Sales Promotion © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

An extra incentive to buy A tool to speed up sales An extra incentive to buy A tool to speed up sales Targeted to different parties Sales Promotion © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin “A direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.”

Samples Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus Packs Price-off deals Frequency programs Cooperative advertising Trade allowances Training programs Contests, dealer incentives Point-of-purchase displays Trade shows Sales Promotion Vehicles © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Consumer-OrientedTrade-Oriented Event marketing Samples Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus packs Price-off deals Loyalty programs Trade allowances Training programs Contests, dealer incentives Point-of-purchase displays Trade shows Event marketing

The San Diego Padres Use a Promotion to Boost Attendance © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin *Click outside of the video screen to advance to the next slide

Media Advertising Often Delivers a Promotion Message © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Growing power of retailers Declining brand loyalty Increased promotional sensitivity Brand proliferation Fragmentation of consumer markets Short-term focus of marketers Increased accountability Competition Clutter Competition Increased accountability Short-term focus of marketers Fragmentation of consumer markets Brand proliferation Increased promotional sensitivity Declining brand loyalty Growing power of retailers Reasons for Increase in Sales Promotion © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Reasons

Communicate distinctive brand attributes Build long-term brand preference Develop and reinforce brand identity “Frequency” programs encourage repeat purchase “Frequency” programs encourage patronage loyalty Contests and, sweepstakes that increase involvement and help build equity “Frequency” programs that encourage repeat purchase and loyalty Build long-term brand preference Develop and reinforce brand identity Communicate distinctive brand attributes Consumer Franchise-Building (CFB) Promotions © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CFB Promotional Objectives CFB Techniques and Practices Premium offers that reinforce the brand image and help build equity

Sweepstakes Can Help Build Brand Equity © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Accelerate the purchase decision process Do not identify unique brand features Generate an immediate sales increase Do not contribute to brand identity or image Do not identify unique brand features Generate an immediate sales increase Accelerate the purchase decision process Nonfranchise-Building (non-FB) Promotions © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Non-FB Promotional Objectives Non-FB Promotions...

Price-off deals Rebates or refunds Bonus packs Trade promotions benefits may not reach customers If they do, they may lead only to price reductions Trade promotions benefits may not reach customers Rebates or refunds Bonus packs Price-off deals Nonfranchise-Building (non-FB) Promotions © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Non-FB Promotions May Include... Non-FB Promotions Shortcomings Customers may “buy price” rather than brand equity

To increase consumption of an established brand To target a specific segment Enhance IMC efforts and build brand equity To defend (maintain) current customers To obtain trial and purchase To target a specific segment To defend (maintain) current customers To increase consumption of an established brand To obtain trial and purchase Objectives of Consumer-Oriented Sales Promotion © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Objectives

Use of Consumer Promotions by Package Goods Companies © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 0% 25% 50% 75% 100% Money back offers/other refunds Couponing consumer direct Cents-off promotions Couponing in retailers' ads Couponing in store Sampling new products Sampling established products Premium offers Electronic retail promotions Sweepstakes Internet promotions Contests Prepricing on package Other

The products are of relatively low unit value, so samples don’t cost much The products are divisible and can be broken into small sizes that can reflect the products features and benefits The purchase cycle is relatively short so the consumer can purchase in a relatively short time period The products are of relatively low unit value, so samples don’t cost much The products are divisible and can be broken into small sizes that can reflect the products features and benefits Sampling © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Sampling Works Best When

Event sampling Door-to-door Direct mail Central location distribution In-store sampling Cross-product sampling Co-op package distribution With newspaper/magazine Internet sites Event sampling With newspaper/magazine Co-op package distribution Cross-product sampling In-store sampling Central location distribution Direct mail Door-to-door Sampling Methods © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Methods

Samples are Often Distributed With Local Newspapers © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Armor All Uses an On-Package Sample © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Coupons © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Coupons 80 percent of consumers use coupons and 25% use them regularly Nearly 240 billion distributed each year in the US The oldest and most widely used sales promotion tool Nearly 260 billion distributed each year in the US The oldest and most widely used sales promotion tool

Advantages and Limitations of Coupons © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin AdvantagesDisadvantages Appeal to price sensitive consumer Can offer price break without retailers coop Can be effective way to induce trial of new or existing products Can be way to defend market share and encourage repurchase Coupons are often used by loyal consumers who may purchase anyway Misredemption and fraud Difficult to determine how many consumers will use coupons and when Declining redemption rates and high costs of couponing Appeal to price sensitive consumer Can offer price break without retailers coop Can be effective way to induce trial of new or existing products Can be way to defend market share and encourage repurchase Coupons are often used by loyal consumers who may purchase anyway Difficult to determine how many consumers will use coupons and when Declining redemption rates and high costs of couponing

Percent of Sales Made With Coupons for Various Products © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 43% 35% 29% 25% 24% 20% 12% 11% 8% 7% 2% Gum Candy Carbonated Beverages Adult Cold Remedies Pet Food Coffee Sanitary Protection Deodorants Liquid Detergents Ready-to-Eat Cereal Disposable Diapers

Other Magazines In / On Pack Direct Mail Newspaper Coop Newspaper ROP Freestanding Inserts Coupon Distribution © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

FSIs are the Most Popular Types of Coupons © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Coupon Redemption Rates © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 0%5%10%15%20%25%30%35%40%45% Newspaper Magazine Free Standing Inserts Direct Mail All Other In-Store Handouts All Other Out-Store Handouts Regular In-Pack Instant On-Pack Cross-Ruff On-Pack Cross-Ruff Handout Electronically Dispensed In-Pack Cross-Ruff On-Shelf Distributed Regular On-Pack Instant On-Pack Health & Beauty Grocery

Valpak’s Advertising Helps Enhance the Value of Coupons © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin *Click outside of the video screen to advance to the next slide

Coupons Are Now Available Online © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Free Premiums: Only require purchase of the product Self-liquidating Premiums: require consumer to pay some or all of the cost of the premium Free Premiums: Only require purchase of the product Premium: an offer of an item of merchandise or service either free or at a low cost that is an extra incentive for customers Premiums © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Two Types of Premiums

Airline Miles are a Very Popular Premium Incentive © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Contests and Sweepstakes © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Contest: a promotion where consumers compete for prizes or money on the basis of skills or ability. Winners are determined by judging entries or ascertaining which entry comes closes to some predetermined criteria Sweepstakes/games: a promotion where winners are determined purely by chance and cannot require a proof of purchase as a condition for entry. Winners are chosen by random selection from a pool of entries or generation of a number to match those held by game entrants.

Little consumer franchise building Focus on contest/sweepstakes, not brand Effectiveness Negative publicity Federal regulations Use by professionals or hobbyists Focus on contest/sweepstakes, not brand Effectiveness Negative publicity Federal regulations Little consumer franchise building Problems With Contests and Sweepstakes © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Problems

Bonus Packs Frequency/ Loyalty Programs Event Marketing Price-off Deals Refunds and Rebates Frequency/ Loyalty Programs Price-off Deals Bonus Packs Refunds and Rebates Other Popular Consumer Sales Promotion Tools © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Other Promotional Tools

Event Marketing © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Summary of Consumer-Oriented Promotions and Market Objectives © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Encourage retailers to display existing brands Obtain distribution of new products Maintain trade support for existing products Build retail inventories Maintain trade support for existing products Obtain distribution of new products Trade-Oriented Sales Promotion Objectives © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Objectives

Trade Shows Contests and Incentives Trade Allowances Point-of-Purchase Displays Sales Training Programs Cooperative Advertising Types of Trade-Oriented Promotions © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Buying Allowances Promotional Allowances Slotting Allowances Buying Allowances Promotional Allowances Trade Allowances Point-of-Purchase Displays Sales Training Programs Slotting Allowances

Types of Cooperative Advertising © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cooperative Advertising Vertical Cooperative Advertising Ingredient- Sponsored Coop Advertising Horizontal Cooperative Advertising Ingredient- Sponsored Coop Advertising Horizontal Cooperative Advertising

“Intel Inside”- A Powerful Co-op Program © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin *Click outside of the video screen to advance to the next slide