Chapter 16 Sales Promotion

Sales Promotion An extra incentive to buy “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.” An extra incentive to buy An inducement to intermediaries Targeted to different parties

Sales Promotion Vehicles Consumer-Oriented Trade-Oriented Samples Contests, dealer incentives Coupons Trade allowances Premiums Point-of-purchase displays Contests/sweepstakes Trading programs Refunds/rebates Trade shows Bonus packs Cooperative advertising Price-offs Event sponsorship

Consumer Promotions Media Advertising Trade Promotions Long-Term Allocations to Advertising, Trade Promotions and Consumer Promotions 100% Consumer Promotions 90% 80% 70% Media Advertising 60% 50% 40% 30% Trade Promotions 20% 10% 0% '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 Percent of total promotional dollars, 3-year moving average.

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

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

Consumer Franchise-Building (CFB) Promotions 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

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

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

Percentage of Promotions Vehicles Used by Package Goods Manufacturers, 1997 0% 25% 50% 75% 100% Money back offers/other refunds Couponing consumer direct Cents-off promotions Couponing in retailers' ads Couponing in store Sampling new products Sampling established products Premium offers Electronic retail promotions Sweepstakes Internet promotions Contests Prepricing on package Other

Percentage of Promotions Vehicles Used by Package Goods Manufacturers, 1997 0% 25% 50% 75% 100% Money back offers/other refunds Couponing consumer direct Cents-off promotions Couponing in retailers' ads Couponing in store Sampling new products Sampling established products Premium offers Electronic retail promotions Sweepstakes Internet promotions Contests Prepricing on package Other

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

Coupon Distribution Other Magazines In / On Pack Direct Mail Newspaper Coop Newspaper ROP Freestanding

Percent of Sales Bought with Coupons Gum Candy Carbonated Beverages Adult Cold Remedies Pet Food Coffee Sanitary Protection Deodorants Liquid Detergents Ready-to-Eat Cereal Disposable Diapers 43% 35% 29% 25% 24% 20% 12% 11% 8% 7% 2%

Coupon Fraud Consumers redeem without purchase Clerks and staff exchange for cash Managers/owners redeem without sale Criminals collect or counterfeit and sell

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

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

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

The Sales Promotion Dilemma Our Firm Cut Back Promotions Maintain Promotions We loose market share Same market share, profits stay low Maintain Promotions All Others Higher profits for everyone We gain in market share Cut Back Promotions

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.

Shifting Role of the Promotion Agency Traditional New and Improved 1. Primarily used to develop short-term tactics or concepts 1. Used to develop long- and short-term promotional strategies as well as tactics 2. Hired/compensated on a project-by-project basis 2. Contracted on annual retainer following formal agency reviews 3. Many promotion agencies used a mix—each one hired for best task and/or specialty 3. One or two exclusive promotion agencies for each division or brand group 4. One or two contact people from agency 4. Full team or core group on the account 5. Promotion agency never equal to ad agency—doesn’t work up front in annual planning process 5. Promotion agency works on equal basis with ad agency—sits at planning table up front 6. Not directly accountable for results 6. Very much accountable—goes through a rigorous evaluation process