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16 Sales Promotion Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. 16 Sales Promotion Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Sales Promotion “A direct inducement that offers an extra value or incentive for the Sales Promotion “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. ” An extra incentive to buy A tool to speed up sales Targeted to different parties

Sales Promotion Vehicles Consumer-Oriented Trade-Oriented Samples Contests, incentives Coupons Trade allowances Premiums Point-of-purchase displays Sales Promotion Vehicles Consumer-Oriented Trade-Oriented Samples Contests, incentives Coupons Trade allowances Premiums Point-of-purchase displays Contests/sweepstakes Training programs Refunds/rebates Trade shows Bonus Packs Cooperative advertising Price-off deals Frequency programs Event marketing

• Consumer promotion $350 Billion • Trade promotion $150 Billion • 60 to • Consumer promotion $350 Billion • Trade promotion $150 Billion • 60 to 75% of budget on sales promotion • Trade promotion 50% of package goods 27% to consumer promotion

San Diego Padres Boost Attendance *Click outside of the video screen to advance to San Diego Padres Boost Attendance *Click outside of the video screen to advance to the next slide

Long-Term Budget Allocations 100% 90% 80% 70% 60% Consumer Promotions Media Advertising 50% 40% Long-Term Budget Allocations 100% 90% 80% 70% 60% Consumer Promotions Media Advertising 50% 40% 30% 20% Trade Promotions 10% 0% ‘ 94 ‘ 95 ‘ 96 ‘ 97 '98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ‘ 03 ‘ 04 ‘ 05 % of Total Promotional Dollars, 3 -yr Moving Average

Media Often Delivers a Promotion Message Media Often Delivers a Promotion Message

Sales Promotion Increases Growing power of retailers Reasons Declining brand loyalty Increased promotional sensitivity Sales Promotion Increases Growing power of retailers Reasons Declining brand loyalty Increased promotional sensitivity Brand proliferation Fragmentation of consumer markets Short-term focus of marketers Increased accountability Competition Clutter

Consumer Franchise-Building Promotions Promotional Objectives Communicate distinctive brand attributes Develop and reinforce brand identity Consumer Franchise-Building Promotions Promotional Objectives Communicate distinctive brand attributes Develop and reinforce brand identity Build long-term brand preference Techniques and Practices “Frequency” programs encourage repeat purchase Sweepstakes & contests to build equity, increase involvement Premium offers that reinforce the brand image and help build equity

Nonfranchise-Building Promotions Objectives Accelerate the purchase decision process Generate an immediate sales increase Limitations Nonfranchise-Building Promotions Objectives Accelerate the purchase decision process Generate an immediate sales increase Limitations Do not identify unique brand features Do not contribute to brand identity or image

Contests Can Build Brand Equity Contests Can Build Brand Equity

Nonfranchise-Building Promotions May Include. . . Price-off deals Bonus packs Rebates or refunds Shortcomings Nonfranchise-Building Promotions May Include. . . Price-off deals Bonus packs Rebates or refunds Shortcomings Trade promotions benefits may not reach customers If they do, they may lead only to price reductions Customers may “buy price” rather than brand equity

Objectives of Consumer-Oriented Promotions To increase consumption of an established brand To obtain trial Objectives of Consumer-Oriented Promotions To increase consumption of an established brand To obtain trial and purchase Objectives Enhance IMC efforts and build brand equity To defend (maintain) current customers To target a specific segment

Sampling Works Best When The products are of relatively low unit value The product Sampling Works Best When The products are of relatively low unit value The product can be broken into a small piece or size that reflects the full features and benefits The purchase cycle is relatively short

Sampling Methods Door-to-door Methods Direct mail In-store On package Event Newspaper/magazine insert Internet sites Sampling Methods Door-to-door Methods Direct mail In-store On package Event Newspaper/magazine insert Internet sites

Distributing Samples With Newspapers Distributing Samples With Newspapers

Armor All Uses On-Package Samples Armor All Uses On-Package Samples

Couponing The oldest and most widely used sales promotion tool Nearly 240 billion distributed Couponing The oldest and most widely used sales promotion tool Nearly 240 billion distributed each year in the US 85% of consumers use coupons; 21% use them regularly

Pros and Cons of Coupons Advantages Disadvantages Appeals to price sensitive consumer Hard to Pros and Cons of Coupons Advantages Disadvantages Appeals to price sensitive consumer Hard to tell how many consumers use them and when Can offer price break without retailers co-op Often used by loyal consumers who may purchase anyway Effective way to induce trial of products Declining redemption rates and high costs of couponing Can be way to defend market share and encourage repurchase Misredemption and fraud

Coupons are Most Often Used With… Disposable Diapers Cereal Laundry Soap Coupons are Most Often Used With… Disposable Diapers Cereal Laundry Soap

Coupon Distribution Other Magazines In / On Pack Direct Mail Newspaper Coop Newspaper ROP Coupon Distribution Other Magazines In / On Pack Direct Mail Newspaper Coop Newspaper ROP Freestanding Inserts

The Most Popular Coupons are FSIs The Most Popular Coupons are FSIs

Coupon Redemption Rates Coupon Redemption Rates

Valpak Enhances Value of Coupons Valpak Enhances Value of Coupons

Types of Coupons In/on-pack In-store Bounce-back Tear-off pads Cross-ruff Handouts Instant Dispensers Register printout Types of Coupons In/on-pack In-store Bounce-back Tear-off pads Cross-ruff Handouts Instant Dispensers Register printout

Coupons are Available Electronically Coupons are Available Electronically

Premiums An offer of an item, merchandise, or service, free or at a low Premiums An offer of an item, merchandise, or service, free or at a low cost, that is an extra incentive for customers Types of Premiums Free: Only requires purchase of the product Self-liquidating: consumer required to pay some or all of the cost of the premium

Airline Miles are a Popular Incentive Airline Miles are a Popular Incentive

More Consumer-Oriented Promotions Contests and sweepstakes Refunds and rebates Bonus packs Loyalty programs Price-off More Consumer-Oriented Promotions Contests and sweepstakes Refunds and rebates Bonus packs Loyalty programs Price-off Deals Event marketing

Trade Oriented Promotions Objectives Obtain distribution for new products Maintain support for established brands Trade Oriented Promotions Objectives Obtain distribution for new products Maintain support for established brands Encourage display of products Build retail inventories

Types of Trade Oriented Promotions Contests and incentives Types Co-op Advertising Trade allowances POP Types of Trade Oriented Promotions Contests and incentives Types Co-op Advertising Trade allowances POP displays Buying Sales training Promotional Trade shows Slotting

Coordinating Sales, Advertising, IMC Tools Budget allocation Coordination of themes Media support and timing Coordinating Sales, Advertising, IMC Tools Budget allocation Coordination of themes Media support and timing

Problems With Sales Promotion Problems With Sales Promotion

Aspects of Consumer Promotions Economic Informative Affective Aspects of Consumer Promotions Economic Informative Affective