Chapter 12 Promotion Through the Marketing Channels

Major Topics for Promotion through Marketing Channels Major Topics for Promotion through Marketing Channels 1. Marketing Communication Tools 2. Promotion Objectives 3. Push Promotion and Pull Promotion** 1) Push/Pull Ratio Considerations 2) Push/Pull and Channel Cooperation 4. Push Promotion 5. Research Findings on Push Promotion* 6. Pull Promotion

1. Marketing Communication Tools Advertising Direct Marketing Sales Promotion* Publicity/Public Relations Personal Selling** cf) Another Categorizations of Sales Promotion

Channel Member Support 12 Why is channel member support program one of the major tools of the manufacturer’s promotional mix? Most products and services are not sold directly to final customers. Most products and services are not sold directly to final customers.

5 2. Promotional Objectives Stimulating (more) sales Differentiating offerings Sharing information Accentuating a market offering’s value Stabilizing seasonal demand  These are all for Consumer Promotions For Trade (Channel) Promotion More Reseller Compliance (“More Effort”) More Reseller Representation (“Right Effort”)

12 Pull Strategy 3. Pull Strategy & Push Strategy Push Strategy Manufacturer builds strong consumer demand for a product to force members to automatically promote the manufacturer’s product because it is in their obvious self-interest to do so. Manufacturer builds strong consumer demand for a product to force members to automatically promote the manufacturer’s product because it is in their obvious self-interest to do so. Manufacturer develops mutual effort & cooperation in the development & implementation of promotional strategies by working directly with members to develop strong & viable promotional support. Manufacturer develops mutual effort & cooperation in the development & implementation of promotional strategies by working directly with members to develop strong & viable promotional support.

12 Promotional Strategies in Channels** Promotional Strategies in Channels** Pull Strategy Manufacturer Channel members Final users (consumer or industrial) Final users (consumer or industrial) Channel members Manufacturer Push Strategy 1* 2 3 *Numbers indicate sequence of flows Promotion flow Negotiation flow Product flow 1 2 3

8 Push/Pull Ratio Considerations* 1.Promotion Objectives 2.Budgetary constraints 3.Nature of the product offering 4.Product life cycle 5.Product valuation 6.Relative Power in Channel

12 4. Push Promotion: Promotion Through Channel Members Stand a higher probability of being favorably received by the channel members Strategies that are part of an overall program of manufacturer support of channel member needs Strategies that are part of an overall program of manufacturer support of channel member needs Strategies that involve channel members Strategies that involve channel members &

Basic Push Promotional Strategies Basic Push Promotional Strategies 1. Cooperative Advertising 2. Promotional Allowances 3. Slotting Fees 4. Displays & Selling Aids 5. In-store Promotions 6. Contests & Incentives* 7. Special Promotional Deals & Merchandising Campaigns  All involves “money”

12 Cooperative Advertising Typical Strategy: A sharing in the cost on a 50–50 basis up to some percentage of the retailer’s purchases from the manufacturer Administration: 1. Effective administration by manufacturer is necessary to avoid abuses & to help secure cooperation from channel members 2. Channel manager must be sensitive to channel members’ primary concern about this strategy

Promotional Allowances 12 Typical Strategy: Manufacturer offers channel member a direct cash payment or a certain percentage of the purchases on particular products Administration: Manufacturer should conduct research to determine whether it is getting its money’s worth in terms of retailer cooperation and follow-through

Slotting Fees 12 Typical Strategy: Payments by manufacturers to persuade channel members, especially retailers, to stock, display, and support new products Administration: Joint sponsorship of research between retailers and manufacturers on effects of slotting fees on various topics could help alleviate conflict * Antitrust implication

Displays & Selling Aids 12 Typical Strategy: Include point-of-purchase (POP) displays, dealer identification signs, promotional kits, special in-store displays, & mailing pieces Administration: Channel manager should make the effort to see whether the firm’s selling aids and displays are serving any useful purpose

In-Store Promotions 12 Typical Strategy: Short-term events designed to create added interest and excitement for the manufacturer’s products Administration: The planning of a successful in-store promotion should always include considerations of the potential benefits for the retailers involved.

Contests & Incentives 12 Typical Strategy: Techniques that manufacturers use to stimulate channel member sales efforts for their products Administration: Manufacturer should put much effort into determining the view of channel members toward this form of promotion

Special Promotional Deals & Merchandising Campaigns 12 Typical Strategy: Include a variety of push-type promotional deals such as discounts to channel members to encourage them to order more products Administration: Manufacturers need to develop carefully planned strategies that are based on knowledge of channel member needs and that take a long-term perspective on promotion through the marketing channel

12 “Kinder & Gentler” Push Promotion Toos Training Programs Quota Specification Missionary Selling* Trade Shows  Nonmonetary Promotions

12 Training Programs Wholesale: Help wholesalers’ knowledge, selling techniques, and skill in counseling customers they call on Retail: Help retailer’s product knowledge, selling techniques, and counseling customers on product usage Pro Manufacturers can assist wholesalers & retailers by helping to offset the cost. Con Distributors have often little time for training.

12 Sales volumes that manufacturers specify for channel members to generate during a certain time period Pros Can amount to a substantial sum and can make a major difference in the dealers’ overall profit picture Can be effective in improving channel member promotional support Cons If presented in a coercive fashion, it can produce ill will and conflict rather than support Channel members may ignore quota if manufacturer’s line does not make up an important part of the member’s product mix Quota Specification

12 Manufacturer’s salespeople who are specially assigned to supplement the selling activities of channel members Pros A useful strategy when channel members lack sales capacity or competence to handle tasks assigned to them Useful when channel members desire this service Cons Expensive Can cause conflicts in the channel Some members view these salespeople as intruding on the time of their own sales force Missionary Selling

12 Annual events organized by associations in particular industries Pros Opportunity for manufacturer to sell existing & new channel members substantial quantities of new products face-to-face A chance for manufacturers to socialize with channel members Creates a sense of pride and belonging in channel members that sell its products Trade Shows

23 Promotional Strategies & Channel Cooperation Major Factors Driving the Extent of a Reseller’s Support for a Manufacturer’s Promotion: Big Issue Now** – Item importance – Promotion elasticity – Manufacturer’s brand support –Manufacturer’s reputation –Promotion wearout **: My Research Findings

12 5. Push Promotion Research Findings* Ad hoc, quick-fix, and frequently offered push promotions do not foster high levels of channel member support on a consistent basis. 1.

12 Push promotions should be viewed as part of strategic channel management rather than as mere tactical actions. 2. Push Promotion Research Findings

12 Manufacturers should study channel members’ needs carefully before launching major push promotions.* 3.

12 Post-promotion research is needed if manufacturers expect to make steady progress in improving the effectiveness of push promotions.* 4. Push Promotion Research Findings

6. Pull Promotion* Advertising (to consumers): –Important for demand generation purpose – Market pull through strong brand equity Sales Promotion (to consumers) Can be done by a Manufacturer and/or a Retailer

Point-of-Purchase Displays Point-of-Purchase Displays Premiums Price Packs Cash Refunds Coupons Samples Short-Term Incentives to Encourage Purchase or Sales of a Product or Service. Consumer- Promotion Objectives Consumer-Promotion Tools Patronage Rewards Games Rebates Contests Advertising Specialties Advertising Specialties Patronage Rewards Entice Consumers to Try a New Product Entice Consumers to Try a New Product Lure Customers Away From Competitors’ Products Lure Customers Away From Competitors’ Products Get Consumers to “Load Up’ on a Mature Product Get Consumers to “Load Up’ on a Mature Product Hold & Reward Loyal Customers Hold & Reward Loyal Customers Consumer Relationship Building Consumer Relationship Building Consumer Sales Promotion

30 An Example: Car Marketing Channel* Ford Dealer* Car Buyer Pull: Consumer Promotion (Cash back) Advertising Push by a Maker: Incentive to Dealers Push by a Dealer: Dealer Promotion * Pass-through issue