Sales Promotion Management Last Session 7 th October 2010

MANUFACTURER’S PROMOTION PLANNING PROCESS

The Manufacturer’s Planning Process 1.Corporate and Division objectives 2.Situation Analysis 3.Corporate and Division Policy/Philosophy 4.Marketing objectives and Strategy, Sales Promotion and Strategy 5.Promotion Tactics 6.Performance Criteria 7.Implementation 8.Evaluation 9.Budgeting

Corporate and Division Objectives Often stated in very specific numerical terms involveing sales, market share, profit or ROI. At some level, these goals must be divided up among the firm’s several brands.

Situation Analysis Areas to be reviewed include brand performance, competitive performance consumer behavior particularly w.r.t. consumer response to promotions and competitive activities Specific examples of data : historical competitive activity can provide clues as to the competition’s future plans as well as how competitors react

Corporate and Division Policy/Philosophy Sales promotions are a necessary evil a cost of doing business that should be decreased if possible to be used as defensive measure for protecting one’s market share should extend and reinforce the brand’s advertising and positioning, whenever possible should be developed as campaigns, not as single, unrelated events are built upon sound strategic planning

Marketing Objectives, and Strategy, Sales Promotion Objectives and Strategy In general, Objectives are goals, often numerical, specific, measurable, clear and concise, practical and realistic, affordable and attainable Strategies are general approaches to achieving goals Marketing strategies and objectives pertain to the marketing mix as a whole, while Promotion objectives and strategies pertain just to that aspect of the marketing mix

Examples ofMarketing andPromotion IIIIII Marketing objectives Increase market share from 5% to 7% Increase sales by 20% Increase profit by 20% Marketing strategy Promotion will push the product, while advertising will pull it Increase purchase rate of product Decrease marketing expenditures while holding sales as high as possible Promotion objectives Gain 90% distribution for the product Decrease inter- purchase time from 10 to 8 Maintain distribution at 90% Promotion strategy Use trade deals especially in low distribution areas Use trade dealing to encourage frequent price cuts. Use consumer promotions to encourage faster use rate Cut consumer promotions that do not pay out. Use trade deals only to extent necessary to maintain distributions Three Examples of Marketing and Promotion Objectives and Str ategies

Examples ofMarketing andPromotion Marketing objectives Increase market share by 50% over the past three years Marketing strategy Initiate and establish habit using promotion; reinforce using advertising Promotion objectives Yr. 1 : Increase % ever tried from 50% to 75% Yr. 2: induce 50% repeat rate among your new triers Yr. 3: Maintain 40% repeat rate among new triers Promotion strategy Yr. 1 and 2 : Use direct mail couponing and sampling to attract new Use in-pack coupons to stimulate repeat purchase Yr. 3 : Gradually phase out in-pack coupons and use limited FSI coupon distribution Marketing and Promotion Objectives and Strategies - Long Term Plan

Promotion Tactics Are the specific tools for executing a particular strategy. The output of the tactics plan is a promotion calendar showing when each promotional event will occur and separate description of the events. The best way to specify promotion tactics is through a process of generating and screening alternatives

Generating Alternatives The easiest and most common way to generate alternatives by consulting a list The use of lists often gets the planner in the ball park of what type of promotion to use, but there are still details to be worked out

Screening Alternatives Involves evaluating them on the criteria of consistency with strategy and achievement of objectives. Evaluating consistency with strategy can often be made on a judgmental basis There are four methods for determining whether a given alternative will achieve quantifiable objectives : 1.Judgment based on experience 2.Pretesting 3.Market tests 4.Decision models

Generating Promotion Alternatives for Packaged Goods : A List Cross-referenced by Promotional Objectives Technique Primary Impact Brand Awareness Attract New Customers Increase Sales to Present Customers Bonus PacksY Cash refunds Single purchaseY Multiple purchaseY Contest/SweepstakesY Couponing Media/mailY In/on packY MultipleY Premiums Single purchaseY Multiple purchaseY Price-offY SamplingY

Generating Promotion Alternatives for Durable Goods : A List Cross-referenced by Product types Price Lower Ticket (Disposables)Higher Ticket (Serviceables) Product Type ItemSystemItemSystem Cascaded Demand Example NoYesNoYesNoYesNoYes IronCameraTyresSkis Refri- gerator Auto- mobile Home Security System PC Rebates * * * * * * * * Price/quality promo * Coupons * Sweepstakes ** Accessories/premiums *** Testers/Samples ** Tie-in promotions *** Trade-in allowances ***** Financing incentives *** Service contracts *** Finders fees *

Performance Criteria The “bottom line” performance criteria for a promotion should relate directly to the objectives of the promotion However, intermediate measures are also useful, e.g., Performance criterion : 90% distribution Intermediate criterion, say: % of retailers participating in the trade promotion are also important % display and features achieved at retail % coupon redemption rates

Implementation Can be a very painstaking task, especially when several different components need to be coordinated.

Evaluation It does appear that formal evaluations are undertaken, but the quality and actual usage of these reviews may be suspect. There are three fundamental issues regarding evaluations : 1.Are formal evaluations undertaken? 2.Are the evaluations high quality? 3.Are the results used for future planning?

Budgeting The promotion planning process consists of three levels of budgeting decisions : 1.The total marketing budget 2.The allocation of that budge to promotion versus advertising and other marketing mix elements 3.Preparation of individual promotion budgets