13 Sales Promotion Chapter Afjal Hossain Department of Marketing Assistant Professor Department of Marketing Patuakhali Science & Technology University Kenneth E. Clow & Donald Baack Integrated Advertising, Promotion & Marketing Communications – 2nd ed.

Why Consumer promotion? Sales Promotion Also refers to consumer promotion. Are the incentives aimed at a firm’s customers. This type of promotions are directed toward individuals or firms that use the product and do not resell it to another business. Why Consumer promotion? Stimulate purchase Introduce as a trial Create new users Increase repurchase from occasional customers Reward loyal customers Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 02

Promotions that Work Types/ Forms of Consumer Promotions Coupons Unique, Desirable Offering or Premise They make you believe you can win! Simple to Enter / Participate Coupons Premiums Contests & Sweepstakes Refunds & Rebates Free samples/ Sampling Bonus Packs Price-offs Specialties Price Reductions Types/ Forms of Consumer Promotions Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 03

Types of Consumer Promotions --- Coupons price reduction offer to a consumer for achieving another thing. It may be percentage off the retail price. Three types of coupons are: Instant redemption coupons: This type of coupons are given out along with free samples of a product to encourage consumers to try a new brand. Bonus-back coupons: This type of coupons are given inside packages to encourage repeat purchase. Scanner-delivered coupons: Firms issue coupons at cash register by triggering an item being scanned. The item being scanned is normally a competitor’s product. It is used to brand switching. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 04

Types of Consumer Promotions --- Coupons: Problems Reduced revenues: Using coupon it is to reduce price of the product in case of the loyal customers in the next purchase. So, total revenue is reduced. Mass-cutting: This problems occurs only for a fraudulent retail outlet/ illegal coupon ring. Counterfeiting: Coupons are copied & send back to the manufacturers. Newspaper generated black & white coupons are easiest to counterfeit. Misredemptions: It is of misrepresenting the coupon for a wrong size cane. Coupon for 250 gm cane rather than 500 gm cane. Coupons: Tactics to Improve Coupons Effectiveness The Face value of the coupon: Higher value Distribution method: Free standing inserts (FSI) Attractiveness Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 5

Types of Consumer Promotions --- Premiums prizes, gifts/ other special offers consumer receive while purchasing products In this case consumers pay full price of the product. Four types of premiums are: Free-in-the-mail premiums In or on-package premiums Store or manufacturer premiums Self-liquidating premiums Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 6

Types of Consumer Promotions --- Premiums: Four types of premiums Free-in-the-mail premiums Gifts, individuals receive for purchasing goods. To receive the gift, the customer must mail in a proof or purchase to the manufacturer, who then mails the gift back to the consumer. Sometimes, more than one purchase is required to receive the gift. In or on-package premiums small gifts such as toys in cereal boxes. Sometimes, the gift is disguised or packaged so the consumer must buy the product to find out which premium it contains. Ex: Package of blades with the purchase of razor. Store or manufacturer premiums Gifts given by either the retail store or manufacturer when the consumers purchase a product. Ex: Fast-food restaurants offer children a toy with the purchase of child’s meal. Self-liquidating premium Consumers purchase when the manufacturers bear the shipping or handling costs just paying for the products price. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 7

Types of Consumer Promotions --- Premiums: Problems Time Factor The offers would be for a small time otherwise it will face a huge loss. Cost Higher cost premiums create more sales but cost more to provide. Premiums: Building successful Premium Programs Match the premium to the target market Carefully select the premiums (avoid fads, try for exclusivity) Pick a premium that reinforces the firm’s product and image Integrate the premium with other IMC tools (especially advertising & POP displays) Don’t expect premiums to increase short-term profits Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 8

Types of Consumer Promotions --- Contests & Sweepstakes Contests Sweepstakes Purchase is required to enter No purchase is required to enter Consumers/ Participants to perform some type of activity Participants need not to perform any activity The winner is selected based on who performs best or provides the most correct answers The chance of winning a sweepstakes are based on a probability factor Can’t be restriction for the purchase of the products Can be restricted for the customers to one entry per visit to the store or some other location Consumer goods related Sports related Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 9

Types of Consumer Promotions --- Contests & Sweepstakes: Problems Costs to provide prize, entry forms, legal statements, supportive advertising etc. Consumer Indifference State lotteries, internet gambling create individual difference. Clutter Many companies can offer at a given time Contests & Sweepstakes: Creating successful C & S Finding the right prize Undertake an advantage of a special event sports contest or celebration of any renowned person Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 10

Types of Consumer Promotions --- Refunds & Rebates cash returns offered to consumers for the purchase of a product Consumers pay full price for the product but can mail in some type of proof of purchase and then the manufacturer refunds a portion of the purchase price. Refunds Rebates Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 11

Types of Consumer Promotions --- Difference between Refunds & Rebates Refunds Rebates Cash returns on “soft goods” Cash returns on “hard goods” Soft goods are – food or clothing Hard goods are – ticket items i.e. automobiles Refunds are of small amount of money Rebates are of large amount of money Refund on a food item is Tk. 50 Rebate on a car is Tk. 2,000 Refund is always on products Rebates is for both products & services Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 012

Types of Consumer Promotions --- Refunds & Rebates: Problems Costs mailing & record keeping cost involved. Lost revenue total revenue is decreased. Diminished Effectiveness no new purchase is evolved. Refunds & Rebates: Creating effective RR Visibility Perceived newness An impact Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 013

Types of Consumer Promotions --- Sampling encourage consumers to try new product Sampling is the delivery of actual product to consumers for their use or consumption. Samples are provided free of charge. Often, companies provide samples of products to potential clients. Sampling can be used in service sector i.e. Saloon or Dentist. Seven types of sampling: In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional sampling Selective sampling Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 014

Types of Consumer Promotions --- Sampling: Seven types of sampling In-store sampling when food product companies have personnel, cooking the food and passing it out to individuals in the store Direct sampling samples are mailed or delivered door to door to consumers. Response sampling samples are made available to individuals or businesses responding to a media offer on television, on the internet or from a magazine etc. Cross-ruff sampling samples of one product on another. Media sampling samples are included in the media outlet. Professional sampling samples are delivered by professionals, doctors provide free samples to patients. Selective sampling samples are distributed at a site i.e. state fair, parade, hospital, restaurant, sporting event etc. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 15

Types of Consumer Promotions --- Sampling: Problems Cost Samples are mailed, adding to the expense of the program. Sampling: Effective use of samples It introduces a new product or a new version/ an existing product to a new target market or a prospect. Willing to switch brands if the trial use of the product was a positive experience. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 16

Types of Consumer Promotions --- Bonus Packs encourage to buy existing product with an extra unit when an additional extra number of items is placed in a special product package then it is called bonus packs. Ex: Buys 4 pens for the price of 3 pens in a bonus pack. Bonus Packs: Problems When the bonus is small consumers often believes the price of the product has not truly changed. When the bonus is large, consumers tend to believes that the price was first increased up to compensate for the additional quantity. The size of the bonus catches the consumer’s attention, it may not convey the desired message. Bonus packs are costly because, additional amounts of product sell for the same or a similar price. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 17

Types of Consumer Promotions --- Bonus Packs: Effective use of Bonus Packs A retailer can build a good relationship with a manufacturer that uses a bonus pack to increase brand switching. Consumers like bonus packs because they get additional product at the same price. Reduce brand switching at a minimal cost for existing product. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 18

Types of Consumer Promotions --- Price-offs encourage an display sales more not the actual product A price-off is a temporary reduction in the price of a product to the consumer. It is not on actual item but on a POP display, sign or shelf. It stimulates Sales of an existing product. Work well in the B2B area. Price-offs: Problems Too many price-off offers can create a detrimental impact on the firm’s image. It devastates for profit margins Price-offs: Effective use of price-offs It has an appeal of a monetary savings to consumers The reward is immediate Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 19

Types of Consumer Promotions --- Specialties Items given free to consumers and other stakeholders to help keep a brand’s name top-of-mind. These are normally low cost items, i.e. calendars, rulers, coffee mugs, T-shirts, pens etc. Basically non-profit organizations use specialties for opening new facilities. Price Reductions A featured price that is lower than regular price. Ex: Buy one get one free, 30 more for same price etc. Sometimes the retailers sacrifices some of its profits to clear the stock. Leon G. Schiffman & Leslie Lazar Kanuk “Consumer Behavior” 8th edition, Prentice Hall – 2006 20