2What are Marketing Communications? Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell.17-2
3Modes of Marketing Communications AdvertisingSales promotionEvents and experiencesPublic relations and publicityDirect marketingInteractive marketingWord-of-mouth marketingPersonal selling17-3
9What is Sales Promotion? Sales promotions consist of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.
11Sales Promotion Tactics Consumer promotion is a short term incentive directed at consumer and consists of coupons, discounts, gifts, patronage rewards and other gifts. It can be considered as pull promotion.Trade promotions are financial incentives given by the manufacturer to a retailer for better displays and price promotions. It can be considered as push promotion.
12Key questions regarding Sales promotions Some of the key questions that are of paramount importance to sales promotions are:Are they increasing sales to their maximum?Are they really as much profitable as thought to be?How sensitive is consumer response to the design and communication of sales promotion?What are long-term impact of sales promotion?
13Impact of Sales promotions Sales promotions impacts customers through three different routes:Changing the product utility associated with product purchase ( the economic route).Influencing consumer’s belief about product, brand or industry( the informative/benefit route).Affecting the feelings and emotions aroused in the consumer( the affective route).
14Economic RouteEconomic affects pertains to a monetary or non-monetary gain or loss that a sales promotions provides to a customer.Monetary benefits could be the price discounts and bundling.Non-monetary benefits are the reduced order taking time, reduced delivery time, innovative channel of service or product delivery that actually reduces the cost (e-commerce).
15Informational RouteCommunication of direct or inferential knowledge derived from exposure to a promotion.Increased awareness and increased brand recall are the resulting phenomenon of exposure to a sales promotion.It also enables consumer’s to draw inferences about price-quality, product, product personality etc.
16Affective RouteAffective influences of sales promotions are the feelings and emotions aroused due to typical sales promotions like cause related marketing.It’s effects can be both general or specific.General effects could be the positive impact of the ambiance on the hedonic customer looking for adventure and exploration.
17Affective RouteSpecific effects could be the inferences consumer’s make about themselves like being smart, ethical, lucky etc.
18Deal Evaluation, Purchase Intention/Sale Economic valueInformative valueAffective valueSales PromotionDeal Evaluation, Purchase Intention/SaleManagerially Controllable contextual factorsThe three routes of affective promotions
19Computing Consumer Promotion’s Profitability Promotion Profit= Economic value + Affective value – Opportunity lost – Promotional Expenses – Other variable expensesEconomic Value = Incremental volume due to promotion (Margin – Discount)Affective Value = Incremental volume (Margin)Opportunity lost = Baseline volume expected to be sold without promotion (Discount)
20Using Sales Promotions Establish objectivesSelect toolsDevelop programPretestImplement and controlEvaluate results
22Case Summary Mike Needs strategy to allocate fund to Dinardo’s 16 oz packDinardo’s 32 oz packNatural mealsDo nothingProblem: 2008 GCP’s frozen division was not able to earn desired profitability. They were evaluating options for sales promotion.
23Organization structure A rough look into the structure reveals the following hierarchy (who is answerable to whom)Allan (CEO): Raises concerns on adverse impact of sales promotionPotential for CannibalizationEroding Brand equityCompetitor may take advantageBelow Allan is Flatt (VP Sales): Suggests for Sales promotion
24Organization structure Below Flatt is Mary (GM for FFD): Flatt Consults Mary for effective use of fundsBelow or may be on the same hierarchy with Mary is Mike (VP Marketing for FFD): Mary asks Mike to do the fund allocation for Flatt.
25Brand LineFFD is the brand under which they have two types Dinardo’s and Natural Meals.This forms the length of the Product line.Under Dinardo’s they have D32, D16 & D8&6.This forms the depth of the Product.Under Natural meals they have no depth. For this they followed Lifestyle based segmentation.
26Analysis of the Competitors A look into their competitors reveals the following information:Daft: Competitor for Natural Meal (Organic Product for Niche segment)Restaurants: Competitor for all brandsSupermarkets: Competitor for all brands
27Market Analysis for GCP Market is 2.8%Channel is Manufacturers to RetailersChannel Conflict identified from past for running sales promotions areNot passing benefits to consumersPassing for the offer period and once offer is over selling the same stock for higherSelling it at discount even after the discounting period.The last two is case of forward purchasing and piling of stock.
28Mike’s Planning for Promotion Objective was to increase volume and thus profitability. Vehicle for communication was weekly circular and end aisles displays. Sales promotion was scheduled for 1 week period.Mike and Mary firmly believed that sales promotion is only a push strategy and to pull the customer for the longer period of time they need to focus on:AIDA model of sellingNew Product IntroductionAttractive Packaging
29Solution for Dinardo 16 & 32From Exhibit 3 (template 1) considering promotional impact on the promoted item it is clear thatRunning promotion in D32 would generate profitable margin. ($718,986)Running promotion on D16 would give negative margin (-$526,946)From this template the company can conclude to run promotional campaign for D32 not D16.
30Solution for Dinardo 16 & 32From Exhibit 3 (template 2) considering within brand cannibalization it is clear that:Incremental volume in D32 is largely due to the cannibalization of D16
31Solution for Natural Meals Change in the margin as a result of promotion is 12% for Natural Meal.Go ahead with the promotion for Natural meals as there are no chances of cannibalization.Natural Meal also do not have mass appeal so sales promotion may help the brand to get better mass appeal and increase its awareness and persuade customers to buy the same.