4550: Promotion Strategy I Professor Campbell 2/22/05.

4550:Promotion Strategy I4550:Promotion Strategy I

Professor Campbell2/22/05

Plan for the DayPlan for the Day

• Differences between advertising and promotions

• Types of sales promotions

• Consumer promotions– Objectives

– Types

Sales PromotionSales Promotion

“A direct inducementthat offers an extra value

or incentive for the productto the sales force, distributors

or the ultimate consumerwith the primary objective

of creating animmediate sale.”

Louis J. Haugh

What is Advertising?What is Advertising?

• “Non-personal forms of communication, conducted through paid media under clear sponsorship.”

What is (Sales) Promotion?What is (Sales) Promotion?

• A short-term incentive designed to encourage earlier or stronger target response

PromotionPromotion

• Three general types of promotions– Consumer

– Trade

– Salesforce

Consumer Promotions: Objectives Consumer Promotions: Objectives

• What kinds of behavior can we influence?– What are the types of objectives that

suggest we should use promotions (versus other types of marcom)?

Consumer Promotions: Objectives Consumer Promotions: Objectives

Consumer Promotions: Objectives, cont… Consumer Promotions: Objectives, cont…

Consumer Promotions: Objectives, cont… Consumer Promotions: Objectives, cont…

Promotion OptionsPromotion Options

• There are many different forms of consumer promotions

• Choose:– to best meet current objectives

– with an eye toward longer-term effects on brand

• Set:– appropriate evaluation criteria

SamplingSampling

• Advantages:

• Disadvantages:

• Usage

Manufacturer’s CouponsManufacturer’s Coupons

• Advantages:+ Effective

+ Less expensive

+ Can be used to build equity

• Disadvantages:– “Response costs” lower redemption rate

• can be hard to predict

– Costs more than value of coupon

– “Slow”

– Mis-redemption

– Used by current users (+ and -)

– Often does not build equity

Manufacturer’s Coupons, continuedManufacturer’s Coupons, continued• Usage

» New brand

» New users entering product category

» Price discrimination• Target is price sensitive, but not highly

time sensitive

» Switchers

» Increase purchase incidence (or timing) of brand loyals

» Get people to “trade up”

FSI’s (Manufacturer’s Coupons, cont…)FSI’s (Manufacturer’s Coupons, cont…)• Headline

– Price-based

– Brand-based

• Product Display

• Attribute Information

• Other Picture

FSIs, continued FSIs, continued

• Findings from LeClerc and Little (1997)– “Ad execution” does impact response to FSIs

– When product category involvement is low:• Customers are less likely to be motivated to

process; they respond to the “peripheral cue” of an attractive picture

– When product involvement is high:• Switchers motivated to process, since don’t

have a brand in mind; respond to more informational ads

• Loyals already have a brand in mind, have little incentive to process information; respond more to attractive pictures

Trade CouponsTrade Coupons

• Advantages:+ Quick

+ Localized (can target a particular area)

+ Relatively inexpensive

• Disadvantages:– Localized

– Does not build brand equity

• Usage» Gain distribution

» Influence switchers

» Price discrimination

Numerical FramingNumerical Framing

Bonus or Price PacksBonus or Price Packs

• Advantages+Increases usage (takes consumer out

of the market)

• Disadvantages– Cost

– Production timing and cost (SKU)

• Usage» Good for preempting a new entrant

» Good for seasonal products

Other Consumer PromotionsOther Consumer Promotions

• Frequency programs

• Contests– Skill

• Sweepstakes– Chance

• Refunds/Rebates

• Gifts/Premiums

In conclusion…In conclusion…

• Promotion involves an extra incentive to purchase

• Consumer promotions can influence a variety of behaviors

• Promotions should be used to accomplish specific, concrete objectives

– Use promotions when you have an objective that is appropriate

– Utilize the best type of promotion for specific objective

• Firms often target customers loyal to competitors’ brands

– Switchers

• Evidence suggests that we may be under-targeting our own customers