CH. 16 Sales Promotion

(3) Increased promotional sensitivity - Increase in sales promotions

- Research has shown that consumers are 50% more price sensitive than they were 25 years ago - Customers know that business will issue sales promotions so they wait for the next deal instead of purchasing at a higher price

Sweepstakes

A promotion whereby consumers submit their names for consideration in the drawing or selection of prizes and winners are determined purely by chance. Sweepstakes cannot require a proof of purchase as a condition for entry.

Off-Invoice Allowance

A promotional discount offered to retailers or wholesalers whereby a certain per-case amount or percentage is deducted from the invoice

(9) Clutter - Increase in sales promotions

A promotional program can often break through the clutter that is prevalent in most media today - may attract attention to a certain brand

Price-Off Deal

A promotional strategy in which the consumer receives a reduction in the regular price of the brand.

Trade-Oriented Sales Promotion

A sales promotion designed to motivate distributors and retailers and retailers to carry a product and make an extra effect to promote or "push" it to their customers.

Sales Promotion Trap

A spiral that results when a number of competitors extensively use promotions. One firm uses promotions to differentiate its product or service and other competitors copy the strategy, resulting in no differential advantage and a loss of profit margins to all.

Failure Fees

A trade promotion arrangement whereby a marketer agrees to pay a penalty fee if a product stocked by a retailer does not meet agreed-upon sales levels.

Trade Show

A type of exhibition or forum where manufacturers can display their products to current as well as prospective buyers.

Event Sponsorship

A type of promotion whereby a company develops sponsorship relations with a particular event such as a concert, sporting event, or other activity.

Event Marketing

A type of promotion whereby whereby a company or brand is linked to an event, or where a themed activity is developed for the purpose of creating experiences for consumers and promoting a product or service.

Sampling

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

(6) Short term focus of many marketers - Increase in sales promotions

Brand managers and sales force have goals that have to be accomplished in the short term and sales promotions often assist

(7) Increased accountability - Increase in sales promotions

Many companies are demanding to know what they are getting for their promotional expenditures - results from sales promotions are generally easier to measure than those from advertising

(8) Competition - Increase in sales promotions

Many companies are using sales promotions to gain or maintain a competitive advantage *Account specific marketing - a manufacturer collaborates with an individual retailer to create a customized promotion that accomplishes mutual objectives*

(5) Fragmentation of the consumer market - Increase in sales promotions

Marketers are now turning to more segmented, highly targeted approaches - Many companies are specifically targeting their promotional programs to specific regional markets

Objectives of a consumer oriented sales promotion

Marketers must decide what the sales promotion is designed to accomplish and to whom it should be targeted (1) Obtaining trial and repurchase (2) Increasing consumption of an established brand (3) Defending current customers (4) Targeting a specific market segment (5) Enhancing IMC and building brand equity

Sales Promotion

Marketing activities that provide extra value or incentives to the sales force, distributors, or the ultimate consumer and can stimulate immediate sales.

Bonus Packs

Special packaging that provides consumers with extra quantity of merchandise at no extra charger over the regular price.

In-Store Couponing

The distribution of coupons in retail stores through various methods such as tear-off pads, handouts, and on-shelf or electronic dispensers.

Non franchise building promotions

designed to accelerate the purchase decision process and generate an immediate increase in sales - Do not communicate a brand's unique benefits or features Ex: Price off deals, bonus packs, and rebates or refunds

(2) Trade-oriented sales promotions

include dealer contests and incentives, trade allowances, POP displays, sales training programs, trade shows, cooperative advertising, etc. - Used to motivate distributors and retailers to carry a product and make an extra effort to push it to their customers

(1) Consumer-oriented sales promotions

include sampling, couponing, premiums, contests and sweepstakes, refunds and rebates, bonus packs, price offs, frequency programs, and event marketing - programs directed at consumers, the end purchasers of goods and services

Sampling

consumers are given some quantity of a product for no charge to induce trial *Considered the most effective way to generate trial, although it is also the most expensive* - often used to introduce a new product or brand to the market Three criteria for an effective sampling program: (1) the products are of relatively low unit volume, so samples do not cost too much (2) the products are divisible, which means they can be broken into small sample sizes that are adequate for demonstrating the brand's features and benefits to the user (3) The purchase cycle is relatively short, so the consumer will consider an immediate purchase or will not forget about the brand before the next purchase occasion

(2) Declining brand loyalty - Increase in sales promotions

consumers have become less brand loyal and are purchasing more on the basis of price, value, and convenience

Limitations of sampling

(1) Brand must have some unique or superior benefits for a sampling program to be worthwhile (2) 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

Sampling methods

(1) Door-to-door sampling - product is delivered directly to the prospect's residence - used when it is important to control where the sample is delivered - can be very expensive due to labor costs (2) Sampling through the mail - common for small, lightweight, non-perishable products - marketer has control over where and when the product will be distributed and can target the sample to specific market areas (3) In-store sampling (4) On-package sampling (5) Event sampling

Benefits of sampling

(1) Excellent way to induce trial as they provide consumers with a risk-free way to try new products (2) Consumers experience the brand directly, gaining a greater appreciation for its benefits

Factors that have also lead to increased sales promotions

(1) Growing power of retailers (2) Declining brand loyalty (3) Increased promotional sensitivity (4) Brand proliferation (5) Fragmentation of the consumer market (6) Short term focus of many marketers (7) Increased accountability (8) Competition (9) Clutter (10) Growth of digital and social media

Reasons for increases in sales promotions

- Consumers may love certain brands, but often want extra incentives in order to buy them - Marketers must also partner well with trade accounts which requires extra incentives to ensure product stocks, etc.

(1) Growing power of retailers - Increase in sales promotions

- shift from manufacturers to retailers - with the advent of optical check out scanners and sophisticated in-store computer systems, retailers gained access to data concerning how quickly products turn over, which sales promotions are working, and which products make money *(this information is then used to demand discounts or promotional items from manufacturers)* - Consolidation of the grocery store industry has led to larger chains with greater buying power and clout *(Can pressure manufacturers to provide discounts and deals)*

Horizontal Cooperative Advertising

A cooperative advertising arrangement where advertising is sponsored in common by a group of retailers or other organizations providing products or services to a market.

Vertical Cooperative Advertising

A cooperative arrangement under which a manufacture pays for a portion of the advertising a retailer runs to promote the manufacturer's product and its availability in the retailer's place of business.

Cross-Ruff Coupon

A coupon offer delivered on one product that is redeemable for the purchase of another product. The other product is usually one made by the same company buy may involve a tie-in with antlers manufacturer.

Bounce-Back Coupon

A coupon offer made to consumers as an inducement to repurchase the brand.

Trade Allowance

A discount or deal offered to retailers or wholesalers to encourage them to stock, promote, or display a manufacturer's product.

Freestanding Insert (FSI)

A four-color multipage printed advertising booklet that contains consumer-packaged-goods coupon offers delivered in direct-mail packages along with local retailer ads or can be cooperative booklets such as Redplum or SmartSource as well as solo books done by companies.

Planograms

A planning configuration of products that occupy a shelf section in a store that is used to provide more efficient shelf space utilization.

Game

A promotion that is form of sweepstakes because it has a chance element or odds of wining associated with it. Games usually involve game card devices that can be rubbed or opened to unveil a winning number or prize description.

Contest

A promotion whereby consumers compete for prizes or money on the basis of skills or ability, and winners are determined by judging the entires or ascertaining which entry comes closet to some predetermined criteria.

Cooperative Advertising

Advertising program in which a manufacture pays a certain percentage of the expenses a retailer or distributor incurs for advertising the manufacture's rod cut in a local market area.

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.

Refund

An offer by a manufacture to return a portion of a product's purchase price, usually after the consumer supplies a proof of purchase.

Premium

An offer of an item of merchandise or service either free or at a low price that is used as an extra incentive for purchasers.

Push Money (PM)

Cash payments made directly to the retailers' or wholesalers' sales force to encourage them to promote and sell a manufacturer's product.

Instant Coupon

Coupons attached to a package that can be removed and redeemed at the time or purchase.

Account-Specific Marketing

Development of customized promotional programs for individual retail accounts by marketers.

Coupon distribution

FSIs (Free standing inserts) - four-color multi-page printed advertising booklet that contains consumer packaged goods coupon offers delivered with newspapers - can also be delivered in DM packages In-store couponing - includes all co-op couponing programs distributed in a retail store environment - accounts for about 4% of coupon distribution

Slotting Allowance

Fees that must be paid to retailers to provide a "slot" or position to accommodate a new product on the store shelves.

Self-Liquidating Premiums

Premiums that require the consumers remember some information but not all.

Loyalty Programs

Programs designed to encourage repeat purchase or patronage of a specific brand of a product or service.

Consumer Franchise Building Promotions

Sales promotion activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity - designed to build long-term brand preference and help the company achieve the goal of full-price purchases that do not depend on the promotional offer

Consumer Franchise-Building (CFB) Promotions

Sales promotion activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity.

Consumer-Oriented Sales Promotion

Sales promotion activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity.

(4) Brand proliferation - Increase in sales promotions

The market has become saturated with new brands, many of which lack any significant advantages - over 20,000 new products are added every month from 49 countries; However, 75% fail, so companies rely on sales promotion to get people to try their new brands - Competition for shelf space also plays a factor

Couponing

The oldest, most widely-used, and most effective sales promotion tool is the cents-off coupon Advantages: (1) Make it possible to offer a price reduction only to those consumers who are price-sensitive (2) make it possible to reduce the retail price of a product without relying on retailers for cooperation (3) Good for generating trial (considered only second to sampling) Disadvantages: (1) Hard to tell how many consumers will use a coupon and when - normally takes anywhere from 2-6 months to redeem one (2) Difficult to prevent coupons from being used by consumers who already use the brand - ends up reducing company's profit margins (3) Misredemption - cashing of a coupon without purchase of the brand

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 - includes an extra incentive to buy *an acceleration tool to speed up the sales process* Can be broken down into two major categories: (1) Consumer-oriented sales promotions (2) Trade-oriented sales promotions *Many marketing efforts include both*

Premium

an offer of an item of merchandise or service either free or at a low price that is an extra incentive for purchasers Includes free premium and self-liquidating premium