16 MKTG CHAPTER Lamb, Hair, McDaniel 2007-2008 Chapter 16 Sales Promotion and Personal Selling MKTG Lamb, Hair, McDaniel 2007-2008 16 CHAPTER Sales Promotion and Personal Selling Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University

Learning Outcomes LO1 LO2 LO3 LO4 Chapter 16 Sales Promotion and Personal Selling Learning Outcomes Define and state the objectives of sales promotion Discuss the most common forms of consumer sales promotion List the most common forms of trade sales promotion Describe personal selling LO1 LO2 LO3 LO4

Learning Outcomes LO5 LO6 Chapter 16 Sales Promotion and Personal Selling Learning Outcomes Discuss the key differences between relationship selling and traditional selling List the steps in the selling process LO5 LO6

the objectives of sales promotion Chapter 16 Sales Promotion and Personal Selling Sales Promotion LO1 Define and state the objectives of sales promotion

Sales Promotion LO1 Sales Promotion Chapter 16 Sales Promotion and Personal Selling Sales Promotion Sales Promotion Marketing communication activities, other than advertising, personal selling, and public relations, in which a short-term incentive motivates a purchase. Notes: In addition to advertising, public relations, and personal selling, sales promotion is utilized to increase the effectiveness of other promotional efforts. Sales promotion provides an incentive for consumers to purchase a good or service immediately, either by lowering the price or by adding value. LO1

Sales Promotion LO1 Advertising Reason to buy Sales Promotion Chapter 16 Sales Promotion and Personal Selling Sales Promotion Advertising Reason to buy Sales Promotion Incentive to buy Notes: While advertising offers a reason to buy, sales promotion offers an incentive to buy. Both are important, but sales promotion is usually cheaper and easier to measure. For example, a national TV ad often costs a total of over $5 million, and it is difficult to determine how many people purchase a product as a result of seeing the ad. With sales promotion, it is easy to measure the number of coupons redeemed or the number of contest entries. LO1

Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Sales Promotion Consumer Sales Promotion Trade Sales Promotion Consumer market Marketing channel Drive immediate purchase Influence behavior Goal Notes: Sales promotion is targeted toward either of two different markets: to consumers or to members of the marketing channel (“trade”), such as wholesalers and retailers. Sales promotion expenditures have increased over the last several years as a result of increased competition, an expanding array of media choices, the demand for more deals from manufacturers, and the reliance on accountable and measurable marketing strategies. Promotion marketing in the U.S. exceeds $300 billion a year. Even power companies and restaurants have discovered the power of sales promotion. LO1

Objectives of Sales Promotion Chapter 16 Sales Promotion and Personal Selling Objectives of Sales Promotion Type of Buyer Loyal Customers Competitor’s Customers Brand Switchers Price Buyers Desired Results Reinforce behavior Increase consumption Change purchase timing Break loyalty Persuade to switch Persuade to buy your brand more often Appeal with low prices Supply added value Sales Promotion Examples Loyalty marketing Bonus packs Sampling Sweepstakes, contests, premiums Price-lowering promotion Trade deals Coupons, price-off packages, refunds Notes: The objectives of a promotion depend on the behavior of target consumers, as shown in Exhibit 16.1. LO1

REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal Selling REVIEW LEARNING OUTCOME LO1 The Objectives of Sales Promotion

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion LO2 Discuss the most common forms of consumer sales promotion

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Coupons and Rebates Premiums Loyalty Marketing Programs Contests & Sweepstakes Sampling Point-of-Purchase Promotion Notes: The tools selected for sales promotion must suit the objectives to ensure success of the overall promotion plan. Popular tools are shown here, and described on the following slides. LO2

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Coupon Rebate Premium A certificate that entitles consumers to an immediate price reduction. A cash refund given for the purchase of a product during a specific period. An extra item offered to the consumer, usually in exchange for some proof of purchase. Notes: Coupons encourage product trial and repurchase, and are likely to increase the amount of a product purchased. Coupon distribution has been growing, with almost 350 billion coupons distributed to U.S. households annually. This does not include Internet and in-store coupons. Increased competition and the introduction of 1200 new products each year have contributed to this trend. Coupons promoting new-product use are likely to stimulate purchases. Even though redemption rates are low for coupons, marketers are reevaluating the use of coupons, such as shortening the expiration time, using everyday low pricing instead, or distributing single, all-purpose coupons for redemption on several brands. In-store coupons are more likely to influence buying decisions and are redeemed 15 times more frequently than newspaper coupons. Rebates must be mailed in along with a proof of purchase. Rebates offer price cuts to consumers directly and are more easily controlled. Further, customer databases can be built due to the information forms required for rebates. Premiums reinforce the purchase decision, increase consumption, and persuade nonusers to switch brands. Discussion/Team Activity: Identify companies who have utilized these popular sales promotion tools. Examples: fast food services, cosmetic companies, banks, rental cars, magazines, computer manufacturers, cell phones, etc. LO2

Premiums Premiums provide consumers with a reason to choose one brand over another.

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Loyalty Marketing Program A promotional program designed to build long-term, mutually beneficial relationships between a company and key customers. Frequent Buyer A loyalty program in which loyal consumers are rewarded for making multiple purchases. Notes: Loyalty marketing programs reward consumers for making multiple purchases. These programs enable companies to invest sales promotion dollars in activities designed to capture greater profits from customers already loyal to the product/company. The objective of loyalty marketing is to build long-term, mutually-beneficial relationships. Studies show that frequent shopper programs require something more than just discounts to build loyalty. Furthermore, customers are “loyal” to more than one store, and participate in multiple programs. Discussion/Team Activity: Identify several companies that offer these programs. Discuss the benefits offered by some of the more popular loyalty marketing and frequent buyer programs. LO2

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Contests Promotions that require skill or ability to compete for prizes. Sweepstakes Promotions that depend on chance or luck, with free participation. Online Sweepstakes Online How do online sweepstakes sites compare to the kind of sweepstakes entries you receive in the mail? Visit the popular sweepstakes site Sweepstakesonline.com. Do any of the contests interest you? Do you think the pitches online are ethical? Why or why not? Notes: Contests and sweepstakes are designed to create interest in a good or service, often to encourage brand switching. They are not effective tools for generating long-term sales. Furthermore, the award must appeal to the target market. Offering several smaller prizes instead of one huge prize will increase the effectiveness of a promotion. Online http://www.sweepstakesonline.com LO2

Contests like this one encourage consumers to purchase more Chapter 16 Sales Promotion and Personal Selling Contests like this one encourage consumers to purchase more

Sweepstakes rely on chance Chapter 16 Sales Promotion and Personal Selling Sweepstakes rely on chance

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Sampling A promotional program that allows the consumer the opportunity to try a product or service for free. Notes: Sampling allows the risk-free trial of a product. Sampling can increase retail sales by as much as 40 percent. As a result, sampling has increased by more than 20 percent annually in recent years. Sampling at special events is popular, effective, and a high profile method that permits marketers to piggyback onto fun-based consumer activities. LO2

Samples

Methods of Sampling LO2 Direct mail Door-to-door delivery Chapter 16 Sales Promotion and Personal Selling Methods of Sampling Direct mail Door-to-door delivery Packaging with another product Retail store demonstration Discussion/Team Activity: Discuss some of the occasions that you have had the opportunity to participate in product sampling. How did this influence your decision to purchase the sampled product? What methods are most effective in reaching college students? LO2

Point-of-Purchase Promotion Chapter 16 Sales Promotion and Personal Selling Point-of-Purchase Promotion Build traffic Advertise the product Induce impulse buying Notes: Point-of-purchase promotions (P-O-Ps) include shelf “talkers”, shelf extenders, ads on carts and bags, end-aisle and floor-stand displays, TV monitors and in-store messages, and audiovisual displays. P-O-Ps offer manufacturers a captive audience in retail stores, and can boost sales by as much as 65 percent because between 70 and 80 percent of all retail purchase decisions are made in-store. LO2

Point of Purchase

Online Sales Promotion Chapter 16 Sales Promotion and Personal Selling Online Sales Promotion Effective Types of Online Sales Promotion Free merchandise Sweepstakes Free shipping with purchases Coupons Notes: Online sales promotions have grown due to the popularity of the Internet, generating three to fives times higher response rates than those of off-line counterparts. The most effective types are shown here. Internet retailers are eager to boost traffic and give away free services or equipment to lure consumers not only to the Web site but to the Internet in general. Online versions of loyalty programs are gaining popularity, and the most successful are those run by hotel and airline companies. LO2

REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal Selling REVIEW LEARNING OUTCOME LO2 Consumer Sales Promotion Coupons and rebates Premiums Loyalty marketing programs Contests Sampling P-O-P Online

Tools for Trade Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Trade Sales Promotion LO3 List the most common forms of trade sales promotion

Conventions & Trade Shows Trade Sales Promotion Chapter 16 Sales Promotion and Personal Selling LO3 Trade Allowances Push Money Training Free Merchandise Store Demonstration Conventions & Trade Shows Notes: While consumer promotions pull a product through the channel by creating demand, trade promotions push a product through the distribution channel in an attempt to influence supply. Consumer promotion tools are used when selling to members of the distribution channel, as well as tools that are unique to manufacturers and intermediaries, shown on this slide.

Trade Allowance LO3 Trade Allowance Chapter 16 Sales Promotion and Personal Selling LO3 Trade Allowance A price reduction offered by manufacturers to intermediaries, such as wholesalers and retailers.

Push Money LO3 Push Money Chapter 16 Sales Promotion and Personal Selling LO3 Push Money Money offered to channel intermediaries to encourage them to “push” products--that is, to encourage other members of the channel to sell the products.

Benefits of Trade Promotions Chapter 16 Sales Promotion and Personal Selling LO3 Help manufacturers gain new distribution Obtain wholesaler and retailer support for consumer sales promotions Build or reduce dealer inventories Improve trade relations Notes: Trade promotions are popular among manufacturers for many reasons, as shown on this slide.

REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal Selling REVIEW LEARNING OUTCOME LO3 Forms of Trade Sales Promotion

Describe personal selling Chapter 16 Sales Promotion and Personal Selling Personal Selling LO4 Describe personal selling Notes: Personal selling is direct communication between a sales representative and prospective buyers in an attempt to influence each other in a purchase situation. In a sense, all businesspeople are salespeople, and to reach the top in most organizations, individuals need to sell ideas to peers, superiors, and subordinates. Many business or marketing majors, as well as non-business majors, will start their professional careers in sales.

Personal Selling LO4 Personal Selling is more important if... Chapter 16 Sales Promotion and Personal Selling Personal Selling Personal Selling is more important if... Advertising & Sales Promotion are more important if... Customers are concentrated. Product is technically complex. There are few customers. Product is custom made. Product has a high value. geographically dispersed. Product is simple to understand. There are many customers. Product is standardized. Product has a low value. Notes: Exhibit 16.2 compares the effectiveness of personal selling and advertising/sales promotion based on certain customer and product characteristics. Personal selling is more important as the number of potential customers decrease, as the complexity of the product increases, and as the value of the product grows. LO4

REVIEW LEARNING OUTCOME Chapter 16 Sales Promotion and Personal Selling REVIEW LEARNING OUTCOME LO4 Personal Selling Detailed explanation or demonstration Variable sales message Directed to qualified prospects Controllable adjustable selling costs More effective than other promotion in obtaining sale and gaining customer satisfaction Personal Selling Advantages Notes: Personal selling offers several advantages over other forms of promotion, as shown on this slide.