1. Sales Promotions
Chapter 12

2. Chapter Objectives
What are the two main categories of sales promotions and how do they differ?
What are the advantages and disadvantages of the various types of consumer promotions?
What are the major categories of trade promotions and how are they used?
How can a marketing team tie consumer promotions to trade promotions and other elements of the promotional mix?
What are the potential limitations when sales promotions programs are being developed for international customers?

3. Chapter Overview Individuals that use product
Consumer promotions
Individuals that use product
Trade promotions (read on your own)
Directed to channel members
Possible erosion of brand equity
Can differentiate a brand
Use varies – product life cycle
Sales promotions consist of all the incentives offered to customers and channel members to encourage product purchases. 
Consumer promotions are the incentives that are directly offered to a firm's customers or potential customers.
Trade promotions consist of the expenditures or incentives used by manufacturers and other members of the marketing channel to purchase goods for eventual resale.

4. Promotions
Sales promotion is any initiative undertaken by an organization to promote an increase in sales, usage or trial of a product or service
Sales promotions are varied.

5. Consumer Promotions Coupons Premiums Contests and sweepstakes
Refunds and rebates
Sampling
Bonus packs
Price-offs
Consumer Promotions
The two most general categories of consumer promotions are:
Franchise building, which are designed to increase awareness and loyalty.
Nonfranchise building, which focus on immediate sales.
Figure 12.1 displays the types of consumer promotions including:
Coupons
Premiums
Contests and sweepstakes
Refunds and rebates
Sampling
Bonus packs
Price-offs

6. Three Steps to Effective Sales Promotions
When done correctly, promotions get customers out of a holding pattern by giving them an incentive to take action before a limited-time offer expires.
Getting customers to plunk down cash or credit cards remains a painfully slow process in this struggling economy.
Sales promotions so important
When done correctly, promotions get customers out of a holding pattern by giving them an incentive to take action before a limited-time offer expires.

7. 1. Target your effort Promotions can spur purchases by
established customers,
reel in new customers,
draw customers from competitors,
get current customers to buy differently, and stimulate business during slow periods.
Rarely can one promotion accomplish all of those objectives at once.
As a result, advertisers must decide which of the following is most important so that they can target efforts

8. What do you want customers to do?
purchase more frequently,
buy in greater volume, or
be attracted to new or different offerings
Lure new customers into your business?
Lapsed customers to give your business another try?
Boost business during slow hours, weekdays or particular seasons?

9. 2. Plan Your Incentive
Price savings, including discounts, coupons or added value offers
Samples or trial offers to provide a low-risk way to try new products or services
Events or experiences to generate crowds, enthusiasm, sales, publicity
A well-thought-out, properly targeted promotion prompts customers to take action by offering one of these incentives:

10. 3. Know what you want to Achieve
Work well when consumers are in need of a jolt to take buying action.
Set the number of sales you want to ring up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve.
Then determine what your desired change will mean financially to your business.
Promotions work especially well when consumers are in need of a jolt to take buying action.
Set the number of sales you want to ring up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve.
Then determine what your desired change will mean financially to your business.

11. Coupons 323 billion distributed 3 billion redeemed (0.93%)
Average value was 89 cents
Savings of $3.47 billion
Coupon usage
78% of households use
64% willing to switch brands
Coupons
A coupon is a price reduction offer to a consumer. It may be a percentage off the retail price such as 25% or 40%, or an absolute amount (50 cents or $1.00).
The percentage of consumer use for coupons is shown in Figure 12.2.
The methods used to distribute coupons are displayed in Figure 12.3.
Nearly manufacturers distribute 80% of all coupons. A total of 88% of all coupons are sent out through print media with 80% being distributed through free standing inserts (FSI), which are sheets of coupons distributed in newspapers, primarily on Sunday.

12. Coupons Reynolds web site – coupons distributed on the web site
Latest in coupon programs is to link online coupons to your loyalty card.
Personally, I find myself using coupons for household products like detergent or soap --- or at least cutting them out. My problem is the follow through: making sure I have the coupons with me when I end up at the store, before the coupons themselves expire.
Well, one company has come up with a system to combat that problem, which I hope hits our shores soon.
Donna Montado, who writes about couponing at about.com, pointed out a new service called Shortcuts.com. Not available yet in local zip codes, but it allows customers to link coupons to their loyalty shopping card.
Then, when you get to the store, the coupons get added to your purchase when you swipe the card or keytag. No paper cuts, no printing, no forgetting them in the glove compartment or the kitchen table.

13. Influencing Brand Purchases
On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer.
Sampling
Word-of-mouth
Coupons
Advertising
Contests
Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (

14. Coupon Distribution Print media (90%) FSI (88%) Direct mail
On- or in-package
In-store
Sampling
Scanner-delivered
Cross-ruffing
Response offer
Internet
Fax
Sales staff

15. Types of Coupons Instant redemption Bounce back Scanner-delivered
Cross-ruffing
Response offer
Types of Coupons
1. An instant redemption coupon is distributed in retail stores placed on or in packages.
2. A bounce-back coupon is placed inside packages so that customers cannot redeem them quite as quickly, which encourages repeat purchases.
3. Scanner-delivered coupons are issued at a cash register. They are triggered by an item being scanned.
4. Cross-ruffing is the placement of a coupon for one product on another product.
5. Response offer coupons are issued following requests by consumers. Requests may be from a number or Internet inquiries.

16. Coupon Redemption Rates
Type of coupon Percent Redeemed
Instant redeemable %
Bounce-back %
Instant redeemable – cross ruff 17.1%
Electronic shelf %
Electronic checkout %
In-pack %
On-pack %
Direct mail %
Handout %
Free-standing inserts %
Future of Coupons
The future of the coupons is filled with fast paced, techy-type platforms for distribution, unlike its ancestral Sunday newspaper inserts. For some learning how it all works is fascinating. For others, the only information they want is what button they need to push. Either way, advertising companies are betting on the future of cell phones and Web sites to put coupons into consumer's hands. Here is a glimpse into the future of coupons.
Broadband Video:
Broadband video has a strong potential as a powerful extension to television advertising. The TV-like video content can be seen on a Web site using a high-speed broadband connection. Currently there are two types of on-demand Internet video - In-Stream and In-Banner.
In-Stream Videos:
In-Stream videos, which appear on a Web site, are generally 15 to 30 seconds long and appear when a user clicks on specific content. The advertising is primarily syndicated video content, much like what you see on TV. Generally a banner, which may contain a coupon, is featured as support, along side the video.
In-Banner Video:
In-Banner video are videos embedded in or expanded from a banner on a Web site. Some of these videos do not begin until the user clicks on them, but some are designed to expand and run whether the user clicks or not. Once expanded, the in-banner ad can feature custom designs that often include a coupon.
Mobile Devices:
Mobile devices are quickly growing in popularity as a way to distribute coupons since they are in nearly everyone's hands, especially while out shopping or traveling. There are several ways to deliver coupons to a consumer's mobile device including utilizing short message services (SMS), wireless application protocol (WAP) sites and dynamic downloadable applications.
Short Message Service (SMS):
SMS is available on nearly all of the newer cell phones in the market. Advertisers can design a coupon to be redeemed by the consumer by bringing the phone in-store or via a code that can be entered into a Web site if it's an online purchase.
Wireless Application Protocol (WAP) Sites:
WAP are sites that are designed for the small screen size of mobile phones. WAP sites can be accessed by the user when they use their mobile Internet browsers. Coupons can be put on the WAP sites, along with other information such as store finders, hours of store operation, directions, etc.
Mobile Applications:
Mobile phone users can now download a software application or program, typically from a Web site or WAP site, to view, use and save coupons. These software applications are saved to the device deck of the phone and when selected by the user and feature mobile coupons from participating advertisers.
Source: Santella & Associates

17. Problems with Coupons Reduced revenues $500 million illegally redeemed
Used by brand preference consumers (80%)
“Necessary evil”
$500 million illegally redeemed
Mass cutting
Counterfeiting
Misredemption
Problems with Coupons
The drawbacks to the use of coupons as a promotional tactic include:
Reduced revenues. result from a lower ultimate price being charged.
Mass cutting, which occurs when coupons are “redeemed” through a fraudulent retail outlet that does not exist, except at a mail box set up by an illegal “coupon ring.”
Counterfeiting, when coupons are copied and then sent back to the manufacturer for reimbursement.
Misredemptions, when coupons are redeemed for an incorrect size for which the discount applies, or when clerks honor coupons for merchandise that was not purchased, which can be an error or they can be intentional.

18. Premiums Free-in-the-mail In- or on-package Store or manufacturer
Self-liquidating
Premiums
Premiums are prizes, gifts, or other special offers consumers receive when purchasing products. When a premium is offered, the consumer pays full price for the goods or service.
Types of Premiums
There are four major types of premiums, as summarized in Figure 12.4
Free-in-th premiums, which are gifts individuals receive for purchasing products. To receive the gift, the customer must mail in a proof-of-purchase to the manufacturer who then mails the gift back to the consumer.
In- or on-package premiums are usually small gifts, such as toys in cereal boxes (or Cracker Jacks).
Store or manufacturer premiums are gifts given by either the retail store or manufacturer when the customer purchases a product.
Self-liquidating premiums are used when the consumer must pay an amount of money for the item, which is usually the amount needed to cover the cost of the premium.

19. In-Mail/Proof of Purchase

20. For over 24 years, Kangaroo Pouch has been one of the largest, behind the scenes, manufacturers and providers of promotional premiums, marketing items and novelties.  A multi-year "Gold Star" winner for best new products, Kangaroo Pouch items have been featured in Glamour, Cosmopolitan and Elle.  From designing and  supplying 150,000 dobb kits for a recent perfume launch to manufacturing over 70,000 stuffed bears to providing custom vests for the Olympics, Kangaroo Pouch has never missed a beat.  If you are interested in separating yourself from the competition, give Kangaroo Pouch a call

21. Keys to Successful Premiums
Match premium to target market
Carefully select the premium
Pick premium that reinforces product and image
Integrate premium with other IMC tools
Don’t use premiums to increase short-term profits
Keys to Successful Premium Programs
In building successful premium programs the following items are important, as summarized by Figure 12.5.
Match the premium to the target market.
The best premiums are those that reinforce the firm’s image. They should not be cheap trinkets.
Premiums are more likely to succeed when they are tied into the firm’s products and related in some manner.
It is important to integrate premiums with the other components of the IMC program.

22. Contests and Sweepstakes
Require skill
Sweepstakes
Random chance
Contests and Sweepstakes
Contests and sweepstakes are used in consumer markets as well as business markets. A primary factor in the success of this type of appeal is the prize list.
Contests
Contests normally require the participant to perform some type of activity in order to enter.
Sweepstakes
No purchase can be required to enter a sweepstakes, and consumers may enter as many times as they wish.
Components of Prizes
The perceived value of a prize has two components:
Extrinsic value, or the actual attractiveness of the item.
Intrinsic value, or those associated with playing or participating.

23. Sweepstakes Sweepstakes Companies
TRG excels at standout promotional marketing designed to elicit a strong and positive consumer response that ultimately drives sales. TRG has core experience in creating customized, results-oriented sweepstakes and on-pack promotions. From the creative hook to program design through legal and final shipment, TRG constructs ways for your brand to add value to your consumer. ·  Concept development ·  Rules & regulations ·  Letters of Agreement ·  Indemnification Agreements ·  Contracts ·  Bonding & registration ·  Production: counter cards, tear pads, etc. ·  Mobile campaigns ·  Web design, programming & maintenance ·  Winner selection & notification ·  Prizing fulfillment ·  1099s ·  Database management ·  Customer service

24. Goals of Contests and Sweepstakes
Coordinate with other marketing
Encourage customer traffic
Boost sales - questionable
Intrinsic rewards draw customers back
Increase in brand awareness
Goals of Contests and Sweepstakes
To create successful contests and sweepstakes, it is important to coordinate the contest promotion with the advertising, POP displays, and other marketing tools.
The primary goals of contests and sweepstakes are often to increase customer traffic and boost sales.
Brand awareness also increases with multiple exposures to an advertisement or contest.

26. Refunds and Rebates Refunds – soft goods Rebates – hard goods
Hassle to redeem
Now expected by consumers
Redemption rates
30% overall
65% for rebates over $50
Refunds and Rebates
Refunds and rebates are cash returns offered to consumers or businesses following the purchase of a product.
A refund is a cash return on what are called “soft goods,” such as food or clothing.
Rebates are cash returns on “hard goods,” which are major ticket items such as automobiles and major appliances.
Problems with these programs include:
Costs (lost revenue)
The paperwork involved (to file for the money and process the claim)
Diminished effectiveness, because people expect them
Successful refund or rebate program, must offer a perceived newness or originality. They should generate an impact, or enough to cause an action.

28. Sampling In-store distribution Direct sampling Response sampling
Cross-ruffing sampling
Media sampling
Professional sampling
Selective sampling
Sampling
Sampling is the actual delivery of a product to consumers for their use or consumption. Normally, samples are provided free-of-charge. In business-to-business markets, companies often provide samples of products to potential clients. Sampling can also be used in the service sector.
Types of sampling, as shown in Figure 12.6, include:
In-store distribution, where they are given out in stores.
Direct sampling, in which samples are mailed or delivered door-to-door to consumers.
Response samples are those made available to individuals or businesses that respond to a media offer on television, the Internet, from a magazine, or some other source.
Cross-ruff sampling provides samples of one product on another. A laundry detergent with a free dryer sheet attached to the package is a cross-ruff sample.
Media sampling means the sample is included in the media outlet. For example, a small sample of perfume may be included in a magazine advertisement.
Professional samples are delivered by professionals, such as when a pharmaceutical company provides doctors with free drug samples.
Selective samples are samples distributed at a site such as a state fair, parade, hospital, restaurant, or sporting event.

30. Benefits of Sampling Introduce new products Generate interest
Generate leads
Collect information
Internet sampling
Boost sales
Benefits of Sampling
The benefits of sampling include the ability to introduce new products, generate interest in products, and collect information about consumers.

31. Sampling Programs Problems Effective sampling Cost Distribution
Component of IMC plan
Stimulate trial usage
Target audience of sample
Problems with Sampling
The primary disadvantage of this form of promotion is the cost. Also, many times people simply discard the sample without even trying the product.
Successful Sampling Programs
Sampling must be a central part of the IMC plan. The primary purpose of sampling is to encourage a trial use by a consumer or by a business. Sampling is most effective when it is used to introduce a new product or a new version of a product to a market.

32. Bonus Packs Increase usage of product Match or preempt competition
Stockpiling of product
Develop customer loyalty
Attract new users
Encourage brand switching
Bonus Packs
When an additional or extra number of items of a product is placed in a special package, it is called a bonus pack.
Types of Bonus Packs
Figure 12.7 identifies the major objectives of bonus packs, including:
Increase usage of the product
Match or pre-empt competitive actions
Stockpile the product
Develop customer loyalty
Attract new users
Encourage brand switching
Bonus packs can be additional units or a larger size package.
Benefits of Bonus Packs
Bonus packs reward customer loyalty and allow them to stockpile.
They may lead to brand switching if the brand has been used previously.
They can build relationships between manufacturers, retailers, and consumers.
Problems with Bonus Packs
Bonus packs do not tend to attract new customers because they increase purchase risk. Some consumers are skeptical of bonus pack offers. Furthermore, bonus packs are costly in the sense that additional amounts of product are being sold for the same or a similar price. In addition, new packaging and shipping costs may be incurred.

33. Bonus Pac Tie-In with Coupon & Reward Program

34. Disney

35. Price-Offs Temporary price reduction Stimulating sales
Reduces financial risk
Brand switching
Stockpiling
Price-Offs
A price-off is a temporary reduction in the price of a product to the consumer. Price-offs are normally used to stimulate sales of an existing product. Price-offs are easy to implement and can have a sudden impact on sales.

36. Price-offs Proven to be successful Problems
Appeal of monetary savings
Reward is immediate
Problems
Can have a negative impact on profit
Encourages consumers to become more price-sensitive
Potential image on brand image
Benefits of Price-Offs
Price-offs can stimulate sales. They can encourage brand switching. They provide and immediate reward to customers.
Problems with Price-Off Promotions
The primary problems that occur with price-off promotions include:
It normally takes at least a 20% increase in sales to offset each 5% price reduction. Consequently, although a price-off offer may have a large impact on sales, it can be devastating for profit margins.
Price-off programs can encourage consumers to become more price sensitive.
Too many price-off offers can create a detrimental impact on the firm’s image.

37. Promotion Combinations
Overlay
Intra-company tie-in
Inter-company tie-in
Overlays and Tie-Ins
When companies combine two or more consumer promotions activities into a single campaign, it is called an overlay.
Another common strategy is to develop a consumer promotion with another product or company, which is called a tie-in. Intracompany tie-ins are the promotion of two different products within one company using one consumer promotion. An intercompany tie-in is when one company joins with another.

38. Planning Consumer Promotions
Types of consumers
Promotion prone
Brand loyal
Price sensitive
Retailer incentives
Increase store traffic
Increase store sales
Attract new customers
Increase basket size
IMC Plan
Planning for Consumer Promotions
It is vital for consumer promotions to support the brand image and the brand positioning strategy of a product.
In terms of sales promotions, consumers can be divided into three general categories:
Promotion prone consumers, or individuals who regularly respond to coupons, price-off plans, or premiums.
Brand loyal consumers, or consumers who purchase only one particular brand and do not substitute regardless of any deal being offered.
Price sensitive consumers, for whom price is the primary if not the only criterion used in making a purchase decision.

39. End

40. Trade Promotions Types of trade promotions
Trade allowances
Trade contests
Trade incentives
Trade shows
For manufacturers, trade promotions
Accounts for 70% of marketing budget
Often 2nd largest expense
Accounts for 17.4% of gross sales

41. Trade Allowances Off-invoice allowance Slotting fees Exit fees
Price discount
35% of all trade dollars
Slotting fees
Exit fees

42. Slotting Fees Retailer justification Manufacturer objections
Cost to add new products to inventory
Requires shelf space
Simplifies decision about new products
Adds to bottom line
Manufacturer objections
Form of extortion
Divert money from advertising and marketing
Detrimental to small manufacturers

43. Trade Allowance Complications
Failure to pass allowances on to retail customers
Only occurs 52% of the time
Retailers like only one brand on-deal at a time
Retailers can schedule and promote on-deal brands
Forward buying
Pass savings on or pocket higher margin
Additional carrying costs
Diversion
Additional shipping costs

44. Trade Contests Used to achieve sales targets.
Funds known as “spiff money.”
Rewards can be prizes or cash.
Can be designed for various channel members.
Some organizations do not allow trade contests because of possible conflict of interests.

45. Trade Incentives Cooperative merchandising agreement
Premium or bonus pack
Co-op advertising programs

46. Cooperative Merchandising Agreement
Formal agreement
Popular with manufacturers
Retailer must perform marketing functions
Manufacturer maintains control
Longer-term commitments
Benefit retailers
Schedule calendar promotions

47. Cooperative Advertising
Manufacturer pays part of retailer’s ad costs
Retailer must follow specific guidelines
No competing brands
Retailers accrue monies
Amount is based on sales
Allows retailers to expand advertising
Manufacturers gain exposure in local markets

48. Trade Shows Few deals finalized at trade show
International attendees want to make deals
Increase in international trade shows
National shows being replaced by regional and niche shows
Niche shows
Provide better prospects
Lower costs

49. Trade Show Attendees Education seekers Reinforcement seekers
Solution seekers
Buying teams
Power buyers

50. Concerns of Trade Promotions
Corporate reward structure
Used for short-term sales goals.
Tend to be used outside of IMC Plan.
Costs
Over-reliance to push merchandise.
Difficult to reduce – competitive pressures
Potential erosion of brand image.