S ALES P ROMOTION Distribution Management M Wahidul Islam Spring 2015 LECTURE 7

W HAT IS S ALES P ROMOTION ? “Sales Promotion, a key ingredient in marketing campaigns, consist of a diverse collection of incentive tools, mostly short- term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade” Philip Kotler

B ENEFITS OF S ALES P ROMOTION M ANUFACTURERS Price differentiation Trial Increase in sales Build a database Easy to design and implement and less-expensive Useful for small player

B ENEFITS OF S ALES P ROMOTION C ONSUMERS Loyals vs Switchers Price sensitive customers B ENEFITS OF S ALES P ROMOTION T RADERS New product introduction Increased sales traffic

D RAWBACKS OF S ALES P ROMOTION Manufacturers Reduction in brand value Dilution in quality image Consumer Confusion Traders Price-sensitivity Increased competition

D IFFERENT C ONSUMER P ROMOTIONS Sampling Coupons Premiums (gifts) Contests & Sweepstakes (or Prizes) Refunds and rebates Price-offs Bonus packs Frequency programs Event marketing Point-of-Purchase

SAMPLING In-store distribution Direct from retail store Direct sampling Delivered to a mailing address (home / office) Response sampling Only respondents get the free sample Media sampling Sample is included in the media outlet Selective sampling Samples are distributed at a site / event / Sampling is one of the most expensive ways of consumer promotion as there is no guarantee that it will lead to a future purchase. However, most effective for launching a new product. Sampling is one of the most expensive ways of consumer promotion as there is no guarantee that it will lead to a future purchase. However, most effective for launching a new product.

C OUPONS – A PRICE REDUCTION OFFER Instant redemption coupon Can immediately redeem the coupon while making the purchase Bounce – back coupons Coupons are placed inside packages so that consumers are encouraged for repeat purchase Scanner – delivered coupons When competitors products are scanned, a coupon is given Cross-ruff coupons Coupon for one product places inside another (bundling) Response offer coupons Issued on request of a customer Can be difficult to manage. Brands that are readily recalled by consumer, face value of the coupon, the ease of distribution method and flexibility are key point in successful promotion planning using coupons. Can be difficult to manage. Brands that are readily recalled by consumer, face value of the coupon, the ease of distribution method and flexibility are key point in successful promotion planning using coupons.

P REMIUMS / G IFTS In or On package premiums Small gift inside / strapped on the package Free in the mail premiums After proof of purchase are received by the manufacturer Self liquidating premiums Consumers pays the cost for the gift and the handling as well Store or manufacturer premiums Given by manufacturer or retailer when the customer buys the product Have high cost, but can add value to the product / brand. They can attract new customers and thank the existing customers. Have high cost, but can add value to the product / brand. They can attract new customers and thank the existing customers.

O THERS Contests Consumer buy the product Sweepstakes Participants do not require to buy the products Refunds and Rebates Price-offs Bonus packs Frequency and loyalty programs Event marketing and Event Sponsorship Point-of-Purpose Includes posters, danglers, banners, stand-up racks, brand logos, products dispensers

T RADE P ROMOTIONS Directed towards the channel members OR Resellers Retailers Wholesalers Distributors Dealers Usually companies spend more money on Trade Promotions than Consumer promotions

O BJECTIVES OF T RADE P ROMOTION Persuade the reseller to carry the company’s product To encourage retailers to promote / support company’s product To encourage retailers to display company’s PoP material To get better shelf space To stock and display new products To make retailers and their sales staff more interested to push the company’s products

T YPES OF T RADE PROMOTIONS

T YPES OF T RADE PROMOTIONS T RADE A LLOWANCES A major type of trade promotion Resellers are offered financial incentives to purchase, promote, display company’s products Different execution types Off-invoice allowance Slotting allowance New Product Placement Promotional / Merchandizing allowance Advertising and sales support activities Drop-ship allowance Exit fees

T YPES OF T RADE PROMOTIONS T RADE C ONTESTS Monetary rewards given to resellers’ sales persons for achieving sales goals Also known as spiff money or push money Can have negative impact on end customers as sales persons may push the wrong product

T YPES OF T RADE PROMOTIONS T RAINING P ROGRAMS & T RADE S HOWS Training Programs Training for resellers to know more about the product’s features, benefits and USPs Can be conducted in separate venue or during the sales person’s visit Trade Shows Trade show / trade fair / exhibitions a useful way of showcasing the product Can convey products benefits to resellers as well as end customers as well

T YPES OF T RADE PROMOTIONS C OOPERATIVE A DVERTISING Cost of advertising is shared by two or more organizations Three types Horizontal Cooperative Advertising Group of retailers providing similar products sponsor a common campaign Vertical Cooperative Advertising Company and retailer together run a campaign Ingredient-sponsored Cooperative Advertising Manufacturers of raw materials and component parts help successful promotion of the end product to the customer.

R EFERENCES Chapter 17 – Sales Promotion Havaldar K. and Cavale V. M. (2011) Sales and Distribution Management – Text and Cases (2 nd Edition) Delhi: Tata McGraw-Hill Education Private Limited

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