Sales Promotion Management, Marketing- Oriented Public Relations, and Sponsorships Chapter Sixteen

Chapter Sixteen Objectives Describe the nature and purposes of sales promotion Explain the factors that account for the increased investment in promotions, especially those that are trade oriented Explain the tasks that promotions can and cannot accomplish

Chapter Sixteen Objectives Understand nine empirical generalizations about promotions Discuss the circumstances that determine when promotions are profitable

Introduction to Sales Promotion What Exactly is Sales Promotion? Any incentive used by manufacturers to induce the trade and/or consumers to buy a brand and encourage sales force to aggressively sell it

Introduction to Sales Promotion What Exactly is Sales Promotion? The incentive is additional to the basic benefits provided by the brand and temporarily changes its perceived price or value

Introduction to Sales Promotion Promotion Targets All three groups – the sales force, retailers and consumers – are targets of sales promotional efforts

Sales Promotion Push Pull Encourage Brand-Level Advertising and Sales Promotion Mix Retailers Sales ForceConsumers

Increased Budgetary Allocations to Promotions Advertising spending as a percentage of total marketing communications expenditures has declined in recent years Promotional spending, however, has steadily increased

Increased Budgetary Allocations to Promotions

Push Vs. Pull Push Strategy Using promotional efforts to push product through the selling chain Pull Strategy Using Consumer advertising to pull product through the channel of distribution

Push Vs. Pull Sales Promotion to Consumers Personal Selling to Retailers Advertising to Retailers Advertising to Consumers Sales Promotion to Retailers Advertising to Consumers Advertising to Retailers Sales Promotion to Consumers Personal Selling to Retailers

Factors Accounting for the Shift Balance-of-power shift from manufacturers to retailers Increased brand parity and price sensitivity Reduced brand loyalty Splintering of the mass market and reduced media effectiveness Short-term orientation and corporate reward structures Consumer responsiveness

Sales Promotions - Can Stimulate sales force Invigorate mature brand sales Facilitate introduction of new products Increase merchandising space Neutralize competitive ads Obtain trail purchases Hold current users Increase product usage Preempt competition Reinforce advertising

Sales Promotions - Can’t Compensate for lack of training and advertising Give a long-term reason for repeat purchases of the brand Permanently stop an established brand’s declining sales or basic non- acceptance

Generalizations About Promotions 1. Temporary retail price reductions increase sales 2. The greater the frequency of deals, the lower the height of the deal spike 3. The frequency of deals changes the consumer’s reference price 4. Retailers pass- through less than 100% of trade deals 5. Higher market share brands are less deal elastic

Generalizations About Promotions 7. Feature advertising and displays operate synergistically to influence sales of discounted brands 6. Advertised promotions can result in increased store traffic 8. Promotions in one product category affect sales of complementary and competitive products 9. The effects of promoting higher-and lower-quality brands are asymmetric

A Segmentation Model of Consumer Response to Sales Promotion Deals All Consumers On- and Off-Deal Consumers On-Deal Only Consumers (S8) LoyalistsSwitchers Non-Deal-Prone Loyalists (S1) Deal-Prone Loyalists Non-Deal-Prone Switchers (S5) Deal-Prone Switchers Stockpiling-Exceptionist Loyalists (S4) Stockpiling Loyalists (S2) Exceptionist Loyalists (S3) Nonstockpiling Switchers (S6) Stockpiling Switchers (S7) S1- S8 = Segment1 - Segment 8

Purchase Patterns

Promotion Insensitives SynActive Market Share Shampoo Sales Time Off Deal On Deal Off Deal Insensitive to promotional deals Unprofitable to place SynActive on deal

Stockpiling Loyalists SynActive Market Share Shampoo Sales Time Off DealOn DealOff Deal Sales Depression Due to SynActive Promotions Loyal to SynActive and will stockpile on deal Unprofitable to place SynActive on deal Sales increase is borrowed from future sales

Nonstockpiling Promotion Sensitives SynActive Market Share Shampoo Sales Time Off DealOn DealOff Deal Sales Depression Due to SynActive Promotions Loyalists and switchers but don’t stockpile Profitable only if R x M D > M N (R= S D /S N, M: Margin) SDSD SNSN

Stockpiling Promotion Sensitives Switch among brands and stockpile SynActive baseline sales are depressed both by its own dealing activity and by competitive dealing If SynActive dealing activity is profitable when consumers do not stockpile, then stockpiling behavior will lead to even greater profitability

On-Deal-Only Consumers Only buy on deal Profitable to place SynActive on deal Profit would equal the number of units(Q) sold times the profit margin(M D ) : Q x M D

In Conclusion