Lesson 4: Promotion

Objectives Compare different promotional strategies and the benefits of a promotional mix Discuss the advantages of publicity and public relations Calculate a promotional budget based on net sales Evaluate promotion results and adjust future promotions Explain promotions impact on revenue, margin, and profit Analyze financial statements to determine the success or failure of a promotion

1.What is Promotion? The positive communication a business has with customers –Communicate info about the store –Institutional Promotion – a promo that heighten the store’s image or is applicable to the entire store –Product Promotion – a promo that is specific to one product or a small group of products

2. Types of Promotion 1.Personal Selling 2.Sales Promotion 3.Advertising 4.Public Relations

3.Personal Selling The use of paid sales associates to interact with the store’s customers Relies on person-to-person interaction Sales associates must be friendly, knowledgeable, and helpful

4.Sales Promotion The use of activities that encourage customers to make purchases Ie: coupons, samples, contests, s General goal: INCREASE SALES!

5.Advertising A communication to customers paid for by a business A non-personal, one-way message Ads in the newspaper, on TV, etc.

6.Public Relations The use of unpaid references to a business to further a positive impression Goal: To showcase the business in a positive manner Includes PUBLICITY: calling attention to a newsworthy aspect of the business, such as charitable donations –Not paid for by the business –Try to avoid negative publicity

7.The Promotional Mix The combination of types of promotion a business uses Will change often –There is no universal mix that works best all the time

8. The Goal of Promotion Should be specific and clearly stated –Makes it easier to identify promotional activities Steps in planning a successful promo campaign: –State the goals –Outline the planned campaign –Determine costs –Implement the promotion –Evaluate the campaign

9. The Promotional Budget Regarded as a necessary business expense Usually determined as a % of sales, based on last year’s sales or industry ratios In an established business, there should be a direct relationship between sales and sales and promo budgets –It CAN be smart to invest in promotion, even when sales are slow In a NEW business, there should be a large amount of promotion for the first six months

10. Evaluation of Promotions Determine whether goals were met –If there was a goal of increasing sales 3% in a 2-week timeframe, evaluate the sales figures If goals were not met, determine why

11. Advertising Laws FTC – Federal Trade Commission – enact and enforce advertising laws –Protect consumers from deceptive / false advertising –False advertising – when a business knowingly makes claims about a product that are not supposed by fact Government issues a Cease & Desist Order – legally forces the business to discontinue the untrue advertising –Bait & Switch – illegal practice of advertising a product at a low price and stocking little to none of that product, with the intention of selling customers a more expensive item

12.Key Math Concepts Net Sales = Total Sales – (Returns + Discounts) Promotional Budget = % of Net Sales X Net Sales