All rights rese McGraw-Hill/Irwin 16 Sales Promotion: Intensifying Consideration Key Points: How do sales promotions add value to a brand offering? What are consumer sales promotions designed to accomplish and what are their strengths and limitations? How do trade promotions work? Chapter Sixteen Chapte r
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 16 Sales Promotion: Intensifying Consideration Key Points:
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1616 Sales Promotion: Intensifying Consideration
Key Points: How do sales promotions add value to a brand offering? What are consumer sales promotions designed to
accomplish and what are their strengths and limitations? How do trade promotions work?
Chapter Sixteen
ChapterChapter
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Chapter Perspective
Intensifying the Brand Message
Sales promotion is a marketing communication function that adds value to brand messages.
It intensifies a brand contact when a customer or prospect is in the critical “buy zone”.
Sales promotion’s primary job is to impact behavior.
Sales promotions are mostly nonpersonal, one-way messages.
These types of brand messages are highly persuasive because they provide tangible added value and are available for only a limited time, which can create a sense of urgency.
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Sales Promotion:The Value-Added Function
Sales promotion is a short-term, added-value offer designed to encourage and accelerate a response.
A consumer sales promotion offer is designed for end users or buyers.
A trade sales promotion offer is designed for customers in the distribution channel.
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Consumer Sales Promotion Tools
There are many sales promotion tools used in consumer promotion:
Coupons Price reductions Rebates Premiums Specialties Sampling Sweepstakes and contests Tie-in promotions Loyalty promotions
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Allocation Of Consumer Advertising And Sales Promotion Dollars In 2000
Figure 16-1, p.570
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Dr. Pepper
Exhibit 16-5, p.570
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
How Sales Promotion Works
Marketers use two basic sales promotion strategies: Push strategies Pull strategies
Most sales promotion programs include both push and pull strategies, using both consumer and trade promotions.
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Maybelline Hydra-Time
Exhibit 16-6, p.571
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Loyalty or Disloyalty?
Promotions to reward Loyalists Promotions to encourage Brand-Switching
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Loyalty Programs: The Retention Driver
A loyalty program is a strategy for minimizing customer defections and increasing a brand’s share of wallet.
These programs work best when brands have high fixed costs and low variable costs.
See next slide:
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Loyalty Program Strengths
The primary benefit or strength is an increased level of customer retention.
Other loyalty program strengths include: It can be an excellent vehicle for collection database
information. It can also differentiate a brand.
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Loyalty Program Limitations
Despite its strengths, loyalty programs have several limitations:
Loyalty programs can over-shadow a brand. These programs can take more resources to manage and
administer than other forms of marketing communication used by the brand.
It it is difficult to determine whether such programs are truly cost-effective.
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Media of Consumer Sales Promotion
Businesses use every type of medium to deliver brand messages to consumer and trade audiences.
Every sales promotion needs a vehicle to carry it.
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Free Samples:
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Sprint
Exhibit 16-14, p.584
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Rebates Increasing
What are the advantages of using rebates vs. other promotional pricing methods?
Makes products look cheaper Gives price-cutting control to manufacturers Can be rolled out and shut off quickly Gets consumers’ attention...
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What’s the deal here?
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Rebate “Secrets”
76% of packaged-goods companies used money-back offers in 1996
Redemption rate is only 5-10%
for offers up to $10.00 Redemption rate is only up to 20%
for $20.00 offers
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Downside of Rebates
Consumer resentment Possible damage to company image
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Strengths ofConsumer Sales Promotion
In terms of the marketing program, sales promotion programs are designed to:
Increase distribution Balance demand Control inventory Respond to competitive programs
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Strengths ofConsumer Sales Promotion
Companies also use sales promotion to achieve certain MC objectives such as:
Encourage trial Increase frequency and/or quantity of purchases Build customer databases and relationships Reward and retain customers Cross-sell Extend the use of a brand Reinforce the brand image
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Limitations ofConsumer Sales Promotions
Sales promotion has a questionable image. Some marketers feel that it is simply a way to buy sales as
opposed to convincing people a brand is a good value. Sales promotion is sometimes criticized for primarily
attracting those who are only searching for the best deal, not a long-term brand relationship.
Competitors may soon follow, which negates the added-value advantage and adds another cost of doing business.
The overuse of promotional offers may negatively reposition the brand.
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Trade-Oriented Promotions
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Trade and BtB Promotions
Trade promotions are important in gaining the support of a brand by members of the distribution channel.
By law trade promotions must be offered on an equal basis to all dealers and resellers who compete against each other.
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Trade Promotion Objectives
Trade promotions are used to motivate certain types of actions by channel members such as:
Obtain or increase distribution of a brand Have the brand featured in the store’s advertising Expand amount of shelf display and/or get temporary off-
shelf display
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Types of Trade Promotion
Trade promotion tactics include:
1) Slotting allowances
2) Off-invoice allowances
3) Advertising/Promotion allowances
4) Cooperative advertising allowances
5) Buy-back allowances
6) Dealer contests
7) Dealer loaders
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Trade-Oriented Promotions
Contests / Dealer Incentives Push Money / “Spiffs”
These types of promo’s often referred to as “Non-Franchise Building” -WHY?
Consumer Franchise-Building vs. Non-Franchise Building
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Trade-Oriented Promotions
Not so clear that they’re always NFB… Stihl Chainsaw Example
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Sampling (Free)
Door-to-Door / Direct Mail In-Store / On-Package Known to be effective through Learning Effects Reciprocity also highly likely...
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Couponing / Frequency Marketing
Direct Mail / Handout / Electronic / Newspaper / Magazine / In-Pack / On-Pack
Show coupon clip What’s happening with coupons?
VIDEO CLIP Redemption Rates are down However, still very effective
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Problems with Coupons
Costly (2-3X face value to redeem) Too many of them Consumers becoming dependent on them Poor Targeting (waste) Enter some solutions
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New “Solutions” to Coupons
Eliminate them Cut down on waste by improving targeting Catalina Coupons
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Catalina Coupons
Available at Schnuck’s in Columbia Sport-Drink Story
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AVOID Use of Confusing
Promotions!
Electronics Boutique - Videogame Trade-up offer.
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