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CHAPTER 12
SALES PROMOTION
Chapter Overview
In this chapter we turn our attention to sales promotion and its role in a firm’s integrated marketing
communications program. We examine how marketers use both consumer- and trade-oriented promotions
to influence the purchase behavior of consumers as well as wholesalers and retailers. The chapter begins
with a discussion of the scope and role of sales promotion and a discussion of the reasons for its
increasing importance. Attention is also given to sales promotion objectives including a discussion of
consumer franchise-building versus non-franchise-building promotions and specific promotional
objectives. Much of the chapter is devoted to an examination of the various consumer- and trade-oriented
sales promotion techniques used by marketers and considerations involved in their use. The chapter
concludes with a discussion IMC issues as they relate to sales promotion.
Learning Objectives
1. To understand the role of sales promotion in a company’s integrated marketing communications
program and to examine why it is increasingly important.
2. To examine the various objectives, strategy, and tactical components of a sales promotion plan. To
examine the types of consumer and trade-oriented sales promotion tools and factors to consider in
using them.
3. To examine the consumer and trade promotion strategy options and the factors to consider in using
them.
4. To understand key IMC issues related to sales promotion decisions.
Chapter and Lecture Outline
I. SALES PROMOTION PLANNING
A. Characteristics and Types of Sales Promotion
For many years advertising constituted the major part of the promotional budget of most consumer
product firms. Over the past decade, however, many marketers have come to the realization that
advertising alone often is not enough to stimulate demand for their products and are increasingly turning
to sales promotion methods targeted at both consumers and the trade. Many companies are developing
fully integrated marketing programs that include consumer and trade promotions that are coordinated with
advertising, publicity/public relations, and Internet marketing programs as well as sales force efforts. It is
important to note these trends and emphasize to students the important role sales promotion plays in the
marketing of most consumer products. The chapter opening vignette discusses how the so-called “below
the line” IMC discipline areas such as sales promotion are being used to build brand equity and are taking
center stage alongside advertising.
Sales Promotion has been defined as “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.” There are several important aspects to sales promotion that should be noted:
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
sales promotion involves some type of inducement that provides an extra incentive to purchase the
product or service

sales promotion is essentially an acceleration tool that is designed to speed up the selling process and
maximize sales volume

sales promotion programs and activities can be targeted to different parties in the marketing channel
including wholesalers, retailers and consumers.
Sales promotion can be broken down into two major categories:

Consumer-oriented sales promotion which are promotions directed at the consumers who are final
purchasers of goods and services

Trade-oriented sales promotion which includes promotional programs and activities designed to
motivate distributors and retailers to stock and promote a manufacturer’s products
The various activities included under each sales promotional category are shown in Figure 12-1 of the
text. It should be noted that this chapter focuses on both consumer- and trade-oriented promotions.
B. The Growth of Sales Promotion
The role and importance of sales promotion in companies’ integrated marketing communications
programs has increased dramatically over the past decade. Spending has been growing at between
5 and 7% annually with trade promotion accounting for most of this growth.
There are a number of factors that have led to the shift in marketing dollars from media
advertising to sales promotion. These include:
1. The growing power of retailers—In recent years several developments have helped to transfer
power from the manufacturers to the retailers. With the advent of optical checkout scanners
and sophisticated in-store computer systems, retailers gained access to data concerning how
quickly products turn over, which sales promotions are working and which products make
money. Retailers use this information to analyze sales of manufacturers’ products and then
demand discounts and other promotional support from manufacturers of lagging brands.
Consolidation of the grocery store industry has also resulted in larger and more powerful
retailers who can use their purchasing power to demand more trade promotion deals.
2. Declining brand loyalty—Consumers have become less brand loyal and are purchasing more
on the basis of price, value, and convenience. They are also looking for more deals and will
buy whatever brand is on sale or for which they can use a coupon.
3. Increased promotional sensitivity—The percentage of purchases made in conjunction with
some sort of promotional offer has increased sharply over the past decade. The text discusses
a survey with interesting results and the reasons for consumers’ increasing sensitivity to sales
promotion. This study found that 42 percent of the total unit volume of 12 packaged-good
products was purchased with some type of incentive.
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4. Brand proliferation—Consumer product companies are launching more and more new
products each year. Sales promotion tools such as samples and coupons are often used as part
of the process that leads consumers from trial to repeat purchase at full price. Supermarkets
now carry more than 30,000 products compared to 13,000 in 1982. Promotions play an
important role in securing and maintaining shelf spaces for new and existing products.
5. Fragmentation of the consumer market—The consumer market is becoming more fragmented
and traditional mass-media advertising is being replaced by promotional tools that can target
specific market segments. Sales promotion tools have become one of the primary vehicles for
tailoring promotional efforts to specific regional markets as well as specific demographic and
lifestyle segments.
6. Short-term focus—The increase in sales promotion in motivated by marketing plans and
reward systems geared to short-term performance and the immediate generation of sales
volume. Marketing and brand managers use sales promotions routinely, not only to introduce
new products or defend against the competition, but also to meet quarterly or yearly sales and
market share goals.
7. Increased accountability—Many companies are demanding to know what they are getting for
their promotional expenditures. They feel that sales promotion programs are more
economically accountable than advertising since they often generate a quick and easily
measured jump in sales.
8. Competition—Many companies are turning to sales promotion to gain or maintain a
competitive advantage. A major development in recent years is the use of account-specific
marketing (also referred to a comarketing) whereby a marketer collaborates with customizes
promotions for individual retailers.
9. Clutter—The increasing problem of advertising clutter has lead to the need to use consumer
promotions as a way of attracting attention and interest to advertising. Sales promotion offers
such as coupons, contests and sweepstakes are often used to attract attention to ads and
increase consumers’ involvement with a marketer’s IMC program.
10. Reaching a Specific Target Market – Many marketers are finding that sales promotion tool
such as contests, events, sampling and coupons are effective in reaching specific geographic,
demographic, psychographic and ethnic markets.
C. Sales Promotion versus Advertising
It is very important to note that the increased use of sales promotion is coming at the expense of media
advertising. This has led to concern that the increased use of sales promotion is having a negative effect
on brand equity. As was noted in the Chapter 2, brand equity refers to a type of intangible asset of added
value or “goodwill” that results from the favourable image or differentiation that a brand has achieved.
Another term used synonymously with brand equity is consumer franchise. There are many examples of
situations where a company’s have hurt the brand equity of their products by placing more emphasis on
consumer and trade promotions than advertising. The book discusses how Heinz allocated most of its
marketing budget to trade promotion during the early to mid ‘90s which hurt the brand equity of many of
its brands.
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II.
SALES PROMOTION PLAN
A. Objectives for consumer-oriented sales promotion—As the use of sales promotion
techniques continues to increase, companies must give consideration to what they hope to
accomplish through their promotions and set clearly defined objectives and measurable
goals for their sales promotional programs. While the basic goal of most sales promotion
activities is to induce purchase of a brand, there are a number of different objectives the
marketer might have for both new and established brands. These include:
1.
2.
3.
4.
Obtaining trial purchase
Obtaining repeat purchase
Increasing consumption
Supporting the IMC Program/Building Brand Equity
B. Consumer Promotion Strategy Decisions
1. Sales Promotion Strategy Options – The options identifies in Figure 12-1 are
important strategic choices. In making these choices is important to make the
distinction between consumer-franchise building sales promotions and non-franchise
building efforts. Consumer-franchise-building promotions are designed to
communicate distinctive brand attributes and contribute to the development and
reinforcement of brand image and identity. Non-franchise-building promotions are
designed to accelerate the purchase decision process and generate immediate
increases in sales. They do very little, if any, to contribute to the brand identity and
image.
An additional decision criterion relates to the incentive characteristic. As illustrated
in Figure 12-2, the choice is based on the target audience and the intended
behavioural response.
2. Application across Product Lines – Another strategic decision is the degree to which
each sales promotion tool is applied to the range of sizes, varieties, models, or
products.
3. Application across Specific Markets – Sales promotions can be run nationally,
regionally or in select markets.
C. Consumer Sales Promotion Tactics Decisions
The value, timing and distribution of the sales promotion offer are key tactical decisions.
1. Value of Incentive – the marketer must decide on the value of the promotion in
terms of any discounts offered, the value of premium offers and whether noneconomic incentives will be used.
2. Timing – the marketer must decide during which months, weeks, days and/or
seasons the promotion will be run.
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3. Distribution – the marketer must establish the logistics with respect to how the
promotion will get to the consumer and how the consumer will get to the
promotion.
III. CONSUMER SALES PROMOTION STRATEGY OPTIONS
The various consumer-oriented sales promotion techniques used by marketers should be discussed along
with their advantages and limitations and the role they play in meeting various promotional objectives.
Figure 12-3 shows the extent to which these consumer promotions are used by package-goods companies.
A.
Sampling—sampling involves a variety of procedures whereby consumers are given some
quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing
a new brand to the market although it is also used for established products.
1. Strengths and limitations of sampling



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Samples are an excellent way of inducing trial
Sampling allows consumers to experience a product directly and gain an appreciation for
its benefits and characteristics
Costs of sampling programs can be very high
The benefits of a brand may be difficult to gauge from a sample
2. Sampling Methods—decisions must be made concerning the method by which the sample
will be distributed. The sampling method is important not only in terms of costs, but also in
terms of influencing the type of consumer who receives the sample. Some of the more widely
used sampling methods include:
 Door-to-door sampling
 Sampling through the media
 Sampling through the mail
 In-store sampling
 On-package sampling
 Event sampling
There are other sampling methods available such as:







Direct sampling
Location sampling
The Internet
Creative approaches
inserts in magazines and newspapers
requesting samples by phone
and the use of specialized sample distribution services. The Internet is yet another way
companies are making it possible for consumers to sample their products. There are
several online sampling services such as Catalina Marketing’s ValuPage.com and the
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Sunflower Group’s FreeSample-Club.com. The text discusses several reasons for a
recent resurgence in sampling.
B.
Coupons —Couponing is the oldest, yet most widely used and effective sales promotions tool.
The number of coupons distributed to consumers has increased dramatically over the past decade.
As Figure 12-3 shows, coupons are the most popular sales promotion technique.
1. Strengths and limitations of coupons
Pros:
 Coupons make it possible to offer a price reduction to those consumers who are price
sensitive without having to reduce the price for everyone.
 Coupons allow the offering of a price reduction without having to rely on retailers.
 Couponing can be an effective promotional device for generating trial of a new brand.
 Coupons can be used to encourage trial and increase consumption of established brands.
Cons:
 It can be difficult to estimate how many consumers will redeem a coupon and when they
will do so.
 Coupons targeted to attract new users of established brands are often redeemed by
previous loyal users.
 Couponing programs can be expensive.
 Problems of coupon misredemption and fraud exist.
2. Coupon Distribution—Coupons can be distributed in a variety of ways including:
 media delivery in newspapers and magazines and as free-standing inserts (FSIs)
 through direct mail
 in or on packages
 in stores and at points-of-purchase
 over the Internet through online promotion sites
C.
Premiums—A premium is an offer of an extra item of merchandise or service either free or at
a low price that is used as an incentive for purchase. The two basic types of premiums are:
1. Free Premiums—usually inexpensive gifts or items that are included in the product package,
distributed with a purchase or sent to consumers who make mail-in-requests along with a
proof of purchase. One of the fastest-growing types of premiums or incentive offers being
used by marketers is airline miles which have become a type of promotional currency
2. Self-liquidating premiums—those that require the consumer to pay some or all of the cost
of the premium plus handling and mailing costs. Self-liquidating premiums can be used to
create interest in a brand as well as generate goodwill that enhances the image of a brand.
D.
Contests and Sweepstakes—A contest is a promotion whereby consumers compete for prizes
or money on the basis of skills or ability and winners are determined by judging entries
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against some predetermined criteria. Contests often provide a purchase incentive by requiring
a proof of purchase to enter or to obtain an entry form from a dealer or advertisement. A
sweepstakes is a promotion whereby winners are determined purely by chance and cannot
require a proof of purchase as a condition for entry. Another form of a sweepstakes is a game
which also has a chance element associated with winning. Contests and sweepstakes can be
an effective way of getting the consumer to become involved with the brand by making the
promotion product relevant.
1. Limitations of contests and sweepstakes
 A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to
contribute to the brand franchise or image.
 There are numerous legal problems and considerations that impact the design and
administration of contests and sweepstakes.
 The presence of professionals or hobbyists who submit large numbers of entries but have
no interest in the product can detract from the effectiveness of contests and sweepstakes.
E.
Refunds and Rebates—Refunds or rebates are offers to return some portion of the product
purchase price after supplying some sort of proof or purchase. Consumers are generally
responsive to refund or rebate offers, particularly as the size of the savings offer increases.
1. Strengths and Limitations of Refunds and Rebates—The advantages and disadvantages of
refunds and rebates are:
Pros:
 Refunds and rebates can be effective sales promotional tools for creating new users and
for encouraging brand switching
 Refunds and rebates are often perceived as immediate savings or value even though the
money is not received until the offer is redeemed and many consumers never follow
through on the offer.
 Refunds and rebates can allow a marketer to achieve a price reduction for much less than
if a direct price deal were utilized.
Cons:
 Many consumers do not like the delay and effort required to redeem refund and rebate
offers.
 The terms of some rebate offers are inconvenient or even unrealistic.
 Consumers may have a negative perception of brands that use rebates.
 Many retailers do not want to become involved with the administration of rebate
programs.
F.
Bonus Packs—Bonus packs offer the consumer an extra amount of a product at the regular price
by providing larger containers or extra units. Here are some of the strengths and limitations of
bonus packs:
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Pros:


They provide extra value to consumers without having to get involved with things such as
coupons or rebate offers.
They can be an effective maneuver against a competitor’s promotion or introduction of a
new brand by loading consumers with the product and making them less susceptible to
competitors’ promotional efforts.
Bonus packs often receive favourable response from retailers.

Cons:
 They may require additional shelf space and do not provide extra profit margins to the
retailer.
 They may appeal primarily to current users who may have purchased the brand anyway.
G.
Price-off Deals—Price-off deals provide a reduction in the regular price of the brand, typically
right on the package through specially marked price packs. Here are some of the strengths and
limitations of price-off promotions:
Pros:
 They are controlled by the manufacturer, which enables them to ensure that the
promotional discount reaches the consumer rather than being kept by the trade.
 Price-off deals usually present a readily apparent value to consumers, particularly when
they have a reference price point for the brand and recognize the value of the discount.
 Price-offs can provide a strong influence when point-of-purchase comparisons are made.
 They can encourage consumers to buy larger sizes.
Cons:
 They can create pricing and inventory problems for consumers
 They may appeal primarily to regular users rather than attracting nonusers
H.
Frequency programs—Frequency programs (also referred to as continuity or loyalty programs)
are promotional programs that reward customers for continuing to purchase the same brand of a
product or service over time. Frequency programs have become commonplace in a number of
product and service categories, particularly travel and hospitality, as well as among retailers.
Many consumer packaged goods companies are also developing frequency programs that offer
consumers to accumulate points for continuing to purchase their brands. The points can be
redeemed for gifts such as merchandise or for discounts.
Reasons for the popularity of frequency programs include:



Marketers view these programs as ways of encouraging consumers to use their products or
services on a continual basis and as a way of developing customer loyalty
Many companies are realizing the importance customer retention and frequency programs
help them build relationships with customers
Frequency programs provide marketers with the opportunity to develop databases containing
valuable information on their customers and which can be used for direct marketing purposes
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Challenges associated with frequency programs include:
 Finding ways to make them true loyalty programs rather than just frequent-buyer programs
 Using frequency programs to effectively differentiate a product, service or retail store,
particularly when they are being used by competitors
H.
Event Marketing—Event marketing is a form of promotion where a company or brand is linked
to a specific event or a themed activity is developed for the purpose of creating experiences for
consumers and promoting a product or service. Marketers often do event marketing by
associating their product with a popular activity such as a sporting event, concert, fair, or festival.
It is important to make a distinction between event marketing and event sponsorships, as the two
are often used interchangeably yet refer to different activities. Event sponsorships are
promotions whereby a company develops sponsorship relations with a particular event and
provides financial support in return for the right to display a brand name, logo, or advertising
message and be identified as a sponsor of the event.
Event marketing has become very popular in recent years for several reasons:
 Events can be used as to create experiences for consumers and associate a company’s brand
with certain lifestyles and activities
 Events can be used to distribute samples as well as information about a marketer’s product or
service or to actually let consumers experience the product
III.
TRADE ORIENTED SALES PROMOTION
A.
Objectives for Trade-Oriented Sales Promotion—As with consumer oriented promotions, sale
promotion programs targeted to the trade should be based on well-defined objectives and a
consideration of what the marketer wants to accomplish by using trade promotions. Objectives for
trade-oriented promotions include:
1. Obtain distribution for new products
2. Maintain trade support for established brands
3. Encourage retailers to display and promote established brands
4. Build retail inventories
B.
Trade Sales Promotion Strategy Options—there are a variety of trade promotion tools that
manufacturers can use as inducements for wholesalers and retailers. These include:
1. Contests and incentives—manufacturers use contests and special incentive programs to
stimulate greater selling effort from resellers management or sales personnel. An important
target of contests or special incentives is the sales personnel of the middlemen. In addition to
using contests, programs targeted to sales personnel may include push money or spiffs.
2. Trade allowances—probably the most commonly used trade promotion is some form of trade
allowance which is a discount or deal offered to the retailer or wholesaler to encourage them
to stock, promote, or display a manufacturer’s products. There are several types of trade
allowances including:
 buying allowances—a deal or discount offered to resellers in the form of a price
reduction on product ordered during a fixed time period
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

promotional allowances—discounts provided to retailers for performing certain
promotional or merchandising activities in support of a manufacturer’s brand
slotting allowances—rather than a discount, these are special fees that retailers charge
manufacturers for agreeing to handle a new product and providing a slot or position in
their store to accommodate the new product.
There are several problems with trade allowances. Many companies are concerned over the
abuse of trade allowances by wholesalers, retailers and distributors. Marketers give retailers
trade allowances with the expectation that the savings will be passed on to the consumer in
the form of lower prices. However, the trade members often pocket these discounts. Two
practices that are particularly bothersome are forward buying and diverting. To deal with
these trade problems, some companies such as Procter & Gamble have adopted a policy of
Everyday Low Pricing (EDLP) whereby the list price of its product line is lowered and
promotional allowances to the trade are reduced or even eliminated
3. Displays and point-of-purchase materials—marketers use a variety of point-of-purchase
materials including end-of-aisle displays, posters, banners, shelf cards, motion pieces, standup racks and other material. Point-of-purchase displays are an important promotional tool
because they can help a manufacturer obtain more effective in-store merchandising of their
products. Products often sell better when they are on display as they are more likely to be
noticed by consumers and displays also are often accompanied by price deals.
4. Sales training programs—another important form of manufactured sponsored promotional
assistance is sales training programs for reseller sales personnel. Manufacturers provide sales
training assistance to retail salespeople in a number of ways including having formal classes,
having their sale reps work with resellers and providing sales manuals, brochures, videos and
other selling aids.
5. Trade shows—a trade show is a type of exhibition or forum where manufacturers display
their products to current as well as prospective buyers. Trade shows provide a major
opportunity to display and demonstrate products, interact with customers, identify new
prospects, gather customer and competitive information and even write new orders. The
social aspects of trade show are also important as many customers use them to entertain key
customers and to develop and maintain relationships.
5. Cooperative advertising—cooperative advertising, whereby the cost of advertising is shared
by more than one party, is another important form of trade promotion. Actually there are
three types of cooperative advertising including:


Horizontal cooperative advertising – refers to advertising sponsored in common by a
group of retailers, companies or other organizations providing products or services to a
market.
Ingredient sponsored cooperative advertising – refer to advertising supported by a raw
materials or component manufacturer to help establish end products using the company’s
materials or ingredients.
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
V.
Vertical cooperative advertising—Vertical cooperative advertising is the most common
type of co-op ad program used as part of a trade-oriented promotional program. Under a
vertical co-op program, the manufacturer pays for a portion of the advertising a retailer
runts to promote its product and its availability in the retailer’s place of business. The limit
or amount of co-op funds the manufacturer provides to the retailer is usually based on a
percentage of dollar purchases made from the manufacturer. This percentage is usually
around 3 to 5 percent.
IMC ISSUES RELATED TO SALES PROMOTION DECISIONS
Sales promotion techniques usually work best when used in conjunction with advertising. Conversely, a
consumer sales promotion program can enhance the effectiveness of an ad campaign. When properly
planned and executed to work together, sales promotion can provide a synergistic effect that is much
greater than the response that would be generated from either promotional mix element used alone. Proper
integration of advertising and sales promotion requires the coordination of several decision areas
including:
A.
Budget Allocation—This allocation depends on a number of factors:
 the promotional objectives of the campaign
 the market and competitive situation
 the brand’s stage in its life cycle
B.
Creative Themes—To integrate the advertising and sales promotion programs successfully, the
theme of consumer promotions should be tied in with the advertising and positioning themes
wherever possible. The WD-40 ad shown in Exhibit 12-15 provides a good example of how a
sweepstakes theme is coordinated with the positioning used for the brand.
C.
Media Support—Using a promotion without prior or concurrent advertising can limit its
effectiveness and risk damaging the brand’s image. Conversely, the effectiveness of an ad can be
enhanced by a coupon, a premium offer, or an opportunity to enter a sweepstakes or contest.
D.
Strategic Role - The increasing use of sales promotion in the marketing program represents a
change in the fundamental, strategic decisions regarding how companies market their products
and services. However, the value of this increased emphasis on sales promotion has been
questioned by many experts. Concerns include the following:
Marketers becoming too dependent on using sales promotion to produce short-term or immediate
increases in sales
Investing in sales promotion at the expense of advertising and thus not building the long-term value
of the brand franchise
Brands losing their perceived value from the perspective of consumers when they are purchased
because of a promotional offer



In many situations there is the potential for companies to fall into a sales promotion trap or spiral
whereby all competitors are making extensive use of promotions. Figure 12-8 shows this dilemma which
is analogous to the “prisoner’s game” as the only way out of it is for both parties to cooperate by cutting
back on promotions.
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Teaching Suggestions
In this chapter we examine the very important area of sales promotion including the promotional activities
directed at consumers as well as the trade. This is a very long chapter as its covers both consumer and
trade-oriented sales promotion very thoroughly. We strongly suggest that this material be covered over a
two-class period. The first lecture can provide an overview of the sales promotion area, reasons for the
shift in marketing dollars to sales promotion and consumer-oriented sales promotion. The second lecture
can cover trade promotion, the coordination of sales promotion with advertising and other promotional
mix elements, and the problems of sales promotion abuse. In covering sales promotion you may want to
refer students back to Chapter 3 and the discussion of behavioural learning theory. The discussion of
shaping procedures is particularly relevant to the use of sales promotion.
It is very important to point out to the students the increasing emphasis many companies are placing on
sales promotions targeted to both consumers and the trade. It is helpful to review some of the reasons for
the increase in sales promotion and discuss whether this trend will continue. The instructor should review
the various consumer-and trade-oriented sales promotion techniques along with their advantages and
limitations. Students should be encouraged to evaluate these techniques as strategic and tactical
promotional tools and to consider the reasons why marketers use them. We also feel that it is very
important to discuss how sales promotion can and should be coordinated with the advertising program.
Figure 12-7 shows how the role of sales promotional agencies is changing and provides insight into how
many firms are attempting to coordinate their advertising and promotional efforts.
To keep abreast of development in the sales promotion area and to find some very interesting articles on,
and examples of, successful promotions, the instructor can refer to sources such as Promo magazine. This
magazine offers complimentary subscriptions to professors and is also available online at
www.promomagazine.com. Another organization that has a lot of valuable information on sales
promotion is the Promotional Marketing Association, Inc. Their website can be found at
www.pmalink.org.
Answers to Discussion Questions
1. What are the differences between consumer-oriented and trade-oriented sales promotions? Discuss
the role of each firm’s IMC program.
Consumer-oriented sale promotions are directed at the consumers who purchase various goods and
services and are designed to provide them with an extra incentive or inducement to buy the
marketer’s brand. They are part of a promotional “pull strategy” and designed to help create demand
for a brand at the end-consumer level. Trade-oriented promotions are targeted to the wholesalers,
distributors and retailers in the channel of distribution and are designed to encourage channel
members to stock and promote the marketer’s products. Trade-oriented promotions are part of a
promotional “push” strategy.
Both consumer- and trade-oriented promotions are an important part of a firm’s integrated marketing
communications program. In a very competitive market, consumers must often be provided with an
extra incentive such as a coupon, bonus pack, premium, or price reduction to encourage them to
choose one brand over another. Consumer-oriented promotions, along with advertising, are a very
important part of marketers’ “pull strategy” which create demand for their brands. With the increasing
amount of advertising clutter and many purchase decisions being made in the store, marketers must
do more than just advertise to gain and hold market share. Trade-oriented promotions are also very
important, as marketers must give attention to getting the channel members to stock, display and
promote their brands. Much of the power in channels of distribution has shifted to the retailer and
competition as limited amounts of shelf space have intensified. Thus marketers must focus attention
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and effort on “pushing” their products through the channels of distribution. Trade-oriented
promotions are an important part of this strategy.
2. Discuss how sales promotion can be used as an acceleration tool to speed up the sales process and
maximize sales volume.
There are several ways sales promotion can be used as an acceleration tool to speed up the sales
process and maximize sales volume. Consumer promotion tools such as premiums, bonus packs, and
price-off deals provide an extra incentive that may motivate consumers to take more immediate
action. Coupons usually have expiration dates that require consumers to use them during a specific
time period, which is another way of accelerating the purchase process. Marketers often use
techniques such as in-store sampling programs that may be accompanied by a discount coupon and
thus encourage immediate purchase. Trade promotions can also accelerate the selling process with
retailers. For example, retailers who take advantage of an off-invoice allowance often pass the
savings on to consumers in the form of a price reduction, which encourages them to purchase the
brand. Promotional allowances are given to retailers for performing certain promotional or
merchandising activities such as providing special displays, running in-store promotional programs or
including the marketer’s brand in an ad. These activities will help generate sales volume and
encourage immediate purchases by consumers.
3. Discuss the various reasons marketers’ have been shifting their marketing dollars to sales promotion
from media advertising. Discuss the pros and cons of this reallocation of marketers advertising and
promotion budgets.
There are many reasons why sales promotion has become so important and is receiving a great deal of
marketers’ promotional budgets. These include the growing power of retailers; decline in consumers’
brand loyalty and their increasing sensitivity to sale promotion offers; brand proliferation in the
consumer market as many product categories have experienced a flurry of new brand introductions;
fragmentation of the consumer market and trend toward increased market segmentation and regional
marketing; pressure for increased accountability for promotional expenditures from companies and
the resulting focus on short-term sales results; reliance on sales promotion as a way of gaining
competitive advantage; and finally the increasing problem of advertising clutter which has led many
advertisers to turn to consumer promotions as a way of attracting attention and interest to their
advertisements.
Some experts argue that the reallocation of marketing budgets from media advertising to sales
promotion is reasonable as many companies are now using the various promotional tools in a more
strategic way that contribute to brand equity. However, critics argue that this reallocation often comes
at the expense of brand equity. They note that many types of sales promotion do not contribute to the
building of brand identify or image. The allocation trend toward sales promotion is unlikely to go too
much further as many marketers recognize that they are sacrificing brand equity by spending
promotional dollars on sales promotion rather than advertising. Marketers are also concerned that the
large sums of money they are spending on trade promotions are not being passed through to
consumers and thus they are attempting to cut back in this area. It is unlikely, however, that we will
see a return to the good old days when media advertising accounted for the largest portion of the
promotional budget. The sales promotion area is becoming too sophisticated and consumers have
learned to expect some type of promotional deal when making a purchase. Thus marketers are likely
to continue to provide them with sales promotion incentives in one form or another.
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4. What are the differences between consumer-franchise-building and non-franchise-building
promotions? Find an example of a promotional offer you believe contributes to the equity of a brand
and explain why.
Consumer-franchise-building promotions are those that are designed to communicate distinctive
brand attributes and contribute to the development and reinforcement of brand identity and image.
They are designed to help build long-term brand loyalty or preference and help the marketer achieve
the ultimate goal of full-price purchase. Non-franchise-building promotions are those that are
designed to accelerate the purchase decision process and generate an immediate increase in sales.
These promotions do little or nothing to communicate information about a brand’s unique features or
benefits and contribute very little, if any, to the building of brand identity and image.
Students should find promotional offers that they feel are examples of each type and explain why.
Examples of non-franchise building promotions are not difficult to find as price-off deals, coupons
and refund offers usually fall into this category. Examples of franchise-building efforts might include
a contest or sweepstakes that helps develop and strengthen a brand’s image or position or promotional
programs that encourage repeat purchase.
5. Discuss how the Internet can be used for the distribution of various promotional offers such as
samples, coupons, premiums, contests, and sweepstakes.
As discussed in the chapter, the Internet is already being used to make various promotional offers
available to consumers. Schick Canada created a three-page mini-site to let consumers order a free
sample of its new unisex razor, the Xtreme III. Marketers also include their contests and sweepstakes
on their web sites and consumers can enter these promotions online. Premium offers can also be
offered through marketers’ web sites and consumers can order merchandise online.
6. IMC Perspective 12-2 discusses how Procter & Gamble (P&G) continues to redefine and simplify its
sales promotion strategy in recent years. Evaluate the various changes P&G has made in its
promotional strategy. Do you think other consumer-packaged goods marketers will follow some of
the moves made by P&G?
The moves made by Procter & Gamble have been designed to simplify their marketing programs and
make more effective use of sales promotion. The changes may lead to a reduction in the use of trade
promotions which will result in fewer allowance and promotional deals for retailers. This may result
in more stable prices for products rather than weekly fluctuations. Changes will also occur in the way
consumer promotions are used. As noted in the vignette, P&G is cutting back on its use of coupons
and the money saved on may be put into other promotional areas such as sampling and in-store
demonstrations. The primary goal of the simplification movement is to reduce the complexity of sales
promotion programs targeted at both the trade as well as consumers. Companies such as P&G are
likely to focus more on the returns they get from various types of promotions and work to track their
impact and effectiveness more closely. They are also trying to make consumer less promotion
sensitive and purchase products on the basis of brand equity and/or quality rather than promotional
offers and deals. As part of the “Organization 2005” initiative, P&G is working more closely with its
retailers and forming partnerships with them. This is likely to result in more account-specific
promotions including event marketing and direct marketing programs and other comarketing efforts
with major retailers. It is likely that other major packaged-goods companies will pay close attention
to the changes being made by P&G and will quickly follow suit if they think these new promotional
strategies are giving the company a competitive edge with retailers and/or consumers.
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7.
What is meant by a sales promotion trap or spiral? Find an example of an industry where a
promotional war is currently taking place. What are the options for a marketer involved in such as
situation?
A sales promotion trap or spiral occurs when a number of competitors in an industry are making
extensive use of sales promotions and an individual firms receives no differential advantage from
doing so but cannot stop because its competitive position will be affected. When firms are caught in a
sales promotional trap, no one company gains from the use of promotions but the sales of an
individual firm may decline if it does not continue to offer the promotional incentive. Students should
be encouraged to find an example of an industry where a promotional war is currently taking place.
For example, grocery store chains often run promotional specials such as double or triple coupons or
special price deals to attract shoppers. The fast food industry is another example of a market where
promotional wars often take place as chains such as McDonald’s offer special promotions such as 59cent hamburgers or cheeseburgers on certain days of the week. Other fast food chains in some
markets match these special promotions so McDonald’s does not gain a competitive advantage.
Nearly all fast-food chains now offer 99 cent specials on certain items. Since the fast-food chains
have lowered their prices on these items they have found it difficult to raise them back to normal
levels. One of the competitors is always trying to use low priced specialty items as a draw for
customers and as a way to increase market share.
Companies involved in a sales promotion trap have two basic options—cut back on promotions or
maintain them. As shown in the matrix in table 12-8, if the company cuts back on promotions and
other firms follow, the result should be higher profits for all. However, if the company cuts back on
promotions and competitors maintain them, the company risks losing sales and market share to the
other firms. If the company maintains promotions and other companies cut back, it may see a gain in
sales or market share (assuming the market is promotionally sensitive). If all competitors maintain
their promotions, market shares should stay constant and profits may be negatively impacted by the
costs all companies are incurring to offer the promotional incentive.
8. Canadian Tire and Pillsbury used an aspect of their brand for a sales promotion for the first time ever.
Does this damage the brand at all in light of some of the concerns about sales promotion raised in this
chapter? What other brand has a long-standing icon that could be used for sales promotion?
The risk of damage to either brand depends to a great extent on whether the sales promotions were
franchise-building or non-franchise-building. If they were non-franchise building, their goal would
have been to accelerate the purchase process and generate an immediate increase in sales. Nonfranchise-building promotions – including price-off deals, bonus packs, rebates/refunds and trade
promotions - do not communicate information a brand’s unique features or the benefits of using it, so
they do not contribute to the building of brand identity and image. Furthermore, a brand that is overly
promoted in this fashion may lose perceived value. Research indicates that consumers who
consistently purchase a brand because of a coupon or price-off deal may attribute their behaviour to
the external promotional incentive rather than to a favourable attribute towards the brand.
On the other hand, if Canadian Tire and Pillsbury used franchise-building promotions – those which
communicate distinctive brand attributes and contribute to the development and reinforcement of
brand identity - they would have been much more likely to build long-term brand preference and
achieve the companies’ ultimate goal of full-price purchases that do not depend on a promotional
offer.
With respect to brand potential damage, non-franchise-building sales promotions are much more
risky.
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Other brands which have long-standing icons that could be used for a sales promotion include
Kellogg’s Frosted Flakes (Tony the Tiger), McDonalds (Ronald McDonald), Highliner (Captain
Highliner), Glad (the Man from Glad) and Energizer (the Energizer bunny).
Additional Discussion Questions (not discussed in text)
9. Do you think the decline that has occurred in coupon distribution and redemption will continue? How
might marketers compete without coupons and/or become more efficient in their couponing
strategies?
The decline in coupon distribution and redemption is due to several factors. Coupons have become
very expensive to print, distribute and process and a number of marketers have begun taking a very
close look at their efficiency. Many marketers also feel that consumers are less willing to take time to
clip and save coupons and during strong economic times they are less likely to use coupons. Many
companies also use coupons because their competitors do so. Companies may continue to cut back on
coupons as their competitors do the same. Another important factor is the reactions of the trade. Many
supermarkets on board with companies who are cutting back on the use of coupons and are interested
in eliminating the costly operational aspect of processing coupons in exchange for other types of
programs that better meet their needs.
Marketers can compete without coupons by shifting their promotional dollars to other areas such as
sampling or in-store distribution or by offering consumers every day lower prices. It is unlikely that
marketers will totally eliminate their use of coupons, as they are still very important in generating
new-product trial and brand conversion. Moreover, there is still a large segment of consumers who are
regular coupon users and might switch to another brand that offers coupons. However, marketers will
continue to strive to improve the efficiency of their couponing programs by using techniques such as
universal coupons, shorter expiration periods and more effective targeting when distributing coupons.
They are also likely to use coupons more as part of account specific marketing programs developed in
conjunction with a particular retailer.
10. Discuss how advertising and sales promotion can have a synergistic effect and what is required to
create this effect.
Advertising and sales promotion can have a synergistic effect whereby the impact of the combination
of the two promotional tools is greater than the response that would be generated if they are used
independently. Proper coordination of advertising and sales promotion requires coordinating decisions
regarding the allocation of the budget to each area as well as advertising and sales promotion themes,
the target audience reached and the timing of various sales promotion activities. For example, by
using advertising in conjunction with sales promotion for a new product, marketers can make
consumers aware of the brand and its benefits and increase their responsiveness to the promotional
offer. Consumers are more likely to redeem a coupon or respond to a price-off deal for a brand they
are familiar with or have favorable feelings toward versus a brand they know little about. Moreover,
product trial created through the use of sale promotion techniques such as sampling or coupons is
more likely to result in long-term usage of the brand when accompanied by advertising.
11. What is a slotting allowance? Do you think retailers are justified in charging manufacturers slotting
fees? Why or why not?
A slotting allowance is a fee that must be paid to retailers to provide a “slot” or position to
accommodate a new product in their stores. Retailers argue slotting fees are justified because there
are costs associated with taking on a new product such as redesigning store shelves, entering the
product into their computers, finding warehouse space, and informing store employees of the new
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item. They also argue that they are assuming some risk in taking on a new product since a high
percentage of new product introductions fail.
Manufacturers argue that slotting fees are not justified, as it really does not cost manufacturers that
much money to take on a new product. They argue that these fees are excessive and end up going to
the bottom line of the retailers. They argue that these fees are another way retailers are extracting
money from manufacturers and really are a form of bribery or blackmail that has to be paid to get a
new brand on the retailer’s shelves. An excellent discussion on the debate over slotting allowances
can be found in a recent article by Paul N. Bloom, Gregory T. Gundlach and Joseph P. Cannon in the
Journal of Marketing, Vol. 64 (April 2000) pp. 92-108.
12. Discuss the advantages of cooperative advertising from the perspective of the manufacturer and the
retailer.
Cooperative advertising has many advantages for manufacturers. It gives them the capability of
extending their advertising resources through the purchase of newspaper advertising at local rates. It
also allows them to tailor their advertising to local market conditions and to indicate to consumers
where their products can be purchased. Cooperative advertising can also enhance the manufacturer’s
position with retailers and help get their product promoted at the local level (and often on sale or
special). Cooperative advertising can also stretch a company’s promotional budget since the retailer
also contributes to the advertising of the product.
From the perspective of the retailer cooperative advertising also has many advantages. Co-op ads
provide a source of funding for retailers to advertise in local markets and bring consumers to their
stores. Moreover, when a co-op ad is promoting a well-known brand, it can generate store traffic that
results in sales for this brand as well as other merchandise. Astute retailers take advantage of
cooperative advertising as it can pay for a large amount of the advertising they do.
13. What is mean by account-specific marketing and how does it affect sales promotion strategies?
Account-specific marketing refers to a practice whereby marketers develop a customized promotion
for individual retailers. Account-specific marketing affects sales promotion strategies in several ways.
First, the practice may result in more specific targeting of promotions through the use of direct mail.
Manufacturers will be partnering with retailers to develop promotions that are sent only to the latter’s
customers. Account-specific marketing also will result in more cooperation between marketers and
retailers in the development and implementation of sales promotion programs.
IMC Exercise
The chapter discusses how sales promotion can be used to contribute to the development or
maintenance of brand equity by developing a promotional offer that is consistent with the image or
positioning of a product or service. Find an example of a contest, sweepstakes or premium offer that
a marketer is currently running and analyze the promotion with respect to how it contributes to brand
equity. You can find examples of contests, sweepstakes or premium offers in magazine ads, free
standing inserts (FSIs) in the Sunday newspaper, or on the Internet. Your analysis should include a
discussion of the image or positioning the marketer is using for the brand and how the promotional
offer supports the advertising campaign being used for the brand.
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IMC Comprehensive Project
After reading and discussing this chapter, students should be prepared to develop the sales promotion
portion of their IMC project. The specific assignment is as follows:
IMC Project Assignment for Chapter 12
Discuss how you will use sales promotion as part of the integrated marketing communications plan for
your product or service. You should specify the consumer and trade-oriented sales promotion objectives
for your product or service and discuss how specific sales promotion tools discussed in the chapter may
be used as part of your integrated marketing communications program. You should also discuss how you
will coordinate sales promotion with your advertising campaign giving attention to areas such budgeting,
ad and promotional theme coordination, and media support and timing.
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