Sales Promotion Chapter Eleven

Key Learning Points How sales promotion differs from other modes of communication The different types of sales promotions Differences between customer, trade, and retailer-oriented promotions Issues in the development of promotional strategy and objective-setting Allocating money between advertising and sales promotion Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.1 Automobile Company Average Sales Incentives in 2009 Visit Edmunds.com 11-3 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

“Sales promotion is an action-focused marketing event whose purpose is to have a direct impact on the behavior of the firm’s customers.” - Robert C. Blattberg & Scott A. Neslin Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Figure 11.1 Simplified Channel and Promotional Structure 11-5 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.2, Part A Types of Consumer Promotions 11-6 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Sales Promotion Price-oriented promotions Couponing is the dominant form of activity. Redemption is low.

Table 11.4 Where Coupons are Distributed 11-8 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Methods of Coupon Distribution Marketing Research Methods of Coupon Distribution Free-standing inserts ROP newspaper Sunday supplements Magazine Direct mail On-package Instantly redeemable In-package Cross-ruff Retailer coupons Coupon machines 11-9 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.5 Couponing Objectives 11-10 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Discussion E-coupons are gaining in popularity. Visit one of the web sites below to learn more. www.thecouponclippers.com www.coolsavings.com www.coupondispatch.com What advantages do e-coupons offer compared to traditional coupons?

Sales Promotions Types of price-oriented promotions: Coupons Price, value, or bonus packs Refunds, rebates and money-back offers Interest rate promotions In-store discounts Price-oriented promotions can have negative effects on consumer behavior.

Sales Promotions Product-oriented promotions give away either the product itself or a closely related product. Sampling is commonly used for new products.

Sales Promotion Product-oriented promotions Premiums: Free merchandise provided with purchase or with fee and proofs of purchase

Sales Promotions Special event promotions: Contests and sweepstakes Tie-ins to sporting events and movies

Table 11.2, Part B Types of Trade Promotions 11-16 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Price-Based Trade Promotions Sales Promotions Price-Based Trade Promotions Provide retailers with an incentive to carry the product. Often used when manufacturers want retailers to pass on savings to buyers. Instead, many companies engage in forward buying practices. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.2, Part C Types of Retailer Promotions 11-18 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Illustration Point-of-purchase displays include information and other company-paid advertising. End of aisle displays or endcaps are a popular form of retailer promotion. 11-19 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Promotion Strategy, Objectives and Evaluation Consumer-oriented promotions: Strategic issues Effect on new products Effect on existing brands Promotional dilemma Cost and benefits must be considered

Table 11.6 Consumer Promotion Objectives 11-21 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Figure 11.4 Evaluating Sales Promotions: Tracking Studies 11-22 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Promotion Strategy, Objectives and Evaluation Incremental Effects of Price Promotions Accelerated regular purchases Accelerated captured purchases Unaccelerated regular purchases Unaccelerated captured purchases Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Figure 11.5 Strategies for Trade Dealing 11-24 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.7 Objectives of Trade Deals 11-25 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.8 Sales Promotion Plan 11-26 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Illustration Proctor & Gamble created the following sales promotion plan for a new consumer goods product. Trade allowances Sampling Couponing Special promotions Refunds Premiums Sweepstakes and contests 11-27 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Promotion Strategy, Objectives & Evaluation Evaluating trade promotions Evaluation typically uses tracking of before-and-after results. The frequency with which deals are passed-through should also be considered. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Table 11.9 Sales Effect of Deal Discount, Feature Advertising, and Displays 11-29 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Activity Suppose that you were the marketing manager responsible for introducing a new brand of snack food. Describe the types of consumer and trade sales promotions that you would use to introduce the product.

Promotion Budgeting Budgeting follows the same approaches discussed for setting ad objectives. Select method of budgeting. Determine overall advertising and promotion budget. Determine amount to be spent on promotion. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Conditions Affecting Total Budget for Advertising and Promotions Sales Promotions Conditions Affecting Total Budget for Advertising and Promotions Standardized product Many end-users Small purchase amount Channel members make sales Premium-priced product High contribution margin Small market share 11-32 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Promotion Budgeting Several factors influence the allocation of money between advertising and promotion. The total amount of resources Customer factors Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Promotion Budgeting Consumer Franchise Building CFB $ CFB ratio = (CFB$ + non-CFB$) * CFB activities are those that build brand equity. * Non-CFB activities focus on price alone. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Sales Promotion and Information Technology In-store information technology

Illustration The marketing manager for the number two brand of peanut butter could take several steps to increase market share. Users of #1 brand receive high value coupon. Redeemed coupons of #1 brand generate repeat purchase coupon. Complimentary purchases generate medium value coupon. Checkout Direct program is implemented. 11-36 Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Discussion Questions Sales promotions can be used in the marketing of services and not-for-profit organizations as well as in consumer goods marketing. While some charitable organizations sell merchandise, most use marketing to solicit donations or volunteers. Which promotion techniques are most appropriate for charities that do not sell merchandise? Given that most charities operate with very limited budgets, which techniques could realistically be used by those that do sell merchandise? Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall

Executive Summary Sales promotion is short-term oriented. Three kinds of promotions exist. Customer promotions are often price-related. Trade promotions provide incentives to channel members. Retailer promotions involve both price and special displays. Evaluating sales promotions is important. Promotions are being run on the Web. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall