1 16 MKTG CHAPTER Lamb, Hair, McDaniel 2007-2008 Chapter 16 Sales Promotion and Personal SellingMKTGLamb, Hair, McDaniel16CHAPTERSales Promotion and Personal SellingDesigned byAmy McGuire, B-books, Ltd.Prepared byDeborah Baker, Texas Christian University
2 Learning Outcomes LO1 LO2 LO3 LO4 Chapter 16 Sales Promotion and Personal SellingLearning OutcomesDefine and state the objectives of sales promotionDiscuss the most common forms of consumer sales promotionList the most common forms of trade sales promotionDescribe personal sellingLO1LO2LO3LO4
3 Learning Outcomes LO5 LO6 Chapter 16 Sales Promotion and Personal SellingLearning OutcomesDiscuss the key differences between relationship selling and traditional sellingList the steps in the selling processLO5LO6
4 the objectives of sales promotion Chapter 16 Sales Promotion and Personal SellingSales PromotionLO1Define and statethe objectives of sales promotion
5 Sales Promotion LO1 Sales Promotion Chapter 16 Sales Promotion and Personal SellingSales PromotionSales PromotionMarketing communication activities, other than advertising, personal selling, and public relations, in which a short-term incentive motivates a purchase.Notes:In addition to advertising, public relations, and personal selling, sales promotion is utilized to increase the effectiveness of other promotional efforts.Sales promotion provides an incentive for consumers to purchase a good or service immediately, either by lowering the price or by adding value.LO1
6 Sales Promotion LO1 Advertising Reason to buy Sales Promotion Chapter 16 Sales Promotion and Personal SellingSales PromotionAdvertisingReason to buySales PromotionIncentive to buyNotes:While advertising offers a reason to buy, sales promotion offers an incentive to buy. Both are important, but sales promotion is usually cheaper and easier to measure.For example, a national TV ad often costs a total of over $5 million, and it is difficult to determine how many people purchase a product as a result of seeing the ad. With sales promotion, it is easy to measure the number of coupons redeemed or the number of contest entries.LO1
7 Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingSales PromotionConsumer Sales PromotionTradeSales PromotionConsumer marketMarketing channelDrive immediate purchase Influence behaviorGoalNotes:Sales promotion is targeted toward either of two different markets: to consumers or to members of the marketing channel (“trade”), such as wholesalers and retailers.Sales promotion expenditures have increased over the last several years as a result of increased competition, an expanding array of media choices, the demand for more deals from manufacturers, and the reliance on accountable and measurable marketing strategies.Promotion marketing in the U.S. exceeds $300 billion a year. Even power companies and restaurants have discovered the power of sales promotion.LO1
8 Objectives of Sales Promotion Chapter 16 Sales Promotion and Personal SellingObjectives of Sales PromotionType of BuyerLoyal CustomersCompetitor’sCustomersBrand SwitchersPrice BuyersDesired ResultsReinforce behaviorIncrease consumptionChange purchase timingBreak loyaltyPersuade to switchPersuade to buy your brand more oftenAppeal with low pricesSupply added valueSales Promotion ExamplesLoyalty marketingBonus packsSamplingSweepstakes, contests, premiumsPrice-lowering promotionTrade dealsCoupons, price-off packages, refundsNotes:The objectives of a promotion depend on the behavior of target consumers, as shown in Exhibit 16.1.LO1
9 REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal SellingREVIEW LEARNING OUTCOMELO1The Objectives of Sales Promotion
10 Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Consumer Sales PromotionLO2Discuss the most common forms of consumer sales promotion
11 Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Consumer Sales PromotionCoupons and RebatesPremiumsLoyalty Marketing ProgramsContests & SweepstakesSamplingPoint-of-Purchase PromotionNotes:The tools selected for sales promotion must suit the objectives to ensure success of the overall promotion plan.Popular tools are shown here, and described on the following slides.LO2
12 Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Consumer Sales PromotionCouponRebatePremiumA certificate that entitles consumers to an immediate price reduction.A cash refund given for thepurchase of a product duringa specific period.An extra item offered to the consumer, usually in exchange for some proof of purchase.Notes:Coupons encourage product trial and repurchase, and are likely to increase the amount of a product purchased.Coupon distribution has been growing, with almost 350 billion coupons distributed to U.S. households annually. This does not include Internet and in-store coupons. Increased competition and the introduction of 1200 new products each year have contributed to this trend.Coupons promoting new-product use are likely to stimulate purchases.Even though redemption rates are low for coupons, marketers are reevaluating the use of coupons, such as shortening the expiration time, using everyday low pricing instead, or distributing single, all-purpose coupons for redemption on several brands. In-store coupons are more likely to influence buying decisions and are redeemed 15 times more frequently than newspaper coupons.Rebates must be mailed in along with a proof of purchase. Rebates offer price cuts to consumers directly and are more easily controlled. Further, customer databases can be built due to the information forms required for rebates.Premiums reinforce the purchase decision, increase consumption, and persuade nonusers to switch brands.Discussion/Team Activity:Identify companies who have utilized these popular sales promotion tools.Examples: fast food services, cosmetic companies, banks, rental cars, magazines, computer manufacturers, cell phones, etc.LO2
13 PremiumsPremiums provide consumers with a reason to choose one brand over another.
14 Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Consumer Sales PromotionLoyaltyMarketingProgramA promotional program designedto build long-term, mutually beneficial relationships betweena company and key customers.FrequentBuyerA loyalty program in which loyal consumers are rewarded formaking multiple purchases.Notes:Loyalty marketing programs reward consumers for making multiple purchases. These programs enable companies to invest sales promotion dollars in activities designed to capture greater profits from customers already loyal to the product/company.The objective of loyalty marketing is to build long-term, mutually-beneficial relationships. Studies show that frequent shopper programs require something more than just discounts to build loyalty. Furthermore, customers are “loyal” to more than one store, and participate in multiple programs.Discussion/Team Activity:Identify several companies that offer these programs. Discuss the benefits offered by some of the more popular loyalty marketing and frequent buyer programs.LO2
15 Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Consumer Sales PromotionContestsPromotions that require skill or ability to compete for prizes.SweepstakesPromotions that depend on chance or luck, with free participation.OnlineSweepstakes OnlineHow do online sweepstakes sites compare to the kind of sweepstakes entries you receive in the mail? Visit the popular sweepstakes site Sweepstakesonline.com. Do any of the contests interest you? Do you think the pitches online are ethical? Why or why not?Notes:Contests and sweepstakes are designed to create interest in a good or service, often to encourage brand switching.They are not effective tools for generating long-term sales. Furthermore, the award must appeal to the target market. Offering several smaller prizes instead of one huge prize will increase the effectiveness of a promotion.OnlineLO2
16 Contests like this one encourage consumers to purchase more Chapter 16 Sales Promotion and Personal SellingContests like this one encourage consumers to purchase more
17 Sweepstakes rely on chance Chapter 16 Sales Promotion and Personal SellingSweepstakes rely on chance
18 Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Consumer Sales PromotionSamplingA promotional program that allows the consumer the opportunity to try a product or service for free.Notes:Sampling allows the risk-free trial of a product.Sampling can increase retail sales by as much as 40 percent. As a result, sampling has increased by more than 20 percent annually in recent years.Sampling at special events is popular, effective, and a high profile method that permits marketers to piggyback onto fun-based consumer activities.LO2
20 Methods of Sampling LO2 Direct mail Door-to-door delivery Chapter 16 Sales Promotion and Personal SellingMethods of SamplingDirect mailDoor-to-door deliveryPackaging with another productRetail store demonstrationDiscussion/Team Activity:Discuss some of the occasions that you have had the opportunity to participate in product sampling. How did this influence your decision to purchase the sampled product?What methods are most effective in reaching college students?LO2
21 Point-of-Purchase Promotion Chapter 16 Sales Promotion and Personal SellingPoint-of-Purchase PromotionBuild trafficAdvertise the productInduce impulse buyingNotes:Point-of-purchase promotions (P-O-Ps) include shelf “talkers”, shelf extenders, ads on carts and bags, end-aisle and floor-stand displays, TV monitors and in-store messages, and audiovisual displays.P-O-Ps offer manufacturers a captive audience in retail stores, and can boost sales by as much as 65 percent because between 70 and 80 percent of all retail purchase decisions are made in-store.LO2
23 Online Sales Promotion Chapter 16 Sales Promotion and Personal SellingOnline Sales PromotionEffective Types of Online Sales PromotionFree merchandiseSweepstakesFree shipping with purchasesCouponsNotes:Online sales promotions have grown due to the popularity of the Internet, generating three to fives times higher response rates than those of off-line counterparts. The most effective types are shown here.Internet retailers are eager to boost traffic and give away free services or equipment to lure consumers not only to the Web site but to the Internet in general.Online versions of loyalty programs are gaining popularity, and the most successful are those run by hotel and airline companies.LO2
24 REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal SellingREVIEW LEARNING OUTCOMELO2Consumer Sales PromotionCoupons and rebatesPremiumsLoyalty marketing programsContestsSamplingP-O-POnline
25 Tools for Trade Sales Promotion Chapter 16 Sales Promotion and Personal SellingTools for Trade Sales PromotionLO3List the most common forms of trade sales promotion
26 Conventions & Trade Shows Trade Sales PromotionChapter 16 Sales Promotion and Personal SellingLO3Trade AllowancesPush MoneyTrainingFree MerchandiseStore DemonstrationConventions & Trade ShowsNotes:While consumer promotions pull a product through the channel by creating demand, trade promotions push a product through the distribution channel in an attempt to influence supply.Consumer promotion tools are used when selling to members of the distribution channel, as well as tools that are unique to manufacturers and intermediaries, shown on this slide.
27 Trade Allowance LO3 Trade Allowance Chapter 16 Sales Promotion and Personal SellingLO3Trade AllowanceA price reduction offered by manufacturers to intermediaries, such as wholesalers and retailers.
28 Push Money LO3 Push Money Chapter 16 Sales Promotion and Personal SellingLO3Push MoneyMoney offered to channel intermediaries to encourage them to “push” products--that is, to encourage other members of the channel to sell the products.
29 Benefits of Trade Promotions Chapter 16 Sales Promotion and Personal SellingLO3Help manufacturers gain new distributionObtain wholesaler and retailer support for consumer sales promotionsBuild or reduce dealer inventoriesImprove trade relationsNotes:Trade promotions are popular among manufacturers for many reasons, as shown on this slide.
30 REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal SellingREVIEW LEARNING OUTCOMELO3Forms of Trade Sales Promotion
31 Describe personal selling Chapter 16 Sales Promotion and Personal SellingPersonal SellingLO4Describe personal sellingNotes:Personal selling is direct communication between a sales representative and prospective buyers in an attempt to influence each other in a purchase situation.In a sense, all businesspeople are salespeople, and to reach the top in most organizations, individuals need to sell ideas to peers, superiors, and subordinates.Many business or marketing majors, as well as non-business majors, will start their professional careers in sales.
32 Personal Selling LO4 Personal Selling is more important if... Chapter 16 Sales Promotion and Personal SellingPersonal SellingPersonal Selling is more important if...Advertising & Sales Promotion are more important if...Customers areconcentrated.Product is technically complex.There are few customers.Product is custom made.Product has a high value.geographically dispersed.Product is simple to understand.There are many customers.Product is standardized.Product has a low value.Notes:Exhibit 16.2 compares the effectiveness of personal selling and advertising/sales promotion based on certain customer and product characteristics.Personal selling is more important as the number of potential customers decrease, as the complexity of the product increases, and as the value of the product grows.LO4
33 REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal SellingREVIEW LEARNING OUTCOMELO4Personal SellingDetailed explanation or demonstrationVariable sales messageDirected to qualified prospectsControllable adjustable selling costsMore effective than other promotion in obtaining sale and gaining customer satisfactionPersonal Selling AdvantagesNotes:Personal selling offers several advantages over other forms of promotion, as shown on this slide.