Chapter 12 Chapter Objectives What are the two main categories of sales promotions and how do they differ What are the advantages and disadvantages of the various types of consumer promotions What are the major categories of trade promotions and how are they used ID: 496869
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Slide1
Sales Promotions
Chapter 12Slide2
Chapter Objectives
What are the two main categories of sales promotions and how do they differ?
What are the advantages and disadvantages of the various types of consumer promotions?
What are the major categories of trade promotions and how are they used?
How can a marketing team tie consumer promotions to trade promotions and other elements of the promotional mix?
What are the potential limitations when sales promotions programs are being developed for international customers?Slide3
Chapter Overview
Consumer promotions
Individuals
that use product
Trade
promotions (read on your own)
Directed to channel members
Possible erosion of brand equity
Can differentiate a brand
Use varies – product life cycleSlide4
Promotions
Sales promotion is any initiative undertaken by an
organization
to promote an increase in sales, usage or trial of a product or service
Sales
promotions are varied.Slide5
Consumer Promotions
Coupons
Premiums
Contests and sweepstakes
Refunds and rebates
Sampling
Bonus packs
Price-offsSlide6
Three Steps to Effective Sales Promotions
When
done correctly, promotions get customers out of a holding pattern by giving them an incentive to take action before a limited-time offer expires.Slide7
1. Target your effort
Promotions can spur purchases by
established
customers,
reel
in new customers,
draw customers from competitors, get current customers to buy differently, and stimulate business during slow periods. Rarely can one promotion accomplish all of those objectives at once. As a result,
advertisers must
decide which of the following is most important so that
they can
target
effortsSlide8
What do you want customers to do?
purchase
more frequently,
buy
in greater volume, or
be attracted to new or different
offeringsLure new customers into your business?Lapsed customers to give your business another try?Boost business during slow hours, weekdays or particular seasons?Slide9
2. Plan Your
I
ncentive
Price
savings
, including discounts, coupons or added value offers
Samples or trial offers to provide a low-risk way to try new products or servicesEvents or experiences to generate crowds, enthusiasm, sales, publicitySlide10
3. Know what you want to A
chieve
Work well when
consumers are in need of a jolt to take buying action.
Set
the number of sales you want to ring up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve.
Then determine what your desired change will mean financially to your business.Slide11
Coupons
323 billion distributed
3 billion redeemed (0.93%)
Average value was 89 cents
Savings of $3.47 billion
Coupon usage
78% of households use
64% willing to switch brandsSlide12
Coupons Slide13
Influencing Brand Purchases
Sampling 7.78
Word-of-mouth 7.18
Coupons
5.91
Advertising
5.61
Contests 1.24
On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer.
Source
: The Second Annual Survey of Consumer Preferences for Product Sampling,
Santella
& Associates (Http://www.santella.com/marketing.htm).Slide14
Coupon Distribution
Print media (90%)
FSI (88%)
Direct mail
On- or in-package
In-store
Sampling
Scanner-delivered
Cross-
ruffing
Response offer
Internet
Fax
Sales staffSlide15
Types of Coupons
Instant redemption
Bounce back
Scanner-delivered
Cross-
ruffing
Response offerSlide16
Coupon Redemption Rates
12-
16
Instant redeemable 39.3%
Bounce-back 17.2%
Instant redeemable – cross ruff 17.1%
Electronic shelf 10.2%
Electronic checkout 7.8%
In-pack 5.8%
On-pack 4.7%
Direct mail 3.5%
Handout 3.1%
Free-standing inserts 1.3%
Type of coupon Percent Redeemed
Source: Santella & AssociatesSlide17
Problems with Coupons
Reduced revenues
Used by brand preference consumers
(80%)
“Necessary evil”
$500 million illegally redeemed
Mass cutting
Counterfeiting
MisredemptionSlide18
Premiums
Free-in-the-mail
In- or on-package
Store or manufacturer
Self-liquidating
12-
18Slide19
In-Mail/Proof of PurchaseSlide20Slide21
Keys to Successful Premiums
Match premium to target market
Carefully select the premium
Pick premium that reinforces product and image
Integrate premium with other IMC tools
Don’t use premiums to increase short-term profitsSlide22
Contests and Sweepstakes
Contests
Require skill
Sweepstakes
Random chanceSlide23
SweepstakesSlide24
Goals of
Contests and Sweepstakes
Coordinate with other marketing
Encourage customer traffic
Boost sales - questionable
Intrinsic rewards draw customers back
Increase in brand awarenessSlide25Slide26
Refunds and Rebates
12-
26
Refunds – soft goods
Rebates – hard goods
Hassle to redeem
Now expected by consumers
Redemption rates
30% overall
65% for rebates over $50Slide27Slide28
Sampling
In-store distribution
Direct sampling
Response sampling
Cross-
ruffing
samplingMedia sampling
Professional sampling
Selective samplingSlide29Slide30
Benefits of Sampling
Introduce new products
Generate interest
Generate leads
Collect information
Internet sampling
Boost salesSlide31
Sampling Programs
Problems
Cost
Distribution
Effective sampling
Component of IMC plan
Stimulate trial usage
Target audience of sampleSlide32
Bonus Packs
Increase usage of product
Match or preempt competition
Stockpiling of product
Develop customer loyalty
Attract new users
Encourage brand switching
12-
32Slide33
Bonus Pac Tie-In with Coupon & Reward ProgramSlide34
DisneySlide35
Price-Offs
12-
35
Temporary price reduction
Stimulating sales
Reduces financial risk
Brand switching
StockpilingSlide36
Price-offs
Proven to be successful
Appeal of monetary savings
Reward is immediate
Problems
Can have a negative impact on profit
Encourages consumers to become more price-sensitive
Potential image on brand imageSlide37
Promotion Combinations
Overlay
Intra-company tie-in
Inter-company tie-inSlide38
Planning Consumer Promotions
Types of consumers
Promotion prone
Brand loyal
Price sensitive
Retailer incentives
Increase store traffic
Increase store sales
Attract new customers
Increase basket size
IMC PlanSlide39
EndSlide40
Trade Promotions
Types of trade promotions
Trade allowances
Trade contests
Trade incentives
Trade shows
For manufacturers, trade promotions
Accounts for 70% of marketing budget
Often 2
nd
largest expense
Accounts for 17.4% of gross salesSlide41
Trade Allowances
Off-invoice allowance
Price discount
35% of all trade dollars
Slotting fees
Exit feesSlide42
Slotting Fees
Retailer justification
Cost to add new products to inventory
Requires shelf space
Simplifies decision about new products
Adds to bottom line
Manufacturer objectionsForm of extortion
Divert money from advertising and marketing
Detrimental to small manufacturersSlide43
Trade Allowance
Complications
Failure to pass allowances on to retail customers
Only occurs 52% of the time
Retailers like only one brand on-deal at a time
Retailers can schedule and promote on-deal brands
Forward buying
Pass savings on or pocket higher margin
Additional carrying costs
Diversion
Pass savings on or pocket higher margin
Additional shipping costsSlide44
Trade Contests
Used to achieve sales targets.
Funds known as “spiff money.”
Rewards can be prizes or cash.
Can be designed for various channel members.
Some organizations do not allow trade contests because of possible conflict of interests.Slide45
Trade Incentives
Cooperative merchandising agreement
Premium or bonus pack
Co-op advertising programsSlide46
Cooperative Merchandising Agreement
Formal agreement
Popular with manufacturers
Retailer must perform marketing functions
Manufacturer maintains control
Longer-term commitments
Benefit retailers
Schedule calendar promotionsSlide47
Cooperative Advertising
Manufacturer pays part of retailer’s ad costs
Retailer must follow specific guidelines
No competing brands
Retailers accrue monies
Amount is based on sales
Allows retailers to expand advertising
Manufacturers gain exposure in local marketsSlide48
Trade Shows
Few deals finalized at trade show
International attendees want to make deals
Increase in international trade shows
National shows being replaced by regional and niche shows
Niche shows
Provide better prospects
Lower costsSlide49
Trade Show Attendees
Education seekers
Reinforcement seekers
Solution seekers
Buying teams
Power buyersSlide50
Concerns of Trade Promotions
Corporate reward structure
Used for short-term sales goals.
Tend to be used outside of IMC Plan.
Costs
Over-reliance to push merchandise.
Difficult to reduce – competitive pressures
Potential erosion of brand image.