Sales and Trade Promotions Chapter Fifteen Sales and Trade Promotions

Chapter Objectives Discuss reasons for shift in marketing expenditures to promotions. Identify various forms of sales promotions. Identify types of coupons as well as distribution methods. Explain the importance of in-store promotions. Discuss the goals and the types of trade promotions. Discuss the issue of slotting fees.

Sales Promotions Reasons for recent shift from advertising to sales promotions are: Immediate and dramatic impact on sales Increased brand proliferation and brand parity Greater consumer acceptance of promotions Declining impact of advertising

Sales Promotions Used to stimulate some type of activity on the part of a consumer or business Most sales promotions are aimed at consumers, but sales promotions can also be targeted to businesses if the business is the final user of the product. An office supply store may offer a business a special promotion to either make an immediate purchase or place a larger order. If the business purchases the office supplies for its own consumption, then the promotion is a sales promotion. If, however, they are reselling the office supplies, then it is a trade promotion. Sales promotions need to fit into the IMC and should be part of the company’s strategic planning.

Types of Sales Promotions Coupons Premiums Contests and sweepstakes Bonus packs Tie-ins Frequency programs Sampling Price-offs Refunds and rebates Product placement Brandchannel.com

Coupons Coupon Distribution Instant redemption—can be instantly redeemed Bounce-back—cannot be used immediately but must be used on the next shopping trip Scanner-delivered—issued at the cash register Cross-ruffing—placed on another product Response-offer—issued upon customer request E-coupons—issued electronically Coupon Distribution

Premiums Offer free merchandise for purchasing the product Not as effective in encouraging new customers Need to be attractive to the customer Overlay—the use of two or more promotions in a single offer

Contests and Sweepstakes Allow participants an opportunity to win prizes Contests require participants to make a purchase to be eligible to win. In sweepstakes participants do not need to buy to be eligible. The fun, fantasy, and stimulation aspects should be emphasized. Effective for generating interest in a firm’s products Example: Pepsi sweepstakes Source: Courtesy of Pepsi-Cola Company.

Bonus Packs Additional merchandise offered at the same price or slightly higher price The goal is to entice consumers to switch brands or to encourage current consumers to stock up. Should contain at least 25% of additional product to be effective

Tie-ins Includes two or more goods or services within the same promotional offer Intracompany—involve two or more distinct products within the same company Intercompany—involve two different companies offering complementary products

Frequency Programs Focus on developing brand loyalty and enhancing brand equity. Should require multiple purchases over a period of time There is a standardized redemption process. There is a formal method for accumulating points. Rewards come in the form of additional goods, discounts, or cash once enough points are accumulated. Successful frequency program ties a customer to a firm, because it provides quality products and rewards them for their loyalty.

Sampling Primarily used by food and beverage manufacturers, but can also be used by almost any firm Although expensive, it is effective at generating trial purchase To increase effectiveness, should be used with some other promotional offer

Price-offs Involve a reduction in the listed retail price of a product Attract consumers and stimulate demand by reducing purchase risk. If used too frequently, customers will expect the reduced price and won’t pay the full price. Have almost instantaneous impact

Refunds and Rebates Cash reimbursements paid to consumers with some type of proof of purchase Refund—soft goods Rebate—hard goods Primary goal is to reward individuals for the purchase of a product.

Product Placement Involves the placement of branded products in movies and television shows Branded media—a movie or show that contains a brand name or logo with a storyline that intersects the brand’s advertising campaign. Gets the branded product before the audience in a credible and seemingly non-commercial way

Example of supermarket in-store promotions. Most of brand purchase decisions are made while in a retail store. Packaging, point-of-purchase displays, and in-store promotions are critically important. Packaging is the last opportunity to convince a shopper to purchase a brand. Example of supermarket in-store promotions.

Trade Promotions Incentives used by manufacturers and other members of the marketing channel to help push their products through the channel Primary objective is to build relationships with other members of the channel and to encourage them to sell the firm’s products. Goals of Trade Promotions Stimulating initial distribution Obtaining prime retail locations or shelf space Supporting established brands Countering competitive actions Increasing order size Building retail inventories Reducing excess inventories of the manufacturer Enhancing channel relationships Enhancing the IMC program

Types of Trade Promotions Trade allowances: financial incentive to motivate purchase Off-invoice—financial discount on each case ordered. Slotting fee—funds paid to retailers to stock new products. Exit Problems: Allowance pass-along, Forward buying, Diversion Trade contests: Rewards for achieving a specific goal, e.g., spiff Trade incentives: retailer performs function to receive an allowance, e.g., Cooperative Merchandising Agreement Vendor support programs, e.g., Cooperative Program Trade shows Expenditures rank third in business-to-business market. Offer the opportunity for buyers and sellers to interact. Usually used to share information, compare merchandise, and develop contacts The World Exposition (Expo) is one of the more popular and diverse tradeshows.