Part 5: Principles: How to Win the Battle of the Buzz Sales Promotion, Events, and Sponsorships Part 5: Principles: How to Win the Battle of the Buzz Chapter 16

Questions We’ll Answer CHAPTER KEY POINTS Questions We’ll Answer Which principles drive the use of sales promotion and what are some current trends? How are various consumer promotions used? What are the types and purposes of trade promotions? How do other types of promotions—sponsorships and events, interactive promotions, loyalty programs, and co-marketing programs—work? How are promotions used strategically in marketing in terms of brand building, new product launches, integration, and effectiveness?

What is sales promotion? THE PRACTICE OF SALES PROMOTION What is sales promotion? When a marketer increases the value of its product or brand by offering an extra incentive to purchase it. Designed to encourage action. AMA: “The media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand, or improve product availability.” Sales promotion is primarily designed to motivate people to act by offering incentives.

Changes in the Industry THE PRACTICE OF SALES PROMOTION Changes in the Industry In the past, advertising had dominated marketing spending. Today, more than 2/3 of all firms plan promotions as part of their strategy. Global incentive programs have increased dramatically; online promotions are growing at a rate of about 27% annually.

THE PRACTICE OF SALES PROMOTION Reasons for Growth Pressure for short-term profits Rising cost of mass (traditional) media Need for accountability Sales promotions are easy to track and evaluate Escalation of traditional media costs Promotions cost less and deliver tangible results Easier and quicker to determine if objectives have been met Usually, there’s an immediate response For consumer, risk is reduced Added value from coupons, rebates, discounts

Growth from Marketplace Changes THE PRACTICE OF SALES PROMOTION Growth from Marketplace Changes Consumer behavior Shoppers switch more easily Pricing Consumers expect coupons, sales, discounting Market share Increased switching leads to increased market share Parity products Promotions can distinguish between similar products Power of the retailer Wal-Mart, Home Depot, Toys “R” Us and others demand promotional incentives

Categories of Sales Promotion THE PRACTICE OF SALES PROMOTION Categories of Sales Promotion Consumer Targeted to consumer: people like you and me Trade Targeted to people/companies in the distribution channel such as buyers, brokers, distributors, wholesales, dealers, franchisees, retailers, etc. Sales Force Directed at the firm’s salespeople to motivate them to increase their sales including training, sales presentations, support materials, incentives, performance bonuses, contests

Types of Consumer Promotions Price Deals—temporary price reduction or sale price Cents-off deal Price-pack deals (something extra; prize in cereal box) Bonus packs (25% more lotion) Banded packs (toothpaste and brush) Coupon — discount on the price of the product Retailer: redeemable only at their outlet Manufacturer: at any outlet carrying the product

Types of Consumer Promotions Refunds and Rebates Marketers offer to return a certain amount of money to the consumer who purchases the product (or coupon to encourage repeat use). Sampling Allowing the consumer to try the product or service (in-store, mailed, dentist office, newspaper).

Types of Consumer Promotions Contests and Sweepstakes Create excitement by promising “something for nothing” and offering impressive prizes. Contests are based on skill or ability; you compete for prizes. Sweepstakes are based on luck; send in your name for a drawing. Specialties Presents the brand’s name on something that is given away as a reminder Key chains, pens, calendars, tote bags, coffee mugs.

Types of Consumer Promotions Premiums Tangible reward for a particular act Work by adding value to the product Store premiums: given at retail site In-pack premiums (in the package) On-pack premiums (attached to package) Container premiums (package is premium) Self-liquidating: mail payment with proof of purchase

How to Use Consumer Promotions Awareness McDonalds “movie” toys Trial Get the right people involved with the product through sampling, price deals, coupons, refunds, rebates Maintain/increase market share Convince people to switch Price deals work with low-loyalty products Characters on premiums associate the brand with the character Brand reminder Remind customers of positive experience with ad copy, specialty items, thank you gifts

What are trade promotions? Trade—all those involved in the channel of distribution including buyers, brokers, distributors, wholesalers. Marketers try to get the “trade” involved in promotions to make their marketing effort effective. Trade promotions give channel members information about products and their selling points to encourage them to provide shelf space and push products.

Types of Trade Promotions Point-of-Purchase Display (POP) Manufacturers design and distribute displays to retailers to draw attention to their products. Racks, display cartons, banners, signs, moving parts, lights, action. Retail (Dealer) Kits Materials that support retailer’s selling efforts or help representatives make sales calls on prospective retailing customers. Product spec sheets, ad slicks/discs.

Types of Trade Promotions Trade Incentives and Deals When a manufacturer gives sellers a financial reward for purchasing a certain amount of product or supporting a promotion. Includes special displays, extra purchases, superior store locations, more local promotion. Retailers get special discounts, free goods, gifts, cash from manufacturer. Advertising allowances: deals on coop advertising and deals for using promotional displays.

Types of Trade Promotions Contests Advertisers can develop contests and sweepstakes to motivate resellers. Contests are far more common than sweepstakes because they can be more closely tied to product sales (exceeds the quota by the greatest percentage, win the contest). Trade Shows and Exhibits When companies in the same industry gather to present and sell their merchandise and demonstrate their products.

How to Use Trade Promotions The two primary roles for a trade promotion: Stimulating in-store merchandising or other trade support. Creating excitement among those responsible for selling the product. Trade promotions are also used to: Manipulate wholesalers’ and retailers’ inventory levels. Expand product distribution to new geographic areas or classes of trade.

How to Use Trade Promotions Manipulate Demand Pull strategies: creating or increasing customer demand so product is “pulled” through the channel. Push Strategies: give channel members reasons to carry products or give them better shelf space so product is “pushed” through the channel. Attention POPs get attention and stimulate impulse purchases Motivation Contests, trade deals, and other incentives motivate trade/channel members to make sales. Information Trade show displays give information about products, allow companies to gather and compare products.

What are crossover promotions? Promotions that cross over to other areas of marketing and blur the lines between promotion, advertising, and public relations Sponsorships Event marketing Interactive and Internet promotions Loyalty programs Comarketing/partnership promotions

Sponsorships and Event Marketing CROSSOVER PROMOTIONS Sponsorships and Event Marketing Sponsorships are when companies support an event, say a sporting event, concert, or charity either financially or by donating supplies and services. Event marketing means building a product’s marketing program around a sponsored event, such as the Olympics or a golf tournament.

Other Promotional Support CROSSOVER PROMOTIONS Other Promotional Support Blimps, balloons, inflatables, and skywriting planes capture attention and create excitement at events. Goodyear Blimp Met Life’s Snoopy blimps Inflatable Spiderman to promote the movie Internet sweepstakes Internet coupons

Loyalty Programs Also called a continuity or frequency program CROSSOVER PROMOTIONS Loyalty Programs Also called a continuity or frequency program A promotion to increase customer retention Frequent flyers programs, TGI Friday’s “Frequent Fridays” These programs also capture information to use for more targeted promotions and advertising.

Partnership Programs CROSSOVER PROMOTIONS Comarketing involves manufacturers developing marketing communication programs with their main retail accounts, instead of for them. Cobranding occurs when two companies come together to offer a product (e.g., American Airlines, Citibank Visa). With licensing, one company gives another company the right to use its legally protected trademarks and logos on products and in advertising or promotion. Tie-ins are when two companies are displayed, advertised, or promoted together to multiply impact (e.g., McDonald’s Shrek Happy Meals).

Promotion Objectives Introduce a new product Create brand awareness PROMOTION STRATEGY Promotion Objectives Introduce a new product Create brand awareness Brand building Create affinity between brands and buyers Create brand involvement through positive associations

The Issue of Brand Building PROMOTION STRATEGY The Issue of Brand Building Brand building is long-term and focused on the brand’s core values, while promotion is short term and price-focused. Critics say price promotions can undermine the brand’s established values and erode customer brand loyalty. Proponents say promotion can help build brand image. The solution: advertising must be more accountable and promotion more brand-focused; and they must work together.

Promotion Integration PROMOTION STRATEGY Promotion Integration Advertising and promotion have different strengths that, when combined with other marketing communication tools, can effectively accomplish objectives. Both seek to increase the number of customers and usage of the product by existing customers. Advertising Creates a brand image over time Relies on emotional appeals Adds tangible value to product or service through image Contributes moderately to short-term profitability Promotion Creates immediate action Added value strategies rely on rational appeals; impulse appeals use emotion Adds tangible value to product or service Contributes greatly to short-term profitability

Promotion Effectiveness PROMOTION STRATEGY Promotion Effectiveness Effectiveness is measured by volume, response rates, and redemption (coupons, refunds, rebates) rates. Payout planning seeks to produce promotions that increase sales and profits. Promotions can deliver sales but they must be well planned and executed in order to enhance the brand’s reputation.

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