CHP 12: Sales Promotions

-Introduce new products -Generate interest -Generate leads -Collect information from customers, can't mail you a sample unless i know who you are -Internet sampling -Boost sales

Benefits of Sampling

-Excellent for stimulating sales -Entices trial purchases -Lower financial risk -Encourages brand switching -Encourages stockpiling

Benefits of price-offs

-Increase usage of a product -Match or preempt competition -Stockpile the product -Develop customer loyalty -Attract new users -Encourage brand switching

Bonus Pack Objectives

compare it to the brand they are currently using.

Businesses use sampling extensively to encourage prospects to try the brand and

2.8

Companies issued $500 billion in coupons and ______ billion were redeemed, a redemption rate of 0.85%.

72%

Coupons are used at some level in about ____ of households.

Instant-redemption Bounce-back Scanner-delivered Cross-ruffing

Coupons can be divided into four major types

-Reduced revenues -80% used by brand preference consumers, means they would have purchased the brand regardless of the coupon -Necessary evil to stay in business, customers expect coupons

Disadvantages of Coupons

consumer promotions

Enticing a consumer to take the final step and make a purchase constitutes a primary goal for

Bonus Packs

Extra product in special package Typical bonus -20% to100% percent Most common -30% bonus advil bonus 20 free tablets

trade contests

For industries that use sales people,_____ can be used to spur sales. Used to achieve sales targets Funds known as "spiff money" Rewards can be prizes or cash Can be designed for various channels Some organizations do not allow trade contests because of a possible conflict of interest.

expect them and will hardly make a purchase without one. -Automobiles and printers are two products people now expect a rebate and will not make a purchase without some type of rebate.

For some products, rebates have been used for so long that customers

"spiff money."

Funds used in trade contests are known as

brand image and position strategy and choose promotions that reinforce the image and position that is desired. It is also important to consider the target audience and the types of promotions they are the most receptive to.

In planning consumer promotions, firms must always support the

9%

It is interesting to look at the impact a price-off has on a purchase decision. Most consumers, 51%, were not aware the item was on sale when they purchased it. Another 40% would have purchased the product anyway. That means only _____ of consumers purchased the item because of the price-off.

form of extortion, divert money they could spend on advertising and marketing, and are detrimental to small manufacturers who can't afford the fees.

Manufacturers argue that slotting fees are a

80%

Manufacturers issue about ______ of all coupons.

Print media -FSI (88% of all coupons are distributed this way) Direct mail On- or in-package In-store -Scanner-delivered (on the back of the receipt has coupons for other products) Digital Employee delivered

Methods of Distributing Coupons

free-standing inserts (FSI)

Most coupons are sent through print media with ________ accounting for about 90% of all coupons distributed.

hassle to redeem and involve waiting 6-8 weeks for the check.

People do not like refunds and rebates because typically they are a

-Negative impact on profits -It normally takes a 20% to 40% boost in sales to offset just a 5% price reduction -Encourages greater price sensitivity -Potential negative impact on brand image

Problems with price-offs

1) it costs money to add a new product to inventory 2) it requires shelf space which means other products have to be taken off or less space allocated 3) it simplifies the decision process since manufacturers will not introduce new products unless they are sure they will sell 4) it adds to the bottom line, profit.

Retailers have four reasons for charging slotting fees which can amount to millions of dollars. The average cost, in slotting fees, for a manufacturer to launch a new product is $1.5 to $2 million. Retailer justifications are

prizes

Rewards for winning trade contests can be cash, but ___ seem to work better.

conscious effort to clip the coupon. creates brand awareness encourages a purchase on the next trip to the store.

The advantage of using FSIs is that consumers must make a

$1.94

The average value of coupons was ____. That equates to about $5.9 billion in savings.

brand-preference consumers.

The best group to pursue is ______ They have a small set of brands they prefer, and deals for one of those brands can modify purchase behavior. They also can be encouraged to become more brand loyal.

slotting fee

The most controversial form of trade allowance is the _____, which is a fee charged by retailers to stock new products.

cooperative advertising.

The most used and well-known trade incentive is _______ Manufacturers pay a part of the cost of retail advertisements in exchange for promoting the manufacturer's brand.

affluent and better educated

The users of digital coupons are more ________ than users of printed coupons. Coupons are also now being sent to cell phones and used on smartphones.

manufacturer's guidelines

To earn the co-op dollars, the retailer must meet the ____. Also, no competing brands can be in the ad. Retailers accrue co-op dollars based on sales.

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 -Pass savings on or pocket higher margin -Additional shipping costs

Trade Allowance Complications

conflict of interest.

Trade contests can be designed for various channels, or for various companies within one channel. While it can be an incentive for salespeople to push a brand, some organizations do not allow trade contests because they see them as a ______ Salespeople may not do what is best for customers, or for the company.

-Coupons -Premiums -Contests and sweepstakes -Refunds and rebates -Sampling -Bonus packs -Price-offs

Types of Consumer Promotions

brand-preference

While consumers tend to be one of the four types, it also varies across product categories. Of the four groups, the _____ consumers are the best target.

loyal and as a result not attractive in the long run.

While promotions will boost sales from promotion prone and price sensitive consumers, neither group is

trade allowance

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

diversion

buying a product on-deal in one part of the country and shipping it to another part of the country where it is off-deal -does not occur nearly as often as forward buying bc of the cost of shipping

Price-sensitive consumers

don't care about the brand name. They just want the cheapest product.

Inter-company tie-ins

involve two or more companies working together. -frita lays and pepsi, you buy both products, you get a discount

Sampling

involves delivering a free good or service with the hope the person or business will like the brand and purchase it in the future.

forward buying

involves retailers purchasing additional merchandise when it is on-deal to sell later when it is off-deal -allows them to earn extra money -disadv: carrying costs of holding extra inventory

Mass sampling

is not cost effective. Firms need to target their sampling programs.

Extrinsic value

is the attractiveness of the prize. The more attractive, the more likely to enter.

Intrinsic value

is the fun or skill of playing. This is more important in contests than sweepstakes. Small, incremental rewards given sporadically will encourage people to keep participating. Scratch-and-win tickets are popular because people know instantly if they are winners or losers.

Selective sampling

normally occurs at special events, such as a rodeo or state fair, where a company may distribute a sample of a drink or candy bar for people to try.

33% made a purchase of the brand during that shopping trip, 58% would buy it again, and 25% bought the sample instead of the intended brand.

According to a consumer survey of people who tried a sample,

intra-company tie-in

An _____ involves products within one company.

overlay

At times, companies combine two or more consumer promotions into a single campaign, called an . It may involve a promotion for a sweepstake or contest with a coupon attached to encourage purchasing the product.

price-offs

temporary price reduction, best method for stimulating sales

perceived value

the relationship between a product's or service's benefits and its cost

Brand-loyal consumers

will stay with a brand and don't need a promotion to make a purchase. If they are brand loyal to a competing brand, a promotion is not going to sway them to make a purchase.

Professional sampling

would be a drug company delivering samples to doctors, or a vendor supplying samples of raw materials to a manufacturer.

An example of a cross-ruffing sample

would be a dryer sheet in a box of detergent or attached to the detergent box.

-In-store distribution -Direct sampling -Response sampling -Cross-ruff sampling -Media sampling -Professional sampling -Selective sampling

=Methods of Distributing Samples

coupons at the same time consumers are given a sample of the product

A common overlay involves passing out .

free-standing insert (FSI)

A newspaper insert ad that contains cents-off coupons for a variety of products and is typically delivered with Sunday newspapers.

exit fee

A small number of retailers will charge an _____ instead, which is payment of monies to remove an item if it does not sell and has to be removed from inventory.

encouraging trial purchases

Sampling programs are an excellent means of .

new products, new versions of products, and current products to new markets.

Sampling programs are most effective for It is important to target the right audience at the right venue to ensure success.

7-day free membership at a fitness center or free initial consultation with a lawyer or dentist. -some consumers are concerned that the trial will automatically renew and they will be charged

Services can also provide samples, such as a

IMC plan

Successful sampling programs are a central part of an .

interest and excitement

advertising often creates the ____ and _____ that brings consumers to the store

Media samples

are distributed through the media, such as the newspapers. Small items, such as perfume, can be attached inside of a magazine page.

Refunds rebates

are for soft goods, and _____ are for hard goods.

Digital (online) coupons

are growing in popularity. They are easy to find and print.

Bounce-back coupons

are inside a package and encourage repeat purchases because they cannot be used until the package is opened.

Cross-ruffing coupons

are placed on one item for another item, such as a coupon for dip placed on a bag of potato chips.

Scanner-delivered coupons

are triggered by an item purchased. The coupon is either for a competing brand or for another variety or flavor than was purchased. The most common motive for scanner-delivered coupons is to encourage brand switching on the next trip to the store.

Instant-redemption coupons

are typically placed on the outside of a package or attached to a store shelf and can be redeemed immediately. -encourage trial purchases since the discount is immediate.

Trade shows

are used extensively in business-to-business marketing programs. It allows sellers to display merchandise and to seek prospects. It allows buyers to compare merchandise of various manufacturers and to see vendors for their stores. Few deals are ever finalized at trade shows. It is more of an opportunity to meet, look, and learn.

Tie-ins

are when two or more companies or products are promoted within a single campaign.

Coupons

offer a price reduction to the consumer. It may be a percentage off of the retail price, or absolute amount.

Sweepstakes

rely on random chance. Laws require the odds of winning each prize to be printed in advance and made available at every location where the sweepstakes can be entered. Companies cannot require a purchase to enter, although they can limit people to one entry per visit.

Contests

require some type of activity or skill. They can require a purchase to enter, at least in most states. However, in some states, it is illegal to require a purchase to enter.

promotion-prone consumers

respond to deals and will switch to a brand being offered on-deal. That means a competitor can offer a deal, and the promotion-prone consumer will immediately switch.