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Chapter 16 Sales Promotion. McGraw-Hill/Irwin 16-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sales Promotion An extra incentive.

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Presentation on theme: "Chapter 16 Sales Promotion. McGraw-Hill/Irwin 16-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sales Promotion An extra incentive."— Presentation transcript:

1 Chapter 16 Sales Promotion

2 McGraw-Hill/Irwin 16-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sales Promotion An extra incentive to buy An inducement to intermediaries Targeted to different parties 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.

3 McGraw-Hill/Irwin 16-3 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sales Promotion Vehicles Consumer-Oriented Samples Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus packs Price-offs Event sponsorship Trade-Oriented Contests, dealer incentives Trade allowances Point-of-purchase displays Trading programs Trade shows Cooperative advertising

4 McGraw-Hill/Irwin 16-4 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Long-Term Allocations to Advertising, Trade Promotions and Consumer Promotions 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% '86'87'88'89'90'91'92'93'94'95'96'97 Consumer Promotions Media Advertising Trade Promotions Percent of total promotional dollars, 3-year moving average.

5 McGraw-Hill/Irwin 16-5 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 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 Increased Accountability Competition Clutter

6 McGraw-Hill/Irwin 16-6 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sales Promotion Uses Introduce new products Get existing customers to buy more Attract new customers Combat competition Maintain sales in off season Increase retail inventories Tie in advertising and personal selling Enhance personal selling efforts

7 McGraw-Hill/Irwin 16-7 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. CFB Promotional Objectives Communicate distinctive brand attributes Develop and reinforce brand identity Build long-term brand preference CFB Techniques and Practices Frequency programs encourage repeat purchase Frequency programs encourage patronage loyalty Offers consistent with brand or store image... Reinforce brand or store identity Define store or brand personality Reveal brand or service attributes or benefits Engage participants though active involvement Consumer Franchise-Building (CFB) Promotions

8 McGraw-Hill/Irwin 16-8 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Nonfranchise-Building (non-FB) 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 Non-FB Promotions may include... Price-off deals Bonus packs Rebates or refunds Non-FB Promotions shortcomings Trade promotions benefits may not reach customers If they do, they may lead only to price reductions Customers may buy price rather than brand equity

9 McGraw-Hill/Irwin 16-9 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Objectives of Consumer-Oriented Sales Promotion To Obtain Trial and Purchase To Increase Consumption of an Established Brand To Defend (Maintain) Current Customers To Target a Specific Segment

10 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Percentage of Promotions Vehicles Used by Package Goods Manufacturers, % 25% 50% 75% 100% Money back offers/other refunds Couponing consumer directCents-off promotions Couponing in retailers' ads Couponing in store Sampling new products Sampling established products Premium offersElectronic retail promotionsSweepstakesInternet promotionsContests Prepricing on package Other

11 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Percentage of Promotions Vehicles Used by Package Goods Manufacturers, % 25% 50% 75% 100% Money back offers/other refunds Couponing consumer directCents-off promotions Couponing in retailers' ads Couponing in store Sampling new products Sampling established products Premium offersElectronic retail promotionsSweepstakesInternet promotionsContests Prepricing on package Other

12 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Eight Sampling Media Door-to-door Direct mail Central location In-store sample pack Cross-product sampling Co-op package distribution With newspaper / magazine Any of above with coupon

13 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Other Magazines In / On Pack Direct Mail Newspaper Coop Newspaper ROP Freestanding Coupon Distribution

14 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 43% 35% 29% 25% 24% 20% 12% 11% 8% 7% 2%Gum Candy Carbonated Beverages Adult Cold Remedies Pet Food Coffee Sanitary Protection Deodorants Liquid Detergents Ready-to-Eat Cereal Disposable Diapers Percent of Sales Bought with Coupons

15 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Coupon Fraud Consumers redeem without purchase Clerks and staff exchange for cash Managers/owners redeem without sale Criminals collect or counterfeit and sell

16 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Trade-Oriented Sales Promo Objectives Obtain Distribution of New Products Maintain Trade Support for Existing Products Encourage Retailers to Display Existing Brands Build Retail Inventories

17 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Types of Trade-Oriented Promotions Contests and Incentives Trade Allowances Buying Allowances Promotional Allowances Slotting Allowances Point-of-Purchase Displays Sales Training Programs Trade Shows Cooperative Advertising

18 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sales Promotion Agencies THEN Created tactics Do single project Hired for specialty Single agency contact Inferior to ad agency Indirect accountability NOW Creates strategy Continuing service One full-service firm Agency team contact Equal to ad agency Directly accountable

19 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. All Others Maintain Promotions Maintain Promotions Cut Back Promotions Cut Back Promotions Our Firm We loose market share Same market share, profits stay low Higher profits for everyone We gain in market share The Sales Promotion Dilemma

20 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Promotion Targeted to Reseller Salespeople Product or program sales e.g.... Selling a specific number of cases Selling a specific number of units Selling a specific number of promotional programs New account placements e.g.... Number of new accounts opened Number of new accounts ordering a minimum amount Promotional programs placed in new accounts Merchandising Efforts e.g.... Establishing promotional programs Placing display racks, counter displays, etc.

21 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Shifting Role of the Promotion Agency 1.Used to develop long- and short- term promotional strategies as well as tactics 1.Primarily used to develop short-term tactics or concepts 3.Many promotion agencies used a mixeach one hired for best task and/or specialty 2.Hired/compensated on a project-by- project basis 4.One or two contact people from agency 5.Promotion agency never equal to ad agencydoesnt work up front in annual planning process 6. Not directly accountable for results 3.One or two exclusive promotion agencies for each division or brand group 2.Contracted on annual retainer following formal agency reviews 4.Full team or core group on the account 5.Promotion agency works on equal basis with ad agencysits at planning table up front 6.Very much accountablegoes through a rigorous evaluation process TraditionalNew and Improved


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