Download Power Struggles and Sales Promotion

Chapter 18
Sales Promotion
© 2006 Thomson/South-Western
Power Struggles and Sales
Promotion
Sales promotion plays a key strategic role in
the channel of distribution
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Big name brands need to supported with sales promotion and
POP in order to get the support of retailers through self space
allocation.
The top 10 retailers control 43 percent of all packaged goods
sales so they are in a position to dictate which brands get
how much shelf space.
Brand marketers are spending heavily--$30 billion a year—on
sales promotion and POP to gain favored retailer treatment
and provide incentives to household consumers and
business buyers.
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Sales Promotion
Using incentives to create a
perception of greater brand value
• Consumer Market
– Induce household consumers to purchase a firm’s
brand
• Trade-Market
– Motivate distributors, wholesalers, and retailers to stock
and feature a brand
• Business Buyer
– Cultivate buyers in large corporations who make
purchase decisions
© 2006 Thomson/South-Western
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Sales Promotion Examples
Coupons
Trade Shows
Contests
Gift Cards
Allowances
Sweepstakes
Incentives
Sampling
Price-off deals
Premiums
Brand placements
Loyalty Programs
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Sales Promotion vs.
Advertising
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Short term demand vs. long term demand
Encourage brand switching vs. brand loyalty
Induce trial use vs. encourage repeat purchase
Promote price vs. promote image
Immediate results vs. long term effects
Measurable results vs. difficult to measure
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Importance of Sales
Promotion
• $107 billion in 2003
• Growth rate: 4-8 percent
• Reasons for growth:
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Demand for accountability
Short-term orientation
Consumer response to promotions
Proliferation of brands
Increased power of retailers
Media clutter
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Objectives for ConsumerMarket Sales Promotion
1. Stimulate trial purchase
2. Stimulate repeat purchases
3. Stimulate larger purchases
4. Introduce a new brand
5. Combat or disrupt competitors
6. Contribute to IMC
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© 2006 Thomson/South-Western
Consumer-Market Sales
Promotion Techniques
1. Coupons
2. Price-off deals
3. Premiums
4. Contests/sweeps
5. Samples & trials
6. Phone gift cards
7. Brand placements 8. Rebates
9. Frequency programs
10.Event sponsorship
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Coupons
• Entitles a buyer to a price reduction
for a product or service
• Advantages
– Give a discount to price sensitive
consumer while selling product at full
price to others
– Induce brand switching
– Timing and distribution can be controlled
– Stimulates repeat purchases
– Gets regular users to trade up within a
brand array
© 2006 Thomson/South-Western
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Coupons
• Disadvantages
– Time of redemption cannot be
controlled
– No way to prevent current customers
from redeeming coupons
– Coupon programs require costly
administration
– Fraud is a serious, chronic problem
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© 2006 Thomson/South-Western
Price-Off Deals
• Offers consumer reduced price at
point of purchase through
specially marked packages
• Advantages
– Controllable by manufacturer
– Can effect positive price comparisons
– Consumers believe it increases value
of a known brand
• Disadvantage
– Retailers believe it creates inventory
and pricing problems
© 2006 Thomson/South-Western
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Premiums and Advertising
Specialties
• Premiums: free or at a reduced
price with another purchase
• Free premiums provide item at
no cost
• Self-liquidating premiums require
consumers to pay most of the
cost of the item
• Advertising specialties:
– A message placed on a free, useful
item
© 2006 Thomson/South-Western
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Contests and Sweepstakes
• Contests: consumers compete for prizes
based on skill or ability.
• Sweepstakes: winners picked by chance
• Both create excitement and interest
• But . . .
– Legal and regulatory requirements are
complex
– Consumers may focus on the game rather
than the brand
– Difficult to get an IBP message across in a
game
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© 2006 Thomson/South-Western
Samples and Trial Offers
• Sampling: Giving consumer an
opportunity to use a brand on a trial
basis with little or no risk
• Types of sampling
– In-store
– Door-to-door
– Mail
Newspaper
On-package
Mobile
• Trial offers
– Used for more expensive items
– Consumer tries product for a fixed time
© 2006 Thomson/South-Western
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Phone and Gift Cards
• Manufacturers offer either for free
or for purchase debit cards
– with phone time
– or preset spending limits
• Examples include offers from
Lexus, Oldsmobile, and The Gap.
© 2006 Thomson/South-Western
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Rebates
• Money back offer requiring the buyer
to mail a request for money back from
the manufacturer
• Often tied to multiple purchases
• Many consumers fail to bother sending
the request
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Frequency Programs
• Also known as continuity
programs
• Offers customers
discounts or free products
for repeat patronage
• Common in airline, travel,
and restaurant businesses
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Objectives for Promotions
in the Trade Market
• Objectives:Use a “push” strategy:
Push the product into the
distribution channel to the
consumer
– Obtain initial distribution
– Increase order size
– Encourage cooperation with
consumer market sales promotions
– Increase store traffic
© 2006 Thomson/South-Western
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Trade-Market Sales
Promotion Techniques
• Incentives: Push money
• Allowances: Merchandise allowances, slotting fees, billback allowances, off-invoice allowances
• Sales Training Programs
• Cooperative (Co-Op) Advertising
© 2006 Thomson/South-Western
Ch 18: Sales Promotion 19
Business Market Sales
Promotion Techniques
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Trade Shows
Business gifts
Premiums and advertising specialties
Trial offers
Frequency programs
© 2006 Thomson/South-Western
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Trial offers are very
effective in the business
market. Why?
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Sales Promotion, the
Internet, and New Media
• Sampling removes risk associated with
consumer trial
• Internet firms use incentives to make Web
sites “sticky”
• Internet is used to implement sales
promotions and distribute coupons
© 2006 Thomson/South-Western
Ch 18: Sales Promotion 22
Risks of Sales Promotion
• Create a price orientation
• Borrow from future sales
• Alienate consumers
• Time and expense
• Legal considerations
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Ch 18: Sales Promotion 23
P-O-P Advertising
1. Materials used in the retail setting to attract shoppers’
attention to a brand, to convey primary product
benefits, or highlight pricing information.
2. Objectives for Point-of-Purchase Advertising
• Draw consumers’ attention to a brand in the retail
setting.
• Maintain purchase loyalty among brand loyal users.
• Stimulate increased or varied usage of the brand.
• Stimulate trial use by users of competitive brands.
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P-O-P Advertising and the
Trade and Business Markets
• Product displays and information sheets encourage
retailers to support one distributor or manufacturer’s
brand over another.
• p-o-p promotions can help win precious shelf space
and exposure in a retail setting.
• A p-o-p display should be designed to draw attention
to a brand, increase turnover, and possibly distribute
coupons or sweepstakes entry forms.
• To combat losing business to online shopping,
retailers are trying to enliven the retail environment,
and point-of-purchase displays are one strategy.
© 2006 Thomson/South-Western
Coordination Challenge
• Message coordination
• Media coordination
• Research conclusions
-Short term effects can be dramatic
-Short term effects are often not profitable
-Rare for long-term effects to occur
-Most power effects result from advertising
and sales promotion being used together
© 2006 Thomson/South-Western
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