Advertising Chapter 16

Account-specific marketing

a manufacturer collaborates with an individual retailer to create a customized promotion that accomplishes mutual objectives

Premium

a premium is an offer of an item of merchandise or sercive either free or at a low price that is an extra incentive for purchase

What is the goal of consumer franchise building promotions?

To build long-term brand preferences and help the company achieve the ultimate goal of full-orice purchases that do not depend on a promotional offer

buying allowance

a temporary price reduction to resellers for purchasing specified quantities of a product

slotting allowance

fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products

Marketers spend and estimated _________ each year on promotions targeted at retailers and wholesalers

$150 billion

Objectives of Consumer-Oriented Sales Promotion

-Obtaining trial and repurchase- Encouraging consumers to try a new product or service in hopes that they will continue to use the product and repurchase (ex: sampling, coupon, refund, mix of those, etc.) -Increasing consumption of an established brand- promotions can generate some new interest in an established brand to help increase sales or defend market share against competitors. One way is identifying new uses for the brand (ex: calendars and recipe books) -Defending current customers- one way is to load them with the product, taking the customer out of the market for a certain time or coupons -Targeting a specific market segment -Enhancing integrated marketing communications- making the market more engaging and encouraging involvement (like contests and sweepstakes) -Building brand equity- Want to do more than generate short term sales

How do marketers plan consumer promotions?

1) They must conduct a situation analysis 2) Determine sales promotion's specific role in the IMC (integrating marketing communications) program. 3) They must decide what the promotion is designed to accomplish and who it should be targeted at. 4) Setting clearly defined objectives and measurable goals for their sales promotion programs forces managers to think beyond the short-term sales fix.

Coupon distribution usage has risen and fallen over the years, most recently rebounding by ____%

11%

Estimates are that marketers spend between ___% of their promotional budgets on sales promotion, with the remainder being allocated to _______.

60% to 75% with the remainder being allocated to media advertising.

The Jack in the Box study found that nearly ____% of the respondents in the survey indicated that they have purchased a product they did not normally use after trying a free sample

70%

Consumer oriented promotions definition

A marketing tool such as a coupon that targets consumers and is intended to generate a short-term change in a product's sales or market share. (Goal is to get new people to buy their product)

Couponing

A sales promotion activity that involves the use of printed certificates which entitle the holder to a reduced purchase price

Most often used coupon categories (4)

•disposable diapers, cereal, detergent, and deodorant.

Disadvantages of sample:

Brand needs a unique or superior benefit so consumers don't revert back to other brands The costs can only be recovered if they can get a certain number of consumers to become regular users of the brand at full retail price The benefits of some products are difficult to gauge immediately and the learning period required to appreciate the brand may require supplying the consumer with larger amounts of the brand than are affordable.

Least often used coupon categories (3)

Carbonated beverages, candy, and gum

Sales promotion can be broken into which two major categories?

Consumer-oriented sales promotion Trade-oriented sales promotion

What is the most popular method for delivering coupons to consumer accounting for 90% of all coupons distributed?

FSI

What is the different between FB and CFB?

Franchise building promotions build a franchise and create long-term continuity in their programs, whereas non franchise building promotions merely borrow customers form other brands. Well planned CFB activities can covert customers to loyal customers, whereas short term non FB promotions have their place in a firm's promotional mix particularly when competitive developments call for them, but their limitations must be recognized when a long-term marketing strategy for a brand is developed

Advantages of sampling

Higher trial rates Consumers experience the brand directly, gaining a greater appreciation for its benefits Quality assurance of data Greater response rate

Problems with contests and Sweepstakes

Little consumer franchise building Focus on contest/sweepstakes, not brand Effectiveness Negative Publicity Federal Regulations Use by professionals or hobbyists

Why do trade promotions receive the most criticism for being nonfranchise building

Many of the promotional discounts and allowances given to the trade are never passed on to consumers. Most trade promotions that are forwarded through the channels reach consumers in the form of lower prices or special deals and lead them to buy on the basis of price rather than brand equity.

Why do 90% of businesses fail within the first year?

Many of these failures are due to the fact that the new product or brand lacks the promotional support needed either to encourage initial trial by enough consumers or to induce enough of those trying the brand to repurchase

Trade oriented promotion examples

Point-of-purchase displays Cooperative advertising •Contests and incentives... used to stimulate greater sales efforts. Cash awards are known as push money or spiffs. •Trade allowances... a discount offered to retailers or wholesalers to encourage them to stock, promote, or display products. •Buying allowance... free goods or discounts. •Promotional allowance... discounts for performing certain promotional or merchandising activities. •Slotting allowance... also called stocking allowances, introductory allowances, or street money. Paid to retailers for providing a slot or position for a new product. •POP displays... end-of-aisle displays, banners, posters, shelf cards, motion pieces, stand-up racks, and so on. •Sales training... for reseller personnel. •Trade shows... a forum where manufacturers can display their products to current and prospective buyers.

What are three examples of Non-FB sales?

Price off deals, bonus packs, and rebates or refunds.

Coupons have been around since

They have been around since 1895, when C.W. Post Co. started using the penny-off coupon to sell Grape-Nuts cereal

Consumer packaged goods (CPG)

Typically low-priced items such as paper towels, batteries, toothpaste, laundry products, and frozen or canned food that continue to be the core users of sales promotion programs and tools.

freestanding inserts (FSIs)

a four-color multipage printed advertising booklet that contains consumer packaged goods coupons offers delivered with newspapers (usually in the Sunday paper)

failure fee

a penalty payment a manufacturer makes to compensate a retailer for devoting valuable shelf space to a product that failed to sell

trade allowance

a price reduction offered by manufacturers to intermediaries such as wholesalers and retailers

off-invoice allowance

a program allowing wholesalers and retailers to deduct a set amount from the invoice they receive for merchandise

Sales promotion

direct inducements offering added value or some other incentive for buyers to enter into an exchange

Sampling

involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial

push money

money offered to channel intermediaries to encourage them to "push" products - that is, to encourage other members of the channel to sell the products

Coupon fraud and misredemption cost manufactureres and estimated __________ a year in the US alone.

$500 million a year

planograms

A computer-developed diagram that shows retailers how and where products within a category should be displayed on a shelf at individual stores.

Consumer oriented promotion examples

Samples Coupons Premiums Frequency programs Contests and sweepstakes are an increasingly popular consumer-oriented promotion because they generate excitement among consumers who have a "pot of gold" mentality. A contest requires some sort of skill and competition; a sweepstakes is won purely by chance. Refunds, also known as rebates, are offers by the manufacturer to return a portion of the product purchase price, usually after the consumer supplies some proof of purchase. Consumers are generally receptive to rebate offers, particularly as the size of the savings increases. Bonus packs offer an extra amount of a product at the regular price by providing larger containers or extra units. Price-off deals simply reduce the price of the product, with the reduction typically printed right on the packaging. Loyalty programs offer consumers the ability to accumulate points for purchasing products or services. The points can then be traded for a reward. Event marketing is a type of promotion where a company or brand is linked to an event or a themed activity.

What is generally considered the most effective yet expensive way to generate trial?

Sampling

horizontal cooperative advertising

advertising sponsored in common by a group of retailers or other organizations providing products or services to the market

ingredient-sponsored cooperative advertising

advertising supported by raw material manufacturers with the objective being to help establish end products that include materials and/or ingredients supplied by the company

vertical cooperative advertising

an advertising technique whereby a manufacturer and dealer (either a wholesaler or retailer) share the expense of advertising

cooperative advertising

an arrangement in which the manufacturer and the retailer split the costs of advertising the manufacturer's brand

promotional allowances

payments or price reductions that reward dealers for participating in advertising and sales support programs

nonfranchise-building (non-FB) promotions

sales promotion activities that are designed to accelerate the purchase decision process and generate an immediate increase in sales but do little or nothing to communicate information about a brand and contribute to its identity and image

consumer franchise-building (CFB) promotions

sales promotion activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity (Makes consumers aware and helps them achieve a good brand image)

trade-oriented sales promotions definition

sales tools used to support a company's advertising and personal selling directed to wholesalers, distributors, or retailers and motivate them to carry the product and make an extra effort to push it to tehir customers.

Three important aspects of sales promotion

•An extra incentive to buy, such as coupons, rebates, sweepstakes entries, or an extra amount of product •Acceleration tools to speed up the selling process and maximize sales volume •Targeting different parties... consumers or trade members

most common types of in/on-pack coupons found on products.

•Bounce-back coupons... redeemable for the next purchase, and are an incentive to repurchase the brand. •Cross-ruff coupons... redeemable on the purchase of a different product, usually by the same company. •Instant coupons... attached to the package so they can be redeemed at the time of purchase.

Coupon misredemption or fraud occurs in a number of ways including:

•Customer redemption for a product or size not specified on the coupon •Salesclerk redemption of coupons for cash •Store managers gathering and redeeming coupons without the accompanying sale •Criminals gather or print coupons and sell them to unethical merchants •Web-source fraud, whereby coupons are produced and distributed online

Examples of sample methods and why it is important

•Door-to-door... used when it is important to control where the sample is delivered. Very expensive, but can be effective. •Direct mail.. Common with small, lightweight, nonperishable products. Good targeting ability. •In-store sampling... increasingly popular, especially for food products. Can be expensive, and requires planning and retailer cooperation. •On package... a sample is attached to another item. (see next slide) The drawback is that samples only go to those who buy the item to which it is attached. •At events... one of the most popular distribution methods at concerts, sporting events, grand openings, and other places. With newspapers or magazines... packets may be inserted into Sunday supplements •Other options... toll-free sample request phone lines, mail-in sample request forms, sample distribution service companies, online registration, social media. The choice of a sampling method has two important considerations, the cost of distribution, and the method that will be used to control who receives the sample.

Negative impact of sales promotion

•Fewer dollars to build brand equity.. Every dollar that goes into promotion rather than advertising devalues the brand. •Encourages consumers to purchase on the basis of price... competing on price often results in a downward spiral that continuously reduces profit margins. •Detracts from the value of the brand... advertising is important for building and maintaining a brand's image and position. Shifting dollars to short-term promotions means less advertising.

What are the three criteria for an effective sampling program?

•First, the products are relatively low unit value, so samples do not cost much. •Second, the product can be broken into a small piece or size that reflects the full features and benefits. •Third, the purchase cycle is relatively short so the consumer can purchase in a relatively short time period.

What are the two basic types of premiums?

•Free premiums are small gifts or merchandise that is included in the product package or sent to consumers who mail in a request along with a proof of purchase. •Self-liquidating premiums require the customer to pay for some or all of the cost of the premium, plus handling and mailing costs. The marketer usually purchases these items in large quantities, then offers them to consumers at lower-than-retail prices. Package-carried free premiums have high impulse value and provide an extra incentive to buy the product. They are popular in the fast food restaurant industry, and are often included in kids' meals to attract children. Self-liquidating premiums are designed, not necessarily to make money, but to cover costs and offer value to the consumer.

Current methods of distributing coupons

•Freestanding inserts (86%)... by far the most popular method for delivering coupons to consumers. •In-store couponing (6%)... tear-off pads, in-store handouts, on-shelf dispensers, and electronic dispersers. •Direct mail (2%)... most coupons are sent by local retailers or through co-op mailings where a packet of coupons for many different products is sent to a household. •Magazines (2%)... cost is very high and redemption rate is low, but it is easy to reach specific target audiences. •Newspapers (1%)... market selectivity, short lead times, coop opportunities, and promotional tie-ins with retailers, but higher distribution costs, poor print quality, clutter, and declining readership of newspapers. •Coupons inside/outside product (1%)... has virtually no distribution costs and a much higher redemption rate than other couponing methods. Options are bounce-back, cross-ruff, and instant.

Reasons for the increase in sales promotion and shift from mass media advertisement

•Growing power of retailers. Manufacturers used to have most of the power, now retailers, through technology, consolidation, and private labeling, have more. •Declining brand loyalty. Consumers are purchasing more on the basis of price, value, and convenience. •Increased promotional sensitivity. Consumers want to save money and respond well to promotions that allow them to do so. •Brand proliferation. The market has become saturated with new products, many of which lack any significant advantages that can be used as the basis of an advertising campaign. •Fragmentation of consumer markets. Traditional mass media advertising has become less effective and promotions are a way to reach market segments. •Short-term focus. Sales promotion is seen as a way of generating an immediate increase in sales. •Increased accountability. Managers are under pressure to produce sales results. •Competition. Promotions are a way to gain or maintain a competitive advantage. •Clutter. Promotional offers can break through the clutter and attract attention.

The highest average coupon redemption rates are from:

•Instant on-pack •Internet •Instant on-pack cross-ruff •Regular on-pack

Disadvantages of couponing (4)

•It is hard to determine how many consumers will use coupons, and when •They are often used by loyal consumers who would purchase anyway, which reduces profit margins •Low redemption rates and high costs for coupon production, distribution, and handling •Misredemption and fraud

Trade oriented sale promotion objectives

•Obtaining distribution and support for new products •Maintaining support for established brands •Encouraging retailers to display established brands •Building retail inventories

In-store coupons come in many forms and can be found in various locations such as:

•Tear-off pads •Handouts •On-shelf and electronic dispensers •Register printouts, based on products being scanned for purchase.

Advantages of couponing (4)

•They appeal to price-sensitive consumers, which helps with targeting •You can offer a price break without the retailers cooperation •Can be used to induce trial of new or existing products •Defends market share and encourages repurchase