2 Sales Promotion An extra incentive to buy An acceleration tool “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.”An extra incentive to buyAn acceleration toolAn inducement to intermediariesTargeted to different parties
4 Consumer Promotions Media Advertising Trade Promotions Long-Term Allocations to Advertising, Trade Promotions and Consumer Promotions100%Consumer Promotions90%80%70%Media Advertising60%50%40%30%Trade Promotions20%10%0%'89‘90‘91‘92'93'94'95'96'97'98'99‘00Percent of total promotional dollars, 3-year moving average.
5 Reasons for Increase in Sales Promotion Growing Power of RetailersDeclining Brand LoyaltyIncreased Promotional SensitivityBrand ProliferationFragmentation of Consumer MarketsShort-Term FocusIncreased AccountabilityCompetitionClutter
6 Sales Promotion UsesIntroduce new products by encouraging trial and repurchaseGet existing customers to buy moreAttract new customersDefend current customersMaintain sales in off seasonTarget a specific market segmentEnhance IMC efforts and build brand equity
7 Source: Courtesy Church & Dwight Co., Inc. Arm & Hammer uses a promotion offer to encourage new uses of its productSource: Courtesy Church & Dwight Co., Inc.
8 Consumer Franchise-Building (CFB) Promotions Consumer Franchise Building Promotions – Communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity and imageCFB Promotional ObjectivesCommunicate distinctive brand attributesDevelop and reinforce brand identity that is consistent with the image of the brandBuild long-term brand preferenceEncourage repeat purchase and long-term patronageEngage active consumer involvement
9 Nonfranchise-Building(non-FB) Promotions Nonfranchise-building promotions -Accelerate the purchase decision processand generate an immediate sales increase but do not contribute to the building of brand identify and imageNon-FB Promotions May IncludePrice-off dealsBonus packsRebates or refundsNon-FB Promotions shortcomingsTrade promotions benefits may not reach customersCustomers may “buy on the basis of price rather than brand equityDo not encourage the development of brand loyalty
10 Objectives of Consumer-Oriented Sales Promotion To Obtain Trial and RepurchaseTo Increase Consumption of an Established BrandTo Defend (Maintain) Current CustomersTo Target a Specific SegmentEnhance IMC programs and build brand equity
12 Percentage of Promotions Vehicles Used by Package Goods Manufacturers 0%25%50%75%100%Money back offers/other refundsCouponing consumer directCents-off promotionsCouponing in retailers' adsCouponing in storeSampling new productsSampling established productsPremium offersElectronic retail promotionsSweepstakesInternet promotionsContestsPrepricing on packageOther
13 Sampling Providing consumer with some quantity of a product for no charge to induce trialSampling works best when:The products are of relatively low unitvalue, so samples don’t cost muchThe products are divisible and can bebroken into small sizes that can reflectthe products features and benefitsThe purchase cycle is relatively shortso the consumer can purchase in a relatively short time period
14 Cross-product sampling With newspaper or magazine Through the internet Sampling MethodsDoor-to-doorDirect mailIn-store samplingCross-product samplingWith newspaper or magazineThrough the internet
15 Samples are often distributed with local newspapers
16 The oldest and most widely used sales promotion tool CouponsThe oldest and most widely used sales promotion toolNearly 240 billions distributed each year in the United States80 percent of consumers use coupons and 25% use them regularly
17 Advantages and Limitations of Coupons Appeal to pricesensitive consumerCan offer price breakwithout retailers coopCan be effective wayto induce trial of new or existing productsCan be way to defendmarket share andencourage repurchaseDisadvantagesDifficult to determine how many consumers will use coupons and whenCoupons are often used by loyal consumers who may purchase anywayDeclining redemption rates and high costs of couponingMisredemption and fraud
18 Consumers redeem without purchase Clerks and staff exchange for cash Coupon FraudConsumers redeem without purchaseClerks and staff exchange for cashManagers/owners redeem without saleCriminals collect or counterfeit and sell
19 Coupon Distribution Other Magazines In / On Pack Direct Mail Newspaper CoopNewspaper ROPFreestandingInserts
20 Percent of sales made with coupons for various products GumCandyCarbonated BeveragesAdult Cold RemediesPet FoodCoffeeSanitary ProtectionDeodorantsLiquid DetergentsReady-to-Eat CerealDisposable Diapers43%35%29%25%24%20%12%11%8%7%2%
21 Coupon Trends Major companies cutting back on use of coupons Searching for more effective coupontechniquesMore use of internet for distribution
22 Two types of premiums: Premiums Free premiums - Premium – an offer of an item of merchandiseor service either free or at a low cost thatis an extra incentive for customersTwo types of premiums:Free premiums -only require purchase of the productSelf-liquidating premiums -require consumer to pay some or all of the cost of the premium
23 Airline miles are a very popular premium incentive
24 Contests and Sweepstakes Contest – a promotion where consumers compete for prizes or money on the basis of skills or ability. Winners are determined by judging entries or ascertaining which entry comes closes to some predetermined criteriaSweepstakes/games – a promotion where winners are determined purely by chance and cannot require a proof of purchase as a condition for entry. Winners are determinedby random selection from the pool of entries or generationof a number to match those held by game entrants.
25 Other Popular Consumer Sales Promotion Tools Refunds and RebatesBonus PacksPrice-off dealsFrequency/loyalty programsEvent marketing
26 Gerber developed a sweepstakes in conjunction with a loyalty program Source: Courtesy Gerber Products Company.
27 Trade-Oriented Sales Promotion Objectives Obtain Distribution of New ProductsMaintain Trade Support for Existing ProductsEncourage Retailers to Display and Promote Existing BrandsBuild Retail Inventories
28 Chicken of the Sea targets the trade with this collateral piece
29 Types of Trade-Oriented Promotions Contests and IncentivesTrade AllowancesBuying AllowancesPromotional AllowancesSlotting AllowancesPoint-of-Purchase DisplaysSales Training ProgramsTrade ShowsCooperative Advertising
30 Promotion Targeted to Reseller Salespeople Product or program salesSelling a specific number of casesSelling a specific number of unitsSelling a specific number of promotional programsNew account placementsNumber of new accounts openedNumber of new accounts ordering a minimum amountPromotional programs placed in new accountsMerchandising effortsEstablishing promotional programsPlacing display racks, counter and other p-o-p displays
32 The “Intel Inside” campaign is an example of ingredient-sponsored cooperative advertising
33 Coordinating Sales Promotion With Other IMC Elements Various IMC elements such as advertising,direct marketing, Internet and personal sellingefforts need to be coordinated with sales promotion to create a synergistic effect. Must consider:Budget allocationCoordination of ad and promotion themesMedia support and timingMeasuring effectiveness
35 Shifting Role of Sales Promotion Agencies THENCreated tacticsSingle project basisHired for specialtySingle agency contactInferior to ad agencyIndirect accountabilityNOWCreate strategyContinuing serviceOne full-service firmAgency team contactEqual to ad agencyDirectly accountable