Sales Promotion 16 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion An extra incentive to buy A tool to speed up sales Targeted to different parties “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.”

Sales Promotion Vehicles Samples Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus Packs Price-off deals Frequency programs Cooperative advertising Trade allowances Training programs Contests, incentives Point-of-purchase displays Trade shows Consumer-Oriented Trade-Oriented Event marketing

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Long-Term Budget Allocations 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ‘94‘95‘96‘97'98‘99‘00‘01‘02‘03‘04‘05 Consumer Promotions Media Advertising Trade Promotions % of Total Promotional Dollars, 3-yr Moving Average

Media Often Delivers a Promotion Message

Sales Promotion Increases Declining brand loyalty Increased promotional sensitivity Brand proliferation Fragmentation of consumer markets Short-term focus of marketers Increased accountability Competition Clutter Reasons Growing power of retailers

Consumer Franchise-Building Promotions Communicate distinctive brand attributes Build long-term brand preference Develop and reinforce brand identity “Frequency” programs encourage repeat purchase Sweepstakes & contests to build equity, increase involvement Promotional Objectives Techniques and Practices Premium offers that reinforce the brand image and help build equity

Nonfranchise-Building Promotions Accelerate the purchase decision process Generate an immediate sales increase Objectives Do not identify unique brand features Do not contribute to brand identity or image Limitations

Contests Can Build Brand Equity

Nonfranchise-Building Promotions Price-off deals Rebates or refunds Bonus packs May Include... 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 Promotions To increase consumption of an established brand To target a specific segment Enhance IMC efforts and build brand equity To defend (maintain) current customers To obtain trial and purchase Objectives

Sampling The products are of relatively low unit value The product can be broken into a small piece or size that reflects the full features and benefits The purchase cycle is relatively short Sampling Works Best When

Sampling Methods Door-to-door Direct mail In-store On package Event Newspaper/magazine insert Internet sites Methods

Distributing Samples With Newspapers

Armor All Uses On-Package Samples

Couponing Nearly 240 billion distributed each year in the US The oldest and most widely used sales promotion tool 85% of consumers use coupons; 21% use them regularly

Pros and Cons of Coupons AdvantagesDisadvantages Appeals to price sensitive consumer Can offer price break without retailers co-op Effective way to induce trial of products Can be way to defend market share and encourage repurchase Often used by loyal consumers who may purchase anyway Misredemption and fraud Hard to tell how many consumers use them and when Declining redemption rates and high costs of couponing

Coupons are Most Often Used With… Disposable Diapers Cereal Laundry Soap

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

The Most Popular Coupons are FSIs

Coupon Redemption Rates

Valpak Enhances Value of Coupons

Types of Coupons In/on-pack Bounce-back Cross-ruff Instant Tear-off pads In-store Handouts Dispensers Register printout

Coupons are Available Electronically

Premiums An offer of an item, merchandise, or service, free or at a low cost, that is an extra incentive for customers Types of Premiums Free: Only requires purchase of the product Self-liquidating: consumer required to pay some or all of the cost of the premium

Airline Miles are a Popular Incentive

More Consumer-Oriented Promotions Contests and sweepstakes Refunds and rebates Bonus packs Price-off Deals Loyalty programs Event marketing

Trade Oriented Promotions Maintain support for established brands Encourage display of products Build retail inventories Obtain distribution for new products Objectives

Types of Trade Oriented Promotions Buying Promotional Slotting POP displays Sales training Trade shows Contests and incentives Trade allowances Co-op Advertising Types

Coordinating Sales, Advertising, IMC Tools Budget allocation Coordination of themes Media support and timing

Problems With Sales Promotion

Aspects of Consumer Promotions Economic Informative Affective