1. Sales Promotion

2. 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.
“…temporary addition of Value”

4. Promotion Targets
Three groups :
– sales force,
retailers
consumers

6. 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.

7. Factors Accounting for the Shift
Push Strategy
Using Consumer
advertising to push
product through the
channel of distribution
Pull Strategy
Using Consumer
advertising to pull
product through the
channel of distribution

8. Sales Promotions – Objectives
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

9. 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

10. Trade Promotion - Objectives
Introduce new or revised products
Increase distribution of new packages or sizes
Build retail inventories
Maintain/Increase manufacturer’s shelf space
Obtain displays outside shelf locations
Reduce excess inventory
Achieve product features in retailer’s ads
Counter competitive activity
Sell as much as possible to final consumers

11. Key Ingredients to Success
Financial incentive
Correct timing
Minimize retailer’s effort/cost
Quick results
Improve retailer performance

12. Trade Allowances Used by manufacturers to reward
wholesalers and retailers for
performing activities in support of the
manufacturer’s brand

13. Objectives:
Increase purchases of the manufacturer’s brand by wholesalers and/or retailers.
Augment consumers’ purchases of the manufacturers’ brand from retailers.
Expectation that retailers will pass along their savings to consumers.

14. Major Forms of Trade Allowances
Off-invoice allowances
Bill-back allowances
Slotting allowances
Most frequently used form
Deals offered periodically to trade that permit wholesalers and retailers to deduct a fixed amount from the invoice
Retailers do not necessarily pass along to consumers the discounts

15. Major Forms of Trade Allowances
Slotting allowances
Bill-back allowances
Off-invoice allowances
Retailers receive allowances for featuring the manufacturer’s brand in advertisements or for providing special displays

16. Major Forms of Trade Allowances
Off-Invoice allowances
Bill-back allowances
Slotting allowances
The fees manufacturers pay retailers for access to the slot, or location
Typically paid by a manufacturer to get its new brand accepted by retailers

17. Exit fees
If a brand does not meet a stipulated sales amount, the chain will issue a deslotting charge, or exit fee to cover handling costs for removing the item from the distribution center.

18. Forward Buying and Diverting
Retailers purchase enough products on deal to carry them over until the manufacturer’s next regularly scheduled deal
Retailers’ savings from forward buying often are not passed on to consumers
Leads to increased distribution costs
Manufacturers experience reduced margins due to price discounts

19. Forward Buying and Diverting
Occurs when a manufacturer restricts a deal to a limited geographical area
Retailers buy large quantities at the deal price and then resell the excess quantities in other geographical areas
Product quality potentially suffers due to delays and serious problem could result from product tampering

20. Generalizations About Promotions
1. Temporary retail price reductions substantially 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

21. Generalizations About Promotions
6. Advertised promotions can result in increased store traffic
7. Feature advertising and displays operate synergistically to influence sales of discounted brands
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