value or incentives to the sales force, the distributors, or the ultimate consumer and can stimulate immediate sales.

5 Sales Promotion Consumer Sales Promotion Trade Sales Promotion Trade Sales Promotion Targets Targets

6 Uses of Sales Promotion Immediate Purchases Increase Trial Boost consumer inventory Encourage repurchase Increase ad effectiveness Encourage brand switching UsesofSalesPromotionUsesofSalesPromotion Encourage brand loyalty

7 Objectives of Sales Promotion Type of Buyer Loyal Customers Competitors Customers Competitors Customers Brand Switchers Price Buyers Desired Results Reinforce behavior Increase consumption Change timing Reinforce behavior Increase consumption Change timing Break loyalty Persuade to switch Break loyalty Persuade to switch Persuade to buy your brand more often Appeal with low prices Supply added value Appeal with low prices Supply added value Sales Promotion Examples Loyalty marketing Bonus packs Loyalty marketing Bonus packs Sampling Sweepstakes, contests, premiums Sampling Sweepstakes, contests, premiums Price-lowering promotion Trade deals Price-lowering promotion Trade deals Coupons, price-off packages, refunds Trade deals Coupons, price-off packages, refunds Trade deals

8 Sales Promotion - Double-edged Sword

9 Why we need MR in sales promotion Frequent failures of Promotion Waste resourcesWaste resources Half of the promotion expenditures go to wasteHalf of the promotion expenditures go to waste High promotion spending, low ROIHigh promotion spending, low ROI Cross-product cannibalization, cross-channel dilution and halo effectsCross-product cannibalization, cross-channel dilution and halo effects Promotion-driven stock-out, excess inventoryPromotion-driven stock-out, excess inventory

10 Why we need MR in sales promotion - cont. Marketing Research can help toCreate Optimized Promotion

11 Predict incremental profit, revenue, and associated costs for various promotional alternatives, before we commit marketing dollars Predict incremental profit, revenue, and associated costs for various promotional alternatives, before we commit marketing dollars Reduce promotional costs, while simultaneously boosting market response Reduce promotional costs, while simultaneously boosting market response

12 Optimized Promotion – cont. Avoid cross-product cannibalization, cross- channel dilution and halo effects Avoid cross-product cannibalization, cross- channel dilution and halo effects Forecast expected impacts on inventory levels Forecast expected impacts on inventory levels Set optimal mix of promotions to maximize return, while protecting sales, margin, and market share targets Set optimal mix of promotions to maximize return, while protecting sales, margin, and market share targets

13 How MR Serves Promotion Test the ideal promotional vehicles Test the ideal promotional vehicles Discount, displays or features for each brand/productDiscount, displays or features for each brand/product Single Vehicle (e.g., discount)Single Vehicle (e.g., discount) Mixed Vehicles( e.g., discount and display)Mixed Vehicles( e.g., discount and display) Test which product/brand will profitable to run promotional activities Test which product/brand will profitable to run promotional activities

14 How MR Serves Promotion – cont. Identify cannibalized products mix and the bundled products mix Identify cannibalized products mix and the bundled products mix Survey the Price Elasticity. Help us to make decision on Production Capacity and the Discount Level Survey the Price Elasticity. Help us to make decision on Production Capacity and the Discount Level Marginal Revenue = P(1+1/E)Marginal Revenue = P(1+1/E) Marginal CostMarginal Cost Others: test the effectiveness of promotions with specific targets Others: test the effectiveness of promotions with specific targets

15 How MR Serves Promotion – cont. Sales Promotion Objective to be tested Promotional Type Increase Repeat BuyingTesting in-pack coupon, continuity programs( e.g., frequent flyer, N for retail promotions) Increase market share among brand switchers FSI coupons, Coupons targeted to users of other brands, retail promotion Increase category switchingRetail promotions, FSI coupons, large rebate

16 How MR Serves Promotion – cont. Sales Promotion Objective to be tested Promotional Type Increase category consumptionRetailer promotions, promotions tied to events (e.g., back to school) Increase trial among nonusersCrossing-coupon, free samples, trial packs, direct-mail coupons Increase retailers promotion frequencyTrade deals, combination of consumer promotions and trade deals (big-bang theory)

17 How MR Serves Promotion – cont. Sales Promotion Objective to be tested Promotional Type Enhance the product imageCoop image advertising with image- oriented retailers. Target deal-sensitive consumersCoupon, N for retail promotions Liquidate short-term inventoriesTrade deals, rebates, inventory financing Increase distributionFSI coupons (increase demand), trade deals (increase DPP)

18 Problems to be solved by MR on sales promotion What item? What item? What type of promotion? What type of promotion? When to promote? When to promote? For how long? For how long? Where to promote? Where to promote? At what price? At what price? How? How? Results? Results?

19 MR Measurement Tools Measuring Promotion Effectiveness, Estimation and Evaluation of Models Retail Store Audit Retail Store Audit Consumer Purchase Panels Consumer Purchase Panels Scanner Data Scanner Data Nielsens SCANTRACK – Largest oneNielsens SCANTRACK – Largest one

20 Sample Scanner-Panel Data Customer IDDateBrandQuantityRegular PriceDiscountDisplayFeature /01/02Tide50 oz$ 3.55$ 0.43No /29/02Tide64 oz$ 3.99$ 0.54Yes /25/02Tide50 oz$ 3.55$ 0.45No /28/02All50 oz$ 2.99$ 0.50YesNo /27/02Tide50 oz$ 3.60$ 0.45No /22/02Tide50 oz$ 3.60$ 0.20No /29/02All64 oz$ 3.15$ 0.60Yes /24/02Tide50 oz$ 3.65$ 0.42No /28/02All100 oz$ 4.99$ 1.00Yes /25/02Tide50 oz$ 3.99$ 0.50No

21 Retail Store Audit Beginning inventory + deliveries –ending inventory = sales for the period Beginning inventory + deliveries –ending inventory = sales for the period Observable information such as shelf prices, display space, the presence of special displays and in-store promotion activities Observable information such as shelf prices, display space, the presence of special displays and in-store promotion activities Nielsen Retail Index and Audits and Surveys Nielsen Retail Index and Audits and Surveys Advantage: Know the overall sales change Advantage: Know the overall sales change Disadvantage: No details about customers and their purchasing behavior Disadvantage: No details about customers and their purchasing behavior

22 Consumer Purchase Panels Main categories Main categories Home AuditHome Audit Mail DiaryMail Diary Advantages Advantages Provide changes in behaviorProvide changes in behavior Limitation Limitation Selection biasSelection bias Mortality effectMortality effect Testing EffectTesting Effect

23 Scanner Data Tools : Laser Scanner Laser Scanner Universal product code Universal product code Generates huge amounts of data Generates huge amounts of data Main suppliers: IRI, Nielsen Main suppliers: IRI, Nielsen Kraft Food spends more than $30 million per year on scanner data Kraft Food spends more than $30 million per year on scanner data In comparison to survey research: scanner data reveal actual consumer behavior In comparison to survey research: scanner data reveal actual consumer behaviorAdvantage: High degree of accuracy High degree of accuracy Time saving Time saving Possible to study short period of sales Possible to study short period of sales

24 Models Choice Model Choice Model Likelihood (Prob.) going to buy in response to promotionLikelihood (Prob.) going to buy in response to promotion P (buy) = F (promotion, feature, etc)P (buy) = F (promotion, feature, etc) Quantity Model Quantity Model Number of units of a brand a consumer will buyNumber of units of a brand a consumer will buy Q (buy) = F (price cut, inventory, consumption rate, etc)Q (buy) = F (price cut, inventory, consumption rate, etc) Promotion Model Promotion Model Profit = Sum (Profit margin*P*Q)Profit = Sum (Profit margin*P*Q)

25 Tools to solve the Model problems Linear Programming Linear Programming Objective function ( ROI, Sales, etc)Objective function ( ROI, Sales, etc) ConstraintConstraint Budget Budget Inventory Inventory Timing Timing Optimal SolutionOptimal Solution Excel Solver Excel Solver Various Software (SAP, PeopleSoft, etc) Various Software (SAP, PeopleSoft, etc)

26 Conclusion MR is like a car light for the marketers to see clearer about the future and know what really works.

27 Questions?


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