Sales Promotion… Is an incentive to get customers, channel members, or the sales force to take some action (like buying) Has 2 basic types Price reduction effect (e.g. rebates, coupons) Incentive based on something other than price (e.g. a contest) Clow and Baack -- 2 basic types Franchise Building Sales Building Always conveys one or more messages, intended or unintended

Purposes of Trade Oriented Sales Promotion New product distribution Maintain trade support and market share for established products Get shelf space Get display and other kinds of promotional support Build channel inventories Build order size Build channel relationships

Trade Promotion Tools Trade allowances – incentive for purchasing Trade contests Trade incentives – incentive for performing a function Training programs Vendor support programs – reimbursement to channel members e.g. for advertising Trade shows Specialty advertising Point of purchase advertising – special merchandise displays

Drawbacks and Disadvantages of Trade Promotions Costs Impact on small manufacturers Over-reliance to move merchandise Erosion of brand image Specific to Trade Allowances Failing to pass along savings to consumers Forward buying Diversion

Good Times or Reasons to use Sales Promotion When price promotion is consistent with brand image or positioning When introducing a new product When trying to move inventory, or trying to get the most out of a bad idea (e.g. a clothing line that didn’t work out) In maturity – competing on price But be careful what message is conveyed

Sales Promotion is good for… Getting attention Getting liking (maybe) Getting cognitive involvement (contests & sweepstakes) Getting trial Getting purchase But again, be careful what message is conveyed

Types Coupons Premiums Contests & sweepstakes Refunds & rebates Sampling Bonus packs Price-offs Combinations of the above

Coupons FSIs – most common Avg. redemption rate – about 2%, but >20% for Internet coupons Brand-loyal customers redeem about 80% of coupons: both bad and good Illegal redemption Use couponing to reinforce brand already in evoked set

Other Types, some detail Premiums Use premiums with perceived value Premium should relate to the product or at least to the audience Problems: time and cost Contests and Sweepstakes More engaging – but tie to decision process and hierarchy of effects Use both extrinsic and intrinsic value Problems: cost, indifference, clutter

More types and detail Refunds and rebates Sampling Problems: costs, expectations, time-to-reinforcement Sampling Introduce a new product Problems: costs, effective distribution

Even more types and detail Bonus Packs Can get brand switching Tough to figure right amount of give away Price-offs Message? Business-to-business Few FSIs More emphasis on premiums, contests/sweepstakes, sampling, and bonus packs

Key Aspects of Sales Promotion to Keep in Mind It’s an extra incentive It’s a sales accelerator, often Often the channel is the target It can be consumer oriented, trade oriented, or aimed at business customers

Use of Sales Promotion has grown due to… Power of retailers Lower brand loyalty More sensitivity to promotion More brands Fragmented consumer market Short term view More accountability Competition Clutter in advertising