Sales Promotions

What are Marketing Communications? Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell. 17-2

Modes of Marketing Communications Advertising Sales promotion Events and experiences Public relations and publicity Direct marketing Interactive marketing Word-of-mouth marketing Personal selling 17-3

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Communication Platforms Advertising Print and broadcast ads Packaging inserts Motion pictures Brochures and booklets Posters Billboards POP displays Logos Videotapes Sales Promotion Contests, games, sweepstakes Premiums Sampling Trade shows, exhibits Coupons Rebates Entertainment Continuity programs 17-5

Communication Platforms Events/ Experiences Sports Entertainment Festivals Arts Causes Factory tours Company museums Street activities Public Relations Press kits Speeches Seminars Annual reports Charitable donations Publications Community relations Lobbying Company magazine 17-6

Communication Platforms Personal Selling Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows Direct Marketing Catalogs Mailings Telemarketing Electronic shopping TV shopping E-mail Voice mail Blogs Websites 17-7

Word-of-Mouth Marketing Person-to-person Chat rooms Blogs 17-8

What is Sales Promotion? Sales promotions consist of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.

Sales Promotion Tactics Consumer-directed Samples Coupons Cash refund offers Price offs Premiums Prizes Patronage rewards Free trials Tie-in promotions Trade-directed Price offs Allowances Free goods Sales contests Spiffs Trade shows Specialty advertising

Sales Promotion Tactics Consumer promotion is a short term incentive directed at consumer and consists of coupons, discounts, gifts, patronage rewards and other gifts. It can be considered as pull promotion. Trade promotions are financial incentives given by the manufacturer to a retailer for better displays and price promotions. It can be considered as push promotion.

Key questions regarding Sales promotions Some of the key questions that are of paramount importance to sales promotions are: Are they increasing sales to their maximum? Are they really as much profitable as thought to be? How sensitive is consumer response to the design and communication of sales promotion? What are long-term impact of sales promotion?

Impact of Sales promotions Sales promotions impacts customers through three different routes: Changing the product utility associated with product purchase ( the economic route). Influencing consumer’s belief about product, brand or industry( the informative/benefit route). Affecting the feelings and emotions aroused in the consumer( the affective route).

Economic Route Economic affects pertains to a monetary or non-monetary gain or loss that a sales promotions provides to a customer. Monetary benefits could be the price discounts and bundling. Non-monetary benefits are the reduced order taking time, reduced delivery time, innovative channel of service or product delivery that actually reduces the cost (e-commerce).

Informational Route Communication of direct or inferential knowledge derived from exposure to a promotion. Increased awareness and increased brand recall are the resulting phenomenon of exposure to a sales promotion. It also enables consumer’s to draw inferences about price-quality, product, product personality etc.

Affective Route Affective influences of sales promotions are the feelings and emotions aroused due to typical sales promotions like cause related marketing. It’s effects can be both general or specific. General effects could be the positive impact of the ambiance on the hedonic customer looking for adventure and exploration.

Affective Route Specific effects could be the inferences consumer’s make about themselves like being smart, ethical, lucky etc.

Deal Evaluation, Purchase Intention/Sale Economic value Informative value Affective value Sales Promotion Deal Evaluation, Purchase Intention/Sale Managerially Controllable contextual factors The three routes of affective promotions

Computing Consumer Promotion’s Profitability Promotion Profit= Economic value + Affective value – Opportunity lost – Promotional Expenses – Other variable expenses Economic Value = Incremental volume due to promotion (Margin – Discount) Affective Value = Incremental volume (Margin) Opportunity lost = Baseline volume expected to be sold without promotion (Discount)

Using Sales Promotions Establish objectives Select tools Develop program Pretest Implement and control Evaluate results

Giant Consumer Products Case Analysis

Case Summary Mike Needs strategy to allocate fund to Dinardo’s 16 oz pack Dinardo’s 32 oz pack Natural meals Do nothing Problem: 2008 GCP’s frozen division was not able to earn desired profitability. They were evaluating options for sales promotion.

Organization structure A rough look into the structure reveals the following hierarchy (who is answerable to whom) Allan (CEO): Raises concerns on adverse impact of sales promotion Potential for Cannibalization Eroding Brand equity Competitor may take advantage Below Allan is Flatt (VP Sales): Suggests for Sales promotion

Organization structure Below Flatt is Mary (GM for FFD): Flatt Consults Mary for effective use of funds Below or may be on the same hierarchy with Mary is Mike (VP Marketing for FFD): Mary asks Mike to do the fund allocation for Flatt.

Brand Line FFD is the brand under which they have two types Dinardo’s and Natural Meals. This forms the length of the Product line. Under Dinardo’s they have D32, D16 & D8&6. This forms the depth of the Product. Under Natural meals they have no depth. For this they followed Lifestyle based segmentation.

Analysis of the Competitors A look into their competitors reveals the following information: Daft: Competitor for Natural Meal (Organic Product for Niche segment) Restaurants: Competitor for all brands Supermarkets: Competitor for all brands

Market Analysis for GCP Market is growing @ 2.8% Channel is Manufacturers to Retailers Channel Conflict identified from past for running sales promotions are Not passing benefits to consumers Passing for the offer period and once offer is over selling the same stock for higher Selling it at discount even after the discounting period. The last two is case of forward purchasing and piling of stock.

Mike’s Planning for Promotion Objective was to increase volume and thus profitability. Vehicle for communication was weekly circular and end aisles displays. Sales promotion was scheduled for 1 week period. Mike and Mary firmly believed that sales promotion is only a push strategy and to pull the customer for the longer period of time they need to focus on: AIDA model of selling New Product Introduction Attractive Packaging

Solution for Dinardo 16 & 32 From Exhibit 3 (template 1) considering promotional impact on the promoted item it is clear that Running promotion in D32 would generate profitable margin. ($718,986) Running promotion on D16 would give negative margin (-$526,946) From this template the company can conclude to run promotional campaign for D32 not D16.

Solution for Dinardo 16 & 32 From Exhibit 3 (template 2) considering within brand cannibalization it is clear that: Incremental volume in D32 is largely due to the cannibalization of D16

Solution for Natural Meals Change in the margin as a result of promotion is 12% for Natural Meal. Go ahead with the promotion for Natural meals as there are no chances of cannibalization. Natural Meal also do not have mass appeal so sales promotion may help the brand to get better mass appeal and increase its awareness and persuade customers to buy the same.

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