Sales Promotion

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Sales Promotion

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Presentation StructurePart 1. Sales Promotion ToolsPart 2. Determination of objectivesPart 3. SP Objectives

Consumer objectivesTrade objectives

Part 4. SP StrategiesPart 5. SP TechniquesPart 6. Joint-promotions (cross-promotions)Part 7. Evaluation of SPPart 8. The use of SP agencies

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SP Tools

consumer promotiontrade promotionsales-force promotion

Sales promotion tools are used by most organizations, including manufacturers, distributors, retailers, trade associations, and nonprofit institutions.

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SP Growth Factors Internal factors:1. promotion is now more accepted by top management as an effective

sales tool;2. more product managers are qualified to use sales promotion tools;3. product managers are under greater pressure to increase their sales.

External factors:1. the number of brands has increased;2. competitors have become more promotion-minded;3. inflation and recession have made consumers more deal-oriented;4. the trade has demanded more deals from manufacturers;5. advertising efficiency has declined due to rising costs, media clutter, and

legal restraints.

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SP Tools Classification Consumer Franchise Building

Tools*:

coupons;

free samples;

premiums related to the product.

These tools send a selling message

along with the deal.

Not Consumer Franchise Building Tools:

price-off packs,

consumer premiums not related to a

product,

con tests and sweepstakes,

consumer refund offers,

trade allowances

* Consumer Franchise Building Tools – tools that create producer’s privileges in minds of consumers.

Why use consumer franchise building tools?

Because they reinforce the consumers' brand understanding and help to form brand loyalty.

The determination of sales promotion objectives. Sales promotion objectives: 1) must be defined clearly and succinctly. 2) must be capable of measurement. 3) must be achievable. 4) must be realistically budgeted.

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Sales promotions can be designed to achieve defined consumer objectives, trade objectives, or both.

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Consumer objectives

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Enquiries/list building. An increasing concern among manufacturers is the desire to build accurate lists of actual and potential consumers. Promotions can be designed specifically to ensure that consumers provide this information.

Product trial and sampling. A properly constructed promotional offer will have an immediacy of impact which will attract the potential consumer.

Product re-purchase/loyalty. The generation of repeat purchase/ and the establishment of consumer loyalty to a product is a major facet of sales promotion activity.

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Increasing rate/frequency of purchase. This may be achieved by the presentation of new usages for the product, or the suggestion of new use occasions.

Trading up. Often, and particularly at the time of introduction of a new product the manufacturer will make available a smaller size of the product for trial purchases. Subsequently, however they will wish to encourage the consumer to purchase larger quantities.

Introducing a new product. Sales promotional techniques, because of the immediacy of their impact, are conventionally used at the time of a new product introduction.

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Trade objectives

Traffic building. The consumer will be motivated to visit the outlet because of the specific incentive, it is highly likely that he or she will make other purchases whilst in store.

Inventory building. The manufacturer might seek to encourage the consumer to purchase larger packages of the product.

Stock reduction. the manufacturer may wish to ensure that there is effective pull-through of his products and reduce the level of stock held by the retailer.

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Offsetting impact of competitive activity. Sales promotion will often be employed to minimize the impact of competitive activity.

Promotional support to trade. Promotions will be designed to provide either general or specific support to the trade. Some of the objectives which can be fulfilled by such activities are feature pricing; the provision of displays and display incentives; and in-store demonstrations.

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Trade promotion uses a number of techniques:

o A buying allowanceo A merchandise allowanceo An advertising allowanceo Offering free goods to middlemeno Manufacturers may offer push moneyo Manufacturers may offer free specialty

advertising items that carry the company’s name

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BUSINESS CONVENTIONS AND TRADE SHOWS

Firms selling to the particular industry display and demonstrate their products at the trade show. The participating vendors expect several benefits, including generating new sales leads, maintaining customer contacts, introducing new products, meeting new customers, and selling more to present customers.

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CONTESTS, SWEEPSTAKES, AND GAMES

A contest calls for consumers to submit an entry to be examined by a panel of judges who will select the best entries.

A sweepstake calls for consumers to submit their names in a drawing.

A game presents something to consumers every time they buy—bingo numbers, missing letters—which may or may not help them win a prize.

A sales contest is a contest involving dealers or the sales force to induce them to redouble their sales efforts over a stated period, with prizes going to the top performers.

Sales promotion strategy

Price discrimination.Promotions enable

manufacturers to operate a policy of price discrimination, by charging different prices to different customers.

Ex.: different prices may be charged for the same product in different retail outlets.

Consumer behavior.Promotional activity can

be used to create a sense of urgency in consumers, persuading them to stop comparing alternatives and buy earlier, or in greater quantities.

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Sales promotion techniques

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• Money off - the promotion consists of a price reduction which is communicated either on or off the pack.

• Coupon - is a ticket or document that can be exchanged for a financial discount or rebate when purchasing a product.

• Free gifts - the offering of a free gift item at the time of purchase.

1.Reduced price offers:The pack - these offers represent an alternative expression of the money-off proposition, by providing the consumer with additional product at no extra charge.

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2.Free mail-insAn alternative to the free gift item offered at point of purchase is to invite the

consumer to send in an appropriate number of proofs of purchase for a gift item.

3. Self-liquidating offersThe manufacturer uses his bulk-buying power to purchase gift merchandise,

which is then offered to the consumer at cost.

4. Contests and competitionsThe consumer is offered the opportunity to win a prize of sizeable value, If it

takes part in a lottery.

5. In-store samplingVarious samples of the goods which the consumer can directly try on a place. It

helps a sales person to explain the functions of the product and to enable the consumer to sample it.

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Joint-Promotions (Cross-Promotions)

It is an increasingly important area of promotional

activity, where two or more participants promote

their brands together to obtain a mutual benefit.

This form of promotional activity affords a major

opportunity for close co-operation between brand

manufacturers and retailer stockists.

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How Does It Work?

For promoter:

Opportunity is to gain access to a

group of new consumers, who are

encouraged to associate the

product with another one from a

similar or related category.

For carrier:

Opportunity to add value to his

product in the form of a free gift or

other motivation at a significantly

reduced cost.

Brand proposition is advertised via other products and services (Persil +

Bref, Zlato + Olive Oil, big companies launching new product/ brands). Such

activity may offer significant advantages to both of the participants.

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Factors to Consider

1. degree of image match between the participating brands

2. similarity in the target market profiles of the participants

3. nature of the distribution patterns of the two brands (it is

important that the two brands are available from similar

outlets).

For established brands: the competitors should be of similar

status in the marketplace in order that each

complements the other.

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Joint Promotions Pros & Cons

Advantages of JP1. costs on establishing promotion,

generating publicity and the

necessary administration can be

shared between the participants;

2. helps participants find and attract

new customers;

3. increasing visibility of participants’

brands;

4. risks involved in the promotion are

shared between the partici pants.

Disadvantages of JP

1. brands images must match each

other;

2. such promotions require more time

and are complicated to execute and

administer;

3. danger of theft and pilferage

(especially when two products are

banded together).

The volume a brand achieves when on promotion can be divided into two component parts:

1. Base sales – would have happened irrespective of the promotional activity.

2. Incremental sales – are directly attributable to the promotional activity during the period.

Consumer responses

1. Competitor steal - where the promotion encourages switching from a competitor's brand;

2. Brand cannibalization - where the promotion of a particular brand results in consumers switching their purchases from another product within the company's product portfolio;

3. Category growth - where the additional volume derives from new customers who would not otherwise have purchased either the promoted product or one of its competitors.

A.C. Nielsen Study on Consumer Attitudes towards Promotional Activity

Statement% of 7000 households

‘I will buy a brand I don't normally buy if it is on special offer’

43%

‘If I see a special offer I like, 1 will buy more than I need’

57%

‘I look out for special price offers’ 74%

‘I look out for special displays’ 66%

‘I cut out coupons’ 56%

Promotion effectiveness: average uplift

Promotion type Percentage uplift

Shelf talker 10%

10% temporary price reduction 27%

Extra fill 28%

Display 44%

Multibuy 54%

Special pack 62%

Important factors in evaluation of a promotional activity

1. Does the promotional concept fit well with the brand, its desired imagery and its target audience?

2. Is the recommended solution the most likely to achieve the desired objectives?

3. Is the promotion easy to understand and credible to the target audience?

4. Is it easy to participate in, or does it create a series of unnecessary obstacles for the potential consumer to overcome?

5. Is the promotion likely to satisfy the needs of consumers?

6. Is the promotion dependent on a particular fad or fashion (such as a tie-in with a specific event), or does it provide a concept which can be repeated over time?

Breakdown of promotional purchases, by mechanic

Temporary price reduction 34%

Additional quantity 13%

Price-marked pack 11%

Multiple purchase discount 13%

Send away 7%

Free item 5%

Banded pack 4%

Coupon 3%

Other 29%

The use of sales promotion agencies.

Sales promotion agencies are likely to include: - strategic and advisory inputs; - the development of consumer and trade promotions; - promotion design and artwork production; More specialized service may include: - copywriting services; - print design and buying; - the sourcing of merchandise; - the design and development of sales literature; - promotional administration, implementation and evaluation. - project management; - event management; - sponsorship; - staff motivation schemes; - co-ordination between suppliers; - locating and negotiating with third party contacts.

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