MKTG 303: Advertising and Promotion Sales Promotions December 17, 2009 Zeynep Gürhan-Canlı

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 Plan

Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs

Types of Coupons Instant redemption (versus bounce back) Scanner-delivered Cross-ruffing Response offer Face value of coupon,distribution method, and coupon for preferred brand or brand in evoked set determine their effectiveness. Problems: Reduced revenue, counterfeiting, illegal internet distribution, misredemption

Types of Premiums Free-in-the-mail In- or on-package Store or manufacturer Self-liquidating Time factor Tend to have short life spans Popularity important Cost Related to interest in premium Exclusive premiums

Keys to Successful Premiums Match premium to target market Carefully select premiums Pick premium that reinforces product and firm image Integrate premium with other IMC components Don’t use premiums to increase profits

Contests and Sweepstakes Require skill Sweepstakes Random chance Rewards Extrinsic Intrinsic Costs Consumer indifference Clutter

Creating Successful Contests and Sweepstakes Know legal restrictions. Find right prizes. Consider extrinsic and intrinsic value. Use special events and tie-ins. Use Internet. Coordinate with POP displays and other marketing tools.

Rebates and Refunds Rebates – hard goods Refunds – soft goods Redemption rates 30% overall 65% for rebates over $50

Rebates and Refunds Problems Creating effective programs Costs Paperwork Diminished effectiveness Creating effective programs Visibility Perceived newness Impact

Types of Sampling In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional samples Selective samples

Sampling Programs Problems Effective sampling Costs Distribution Component of IMC Plan Stimulate trial usage Target audience

Bonus Packs Increase usage of product Match or preempt competition Stockpiling of product Develop customer loyalty Attract new users & encourage brand switching?? Bonus range from 30% to 100% 30% bonus most common

Price-offs Temporary price reduction Stimulate sales Reduce financial risk Brand switching Use of by Manufacturers Retailers

Problems with Price-offs Increase sales, but not profits. 20% or more increase in sales is needed to offset 5% price reduction. Makes consumers more price sensitive. 25% of consumers base purchases on price. Competitive pressure to use.

Effective Price-offs Increase store traffic Generate sales Works best with higher margin items Reasons for success Consumers view as monetary savings Reward is immediate

Promotion Combinations Over-lay: Two or more consumer promotion activities in one campaign Intra-company tie-in: Promotion of two different products within one company Inter-company tie-in: Partnering with another company

Trade Promotions Expenditures or incentives to push products through the channel (up to 70% of marketing budgets).

Objectives of Trade Promotions Obtain initial distribution Obtain retail shelf space Maintain established brands Counter competitive actions Increase order size Build retail inventories Reduce excess inventories Enhance channel relationships

Trade Promotion Tools Trade allowances Trade contests Trade incentives Training programs Vendor support programs Trade shows Specialty advertising Point-of-purchase displays

Trade Allowances Off-invoice allowance Slotting fees Exit fees Approximately 35% of all trade promotions Slotting fees To add new products to inventories and to stock merchandise. Shelf space To finalize decisions Add to the bottom line Exit fees Assumption is that a portion of this reduction will be passed on to consumers Forward buying Diversion

Trade Contests & Incentives Trade contests: To distribution channels, stores, sales people Trade incentives involve the retailer to perform a function to receive the allowance. Cooperative merchandise agreement (CMA) is an example.

Training Programs & Trade Shows Training programs are provided by manufacturers Goal is to bias salespeople Provide knowledge Trade shows are used extensively in business-to-business marketing programs

Concerns of Trade Promotions High costs Tend to use outside of IMC Plan Over-reliance on trade promotions Used for short-term sales goals Erosion of brand image Impact on small manufacturers