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4550: Promotion Strategy II Professor Campbell 2/24/05 Plan for the Day • Consumer promotions – Online promotions – Testing • Trade promotions • Putting promotions in perspective Online Promotions • Advantages + Real-time tracking + Message execution + Product movement + Easily/fast modification + Data capture + Follow-up opportunities + Costs + Reach & Frequency + Redemption + Friendly target? Online Promotions, continued... • Disadvantages: – Response rate prediction – Lack of “real” consumer interest – Often does not build equity • Usage Questions for Online Promotions • Does this NEED to be online? – (to meet objective) • Is this something that will work better online than in traditional media? • What does this say about the brand? Testing Promotions • Is the promotion offer being processed by target consumers as intended to meet communication goals? • How does the promotion affect brand equity? – Consumers’ attributions for the promotion need to be understood Trade Promotions • Promotions (ie, short-term incentive) targeted to some member of the channel of distribution – Should be based on well-defined, specific objectives – Should have measurable goals Trade Promotions: Objectives Trade Promotions • Point-of purchase displays • Trade deals/ Buying allowances – Price-offs/ Off-invoice – Free goods – Slotting allowances • Dealer loaders • Comarketing – Co-op Ads – Account Specific Promotions • Market Development Funds • Dealer contests & incentives – Push $$/Spiffs Price-offs • Advantages + Quick implementation + Evoke strong response and fast response • Disadvantages – Cost – Short-term impact – Does not help brand equity and can hurt it • Usage » Short-term competitive response Tradeoffs among Promotions Manufacturer Factors Price Reductions Bonus Packs Coupons Trial Sizes Pass Through Unplanned Costs Ability to Forecast Costs Lead Time Source of Offer Immediacy of Impact Added Cost to Retailer Effect on Brand Equity Unsure Incomplete Pass Low Short Retailer High Shelf Talker Negative Yes Residual Stock Moderate Long Manufacturer Moderate Handling Depends Yes Misredemption High Moderate Manufacturer Low Checkout Time Depends Yes Residual Stock Moderate Long Manufacturer Moderate In-Store Handling Depends-Neutral Immediate Low Impulse Yes Moderate Immediate Low Impulse Yes Moderate Delayed Moderate Planned No High Immediate Low Impulse Yes Low Consumer Factors Timing of Reward Consumer Effort Impulse of Planned? # of Units can Purchase % Regular Users Generalizations about Promotion Types Advertising Consumer Promotion Trade Promotion Franchise Building Non-franchise Building Brand Benefit Emphasis Price Emphasis High Marketer Control Low Marketer Control Pull Strategy Push Strategy Longer-Term Impact Short-Term Impact Investment Financing Pay-as -You-Go Financing Long Time Horizon Shorter Time Horizon Image oriented Action oriented Promotions • Usage of promotions grew dramatically during the ‘80’s and early ‘90’s – 60% of consumer goods firms were spending more on promotions than ads – 80% of consumers made use of promotions • Trend then began reversing – 1991 - average of 47% of budget went to promotions – 1995 - average of 44% of budget went to promotions • Now appears to be increasing again – Retailer power & expectations Limitations Other “Promotions” • Because of limitations, promotion expenditures are increasingly going to nonsales promotions, e.g., event sponsorship – Global trend – Consistent with “micro-marketing,” “relationship marketing” Setting the Marketing Communications Mix • Decide on target market and marketing communications objectives – What effect do you want to have on the consumer? • Then decide which communications tools appear to be the best for achieving the desired effects What can we do to Generate Trial? What can we do to Generate Usage? Think about Brand Building • Non-Brand-Building Promos – Accelerate purchase process and generate an immediate increase in sales • Brand-Building Promo – Communicate brand attributes and contribute to the development and reinforcement of brand identity Base the marketing communications mix on consideration of the communications objectives and how best to achieve them In Conclusion... • Some promotions are likely to be necessary – Consumer: may be the best route to objectives – Trade: may be best route to objective but also may not have much latitude • Interest should be in incremental sales (versus short terms spikes in the sales curve) • Promotions (like everything else!) should be considered in terms of likely effects on brand equity Conclusion, continued… • Advertising and promotion work together – Prior attitude-building advertising creates higher perceived value from a brand’s promotion – Prior attitude-building advertising creates resistance in the consumer to other brand’s promotional activities • Synergies among marketing communications activities can make or break the overall plan.