Sales Promotions Copyright 2010 SAGE Publications, Inc. 8-1

Kraft J.L. Kraft, , acquired Phoenix Cheese Company 1989, Kraft and General Foods merged Multiple powerful brands Promotional offers to consumers Variety of distribution systems Emphasis on being good global citizen Revamping for sustained growth Copyright 2010 SAGE Publications, Inc. Insert Photo

Promotions Consumer promotions Directed toward end-users Pull products through channel Trade promotions Directed toward channel members Push products through channel Copyright 2010 SAGE Publications, Inc. 8-3

Copyright 2010 SAGE Publications, Inc. Insert Figure Objectives of Consumer and Trade Promotions

Managing Consumer Promotions Advertising Creates awareness Sparks interest Produces excitement Consumer promotions Encourages switching brands Encourages sampling new brand Keeps current customers Generate store traffic Boost sales Copyright 2010 SAGE Publications, Inc. 8-5

Copyright 2010 SAGE Publications, Inc. Insert Figure Factors to Consider When Choosing a Consumer Promotion

Copyright 2010 SAGE Publications, Inc. 8-7 Consumer Promotions Bonus Packs Price-offs Refunds and Rebates Sampling Contests and Sweepstakes Premiums Coupons

Price reduction offer In United States 323 billion distributed annually 3 billion redeemed (0.93%) 80% of households use coupons 80% of coupons issued by manufacturers Majority distributed in print media FSIs (Free standing inserts) Copyright 2010 SAGE Publications, Inc. 8-8

Copyright 2010 SAGE Publications, Inc. Insert Figure

CouponGoal Copyright 2010 SAGE Publications, Inc Instant redemption Bounce back Scanner-delivered Cross-ruffing Trial purchase Repeat purchase Brand switching Additional product

Coupons Advantages Stimulate sales Match competing offer Additional purchases Disadvantages Misredemption Counterfeiting Tend to be used by current customers Copyright 2010 SAGE Publications, Inc Insert Photo 8.2

Copyright 2010 SAGE Publications, Inc. Insert Table

Copyright 2010 SAGE Publications, Inc. Insert Table

Premiums Prize, gift or special offer with purchase Advantages Pay full price Can boost sales Acquire new customers Can create buzz Disadvantages Not good for stimulating sales or attracting customers Costs Copyright 2010 SAGE Publications, Inc. 8-14

Copyright 2010 SAGE Publications, Inc. Insert Table

Contests and Sweepstakes Contests Normally require some type of activity Winner selected on performance May require purchase (not legal in some states) Sweepstakes No purchase required Chances of winning must be published Copyright 2010 SAGE Publications, Inc. 8-16

Contests and Sweepstakes Major goal is to collect data Intrinsic value Extrinsic value Instant rewards Copyright 2010 SAGE Publications, Inc Insert Photo 8.3

Contests and Sweepstakes Advantages Create interest, excitement, and buzz Increase brand awareness and brand loyalty Create a positive image Disadvantages May not impact sales Lack of intrinsic and extrinsic value Copyright 2010 SAGE Publications, Inc. 8-18

Refunds and Rebates Refund – soft goods Rebate – hard goods Consumer pays full price Manufacturer mails refund Inconvenient for consumers Only 30% redeemed Rebate over $50, 65% redeemed Copyright 2010 SAGE Publications, Inc Insert Photo 8.4

Refunds and Rebates Advantages Creates interest in brands with rebate Counter competitive efforts Maintain customer base without lowering price Attractive to retailers Encourages cooperation between manufacturers and retailers Can lead to point of purchase brand switching Disadvanta ges Loss of revenue Costs of record keeping and mailing rebates Customers expect and will not purchase without rebate Copyright 2010 SAGE Publications, Inc. 8-20

Copyright 2010 SAGE Publications, Inc. Insert Table

Copyright 2010 SAGE Publications, Inc. Insert Table

Sampling Delivery of good or service for trial use Another promotional offer may be used with sampling Used in consumer and business markets Targeted sampling due to costs Advantages Stimulates trial usage Excellent for new product introductions Disadvanta ges High costs Copyright 2010 SAGE Publications, Inc. 8-23

Bonus Packs Offer additional product in special package Bonus packs range from 20% to 100% of normal package 30% bonus pack most common Advantages Encourages greater use of a product Preempt customer from buying competing brand May attract non-loyal customers Can attract price sensitive consumers Disadvantages Delays next purchase through stockpiling Costs of new package and reduced price Not best method of acquiring new customers Copyright 2010 SAGE Publications, Inc. 8-24

Copyright 2010 SAGE Publications, Inc. Insert Figure

Price-Offs Temporary reduction in price Used in both consumer and business markets Advantages Ability to attract new customers Stimulate sales Encourage switching of brands Encourage stockpiling Disadvantages Lost revenue per item Reduced profits Customers not willing not willing to pay full price Copyright 2010 SAGE Publications, Inc Insert Photo 8.6

Copyright 2010 SAGE Publications, Inc. Insert Table

Types of Customers Promotion prone Price sensitive Brand loyal Preferred brand Best group to target Consumers vary by across products Copyright 2010 SAGE Publications, Inc Insert Photo 8.7

Trade Promotions Incentives to channel members Push product through the channel 70% of manufacturer’s marketing budget 17.4% of gross sales of manufacturers Primary categories of trade promotions Trade allowances Trade incentives Trade shows Copyright 2010 SAGE Publications, Inc. 8-29

Trade Allowances Financial incentives Most common is off-invoice allowance Accounts for 35% of all trade incentives Extremely popular because reduces price Allows retailers to charge less or earn greater profits Encourages two activities by retailers Forward buying Diversion Slotting fees Copyright 2010 SAGE Publications, Inc. 8-30

Trade Incentives Channel member agrees to perform some marketing function Cooperative merchandising Agreement (CMA) Popular with manufacturers Can lead to calendar promotions by retailers Premium or bonus pack Cooperative (co-op) advertising Most popular trade incentive Allows retailers to use manufacturers’ dollars to advertise Allows manufacturers to gain additional exposure at lower costs Copyright 2010 SAGE Publications, Inc. 8-31

Trade Shows Allows buyers and sellers to meet Used extensively in b-to-b markets Opportunity to locate potential customers and vendors Investigate activities of competitors Can strengthen brand name and image In United States, few deals are finalized at trade shows International attendees want to finalize deals Copyright 2010 SAGE Publications, Inc. 8-32

Implications for Marketing Managers Pay structure encourages use of trade promotions Quickest way to boost sales Only way to reduce trade dollars is strong brand name Competitive market encourages consumer incentives to push brand Costs passed on to consumers Copyright 2010 SAGE Publications, Inc. Insert Photo

Copyright 2010 SAGE Publications, Inc. Observational skills Determine type of visitor at booth Develop strategies for dealing with each type Sales and presentation skills Practice and learn to greet, listen, and ask Networking skills Develop network of prospects and associates Learn methods of networking Insert Photo

Copyright 2010 SAGE Publications, Inc. Do customers use the wrong coupons? Is it intentional or not intentional? Does it make a difference Insert Figure 8.12 How do you handle the employees? Should they be punished for misredemptions? Should you develop a reward system? How should you handle angry customers? If you were Andy’s boss, how would you handle Andy’s role in correcting redemptions? 4-35

Copyright 2010 SAGE Publications, Inc. Insert Photo What types of consumer promotions should Barney’s offer? For books? For the coffee shop? 2.What type of trade promotions should Barney’s seek? 3.What features could Barney’s emphasize to create a unique shopping and buying experience? 8-36