2. Sales Promotion Chapter 18

3. Ch 18: Sales Promotion 2 Sales Promotion Using incentives to create a perception of greater brand value Consumer Market –Induce household consumers to purchase a firms brand Trade-Market –Motivate distributors, wholesalers, and retailers to stock and feature a brand Business Buyer –Cultivate buyers in large corporations who make purchase decisions

4. Ch 18: Sales Promotion 3 Sales Promotion Examples Coupons Price-off deals Premiums Contests Sampling Sweepstakes Brand placements Incentives Loyalty Programs Trade Shows AllowancesGift Cards

5. Ch 18: Sales Promotion 4 Importance of Sales Promotion $100 billion in 2000 Growth rate: 9 – 12 percent Reasons for growth: –Demand for accountability –Short-term orientation –Consumer response to promotions –Proliferation of brands –Increased power of retailers –Media clutter

6. Ch 18: Sales Promotion 5 Objectives for Consumer- Market Sales Promotion 1. Stimulate trial purchase 2. Stimulate repeat purchases 3. Stimulate larger purchases 4. Introduce a new brand 5. Combat or disrupt competitors 6. Contribute to IMC

7. Ch 18: Sales Promotion 6 Consumer-Market Sales Promotion Techniques 1. Coupons2. Price-off deals 3. Premiums4. Contests/sweeps 5. Samples & trials6. Phone gift cards 7. Brand placements8. Rebates 9. Frequency programs 10.Event sponsorship

8. Coupons are the most widely used form of consumer sales promotion

9. Ch 18: Sales Promotion 8 Coupons Entitles a buyer to a price reduction for a product or service Advantages –Give a discount to price sensitive consumer while selling product at full price to others –Induce brand switching –Timing and distribution can be controlled –Stimulates repeat purchases –Gets regular users to trade up within a brand array

10. Ch 18: Sales Promotion 9 Coupons Disadvantages –Time of redemption cannot be controlled –No way to prevent current customers from redeeming coupons –Coupon programs require costly administration –Fraud is a serious, chronic problem

11. Ch 18: Sales Promotion 10 Price-Off Deals Offers consumer reduced price at point of purchase through specially marked packages Advantages –Controllable by manufacturer –Can effect positive price comparisons –Consumers believe it increases value of a known brand Disadvantage –Retailers believe it creates inventory and pricing problems

12. Ch 18: Sales Promotion 11 Premiums and Advertising Specialties Premiums: free or at a reduced price with another purchase Free premiums provide item at no cost Self-liquidating premiums require consumers to pay most of the cost of the item Advertising specialties: –A message placed on a free, useful item

13. Premiums attract attention to a brand and offer the consumer something for free

14. Ch 18: Sales Promotion 13 Contests and Sweepstakes Contests: consumers compete for prizes based on skill or ability. Sweepstakes: winners picked by chance Both create excitement and interest But... –Legal and regulatory requirements are complex –Consumers may focus on the game rather than the brand –Difficult to get an IBP message across in a game

15. Ch 18: Sales Promotion 14 Samples and Trial Offers Sampling: Giving consumer an opportunity to use a brand on a trial basis with little or no risk Types of sampling –In-storeNewspaper –Door-to-doorOn-package –MailMobile Trial offers –Used for more expensive items –Consumer tries product for a fixed time

16. Ch 18: Sales Promotion 15 Phone and Gift Cards Manufacturers offer either for free or for purchase debit cards –with phone time –or preset spending limits Examples include offers from Lexus, Oldsmobile, and The Gap.

17. Ch 18: Sales Promotion 16 Rebates Money back offer requiring the buyer to mail a request for money back from the manufacturer Often tied to multiple purchases Many consumers fail to bother sending the request

18. Ch 18: Sales Promotion 17 Frequency Programs Also known as continuity programs Offers customers discounts or free products for repeat patronage Common in airline, travel, and restaurant businesses

19. Ch 18: Sales Promotion 18 Event sponsorship When a firm sponsors or cosponsors an event, the brand gains credibility with the event audience Now the fourth most popular form of promotion in U.S. Most preferred venue: sporting events

20. Sales Promotion Directed at Trade and Business Buyers Objectives:Use a push strategy: Push the product into the distribution channel to the consumer –Obtain initial distribution –Increase order size –Encourage cooperation with consumer market sales promotions –Increase store traffic Ch 18: Sales Promotion 19

21. Ch 18: Sales Promotion 20 Trade-Market Sales Promotion Techniques Point-of-purchase displays Incentives: Push money Allowances: Merchandise allowances, slotting fees, bill- back allowances, off-invoice allowances Sales Training Programs Cooperative (Co-Op) Advertising

22. Ch 18: Sales Promotion 21 Business Market Sales Promotion Techniques Trade Shows Business gifts Premiums and advertising specialties Trial offers Frequency programs

23. Trial offers are very effective in the business market. Why?

24. Ch 18: Sales Promotion 23 Sales Promotion, the Internet, and New Media Big tech companies give away their products Sampling removes risk associated with consumer trial Internet firms use incentives to make Web sites sticky Internet is used to implement sales promotions

25. Ch 18: Sales Promotion 24 Risks of Sales Promotion Create a price orientation Borrow from future sales Alienate consumers Time and expense Legal considerations

26. Ch 18: Sales Promotion 25 Coordination Challenge Message coordination Media coordination Research conclusions -Short term effects can be dramatic -Short term effects are often not profitable -Rare for long-term effects to occur -Most power effects result from advertising and sales promotion being used together