Chapter 15 Sales Promotions

Sales Promotion “Sales Promotion is a Marketing Discipline that Utilizes a Variety of Incentive Techniques to Structure Sales-Related Programs Targeted to Consumers, Trade, and/or Sales Levels that Generate a Specific, Measurable Action or Response for a Product or Service.”

Reasons for the Growth of Sales Promotion Sales Managers are Under Great Pressure to Produce Results Quickly. Assessment of Sales Promotion is Relatively Easy. Why Are Companies Spending More and More Money on Sales Promotion? Cost for Results In This Industry Are Relatively Low. Sales Promotion Strategies Target Consumer, Trade, and The Sales Force.

Promotion Strategies Promotion Can: Promotion Can’t: Offer an immediate inducement, Cause customers to try a product, Persuade customers to buy again, Introduce a new product or build a brand over time. Promotion Can’t: Create an image for a brand, Compensate for a lack of advertising, Do much to compensate for a negative image, Reverse a sales decline.

Sales Promotion Strategies Objectives Intended to Change Consumer Behavior Building Brands Can be Used to Build Brand Images, But May be Long-Term Introducing New Products Advertising and Promotion Work Well Together Here Using Push & Pull Strategies

Consumer-Oriented Promotions Samples Coupons Consumer- Oriented Promotion Premiums Contests/sweepstakes Refunds/rebates Sampling - sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing a new brand to the market although it is also used for established products. Couponing is the oldest, yet most widely used and effective sales promotions tool. As shown in the text, the number of coupons distributed to consumers has increased dramatically over the past decade and more than 7 billion are redeemed each year in the U.S. A premium is an offer of an extra item of merchandise or service either free or at a low price that is used as an incentive for purchase. The two basic types of premiums are: A contest is a promotion whereby consumers compete for prizes or money on the basis of skills or ability and winners are determined by judging entries against some predetermined criteria. Contests often provide a purchase incentive by requiring a proof of purchase to enter or to obtain an entry form from a dealer or advertisement. A sweepstakes is a promotion whereby winners are determined purely by chance and cannot require a proof of purchase as a condition for entry. Another form of a sweepstakes is a game which also has a chance element associated with winning. Refunds and Rebates are offers to return some portion of the product purchase price after supplying some sort of proof or purchase. Consumers are generally responsive to refund or rebate offers, particularly as the size of the savings offer increases. Bonus Packs offer the consumer an extra amount of a product at the regular price by providing larger containers or extra units. Here are some of the advantages and limitations of bonus packs: Price-off Deals provide a reduction in the regular price of the brand, typically right on the package through specially marked price packs. Here are some of the advantages and limitations of price-off promotions: Event Sponsorship are promotions whereby a company develops sponsorship relations with a particular event. Sponsorship of sporting events such as golf and tennis tournaments and car races are common among and many companies are sponsoring concert tours. Marketers are attracted to event sponsorship for many reasons including: Bonus packs Price-offs Event sponsorship 2 2

Objectives of Consumer-Oriented Sales Promotion Obtaining trial and repurchase Increasing consumption of an established brand Defending current customers Targeting a specific market Enhancing advertising and marketing efforts Objectives for consumer-oriented sales promotion - As the use of sales promotion techniques continues to increase, companies must give consideration to what they hope to accomplish through their promotions and set clearly defined objectives and measurable goals for their sales promotional programs. While the basic goal of most sales promotion activities is to induce purchase of a brand, there are a number of different objectives the marketer might have for both new and established brands. These include: 3 3

Advantages of Coupons Offers price reduction only to consumers who are price sensitive Does not rely on retailers’ cooperation Generates trial of a new brand Encourages non-users to try an established brand or users to repeat use

Disadvantages of Coupons Difficult to estimate redemption rates (<2%) May be redeemed by loyal users who would buy anyway Expensive Misredemption and fraud Cons: It can be difficult to estimate how many consumers will redeem a coupon and when they will do so. Coupons targeted to attract new users of established brands are often redeemed by previous loyal users. Couponing programs can be expensive. Problems of coupon misredemption and fraud exist. 5 5

Contests and Sweepstakes Compete for a Prize Based On Some Skill or Ability Generates High Degree Of Consumer Involvement Can Help Revive Lagging Sales Participants Submit Names To Be Included in Drawing Game – Type of Sweepstakes; Time Frame Much Longer

Advantages of Sweepstakes and Contests Effective way of getting the consumer to become involved with the brand by making the promotion product relevant Generate interest in or excitement over a brand and attracting attention to advertising Effective way of dealing with specific marketing problems 6 6

Disadvantages of Contests and Sweepstakes May overshadow the ad or brand May detract from brand franchise or image Legal problems and administration Presence of professionals or hobbyists who may submit entries and detract from effectiveness 7 7

Station Break Go to the McDonald’s Web site at www.mcdonalds.com. This site provides a variety of activities for visitors including contests and sweepstakes. What is your view of contests or sweepstakes where children might be involved (notice that the Web site is oriented toward younger customers)? What is the purpose of the contest or sweepstakes in this case? Do they help sell the products? Discuss in class.

Refunds, Rebates, and Premiums Refunds and Rebates A Marketer’s Offer to Return a Certain Amount Of Money to the Consumer Who Purchases the Product. i.e cash rebate + low-value coupon Premiums Tangible Reward for Performing a Particular Act. Direct – Received At Time of Purchase Mail – Proof of Purchase & Payment Be Mailed In

Sampling Allowing the Customer to Experience the Product or Service. Very Effective Strategy for Introducing A New or Modified Product. Most Common Method of Distributing Samples is Through the Mail. 9 Out of 10 Customers Prefer a Sample To a Cents-Off Coupon to Introduce Product.

Trade Promotions Trade advertising is directed at wholesalers and retailers and represents 50% of the total promotional spending. Four goals of a trade promotion are: Stimulate in-store merchandising or other trade support, Manipulate levels of inventory held by wholesalers and retailers, Expand product distribution to new areas of the country or new classes of trade, Create a high level of excitement about the product among those responsible for its sale.

Types of Trade Promotions Point-of-Purchase Trade Deals Retailer Kits Trade Incentives Contests Exhibits Sweepstakes Trade Shows

Promotion Integration (Tab. 15.5)

Objectives of Trade-Oriented Sales Promotions Obtain distribution for new products Maintain trade support for established brands Encourage retailers to display established brands Build retail inventories 10 10

Point-of-Purchase Displays Display Distributed to Retailers Used to Call Customer’s Attention to Product Promotions. Point-of-Purchase Displays Some of the Most Popular POP Tools & Techniques Mechanical Product Dispensers Price Cards Signs Banners Special Racks Carton Displays $12 Billion Business; Second Largest Category of Sales Promo Expenditures.

Trade Promotions Contests & Sweepstakes Retailer (Dealer) Kits Materials That Help Reps Make Sales Calls Are Often Designed as Kits. Contain Detailed Product Specs, How-to-Do it Display, etc. Trade Shows & Exhibits Advertisers Can Develop Contests & Sweepstakes to Motivate Resellers. Occasional Use Only is Effective. Allow Product Demonstrations, Provide Information, & Answer Questions. $16.5 Billion is Spent Annually.

Trade Incentives and Deals $8 to $12 Billion Business Annually Designed for Special Trade Promotional Circumstances. Trade Incentives and Deals Incentive Programs i.e. Used When Introducing A New Product. Types Include Bonuses & Dealer Loadings Trade Deals Most Important Reseller Sales Promo Technique. Types Include Buying & Advertising Allowances

Sponsorships and Event Marketing Sponsorships include a number of activities including: sports sponsorships, entertainment tours and attractions, festivals, fairs, and annual events, cause marketing – associating with an event that supports a social cause, and arts.

Sponsorships and Event Marketing Event marketing describes the marketing practice in which a brand is linked to an event to create experiences for customers and associate the brand personality with a certain lifestyle. A sponsorship occurs when a company sponsors a sports event or concert, or supports a charity with its resources. It is attempting to increase the perceived value of the sponsor’s brand in the consumer's mind. Blimps, balloons, and inflatables are used at many events.

Specialty Advertising Build Brands; Creating Both Awareness and Reminders Includes Everything From Hats With Logos to T-shirts, & Mousepads Third Largest Category of Promotional Spending Normally Have a Promotional Message Printed Somewhere