Sales Promotions. 17-2 What are Marketing Communications? Marketing communications are the means by which firms attempt to inform, persuade, and remind.

Sales Promotions

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What are Marketing Communications?

Marketing communications are the means by which firms attempt to inform,

persuade, and remind consumers, directly or indirectly, about the products and

brands they sell.

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Modes of Marketing Communications

• Advertising• Sales promotion• Events and experiences• Public relations and publicity

• Direct marketing• Interactive marketing• Word-of-mouth marketing• Personal selling

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Communication Platforms

Advertising• Print and broadcast ads• Packaging inserts• Motion pictures• Brochures and booklets• Posters• Billboards• POP displays• Logos• Videotapes

Sales Promotion• Contests, games, sweepstakes• Premiums• Sampling• Trade shows, exhibits• Coupons• Rebates• Entertainment• Continuity programs

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Communication PlatformsEvents/ Experiences• Sports• Entertainment• Festivals• Arts• Causes• Factory tours• Company museums• Street activities

Public Relations• Press kits• Speeches• Seminars• Annual reports• Charitable donations• Publications• Community relations• Lobbying• Company magazine

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Communication PlatformsPersonal Selling• Sales presentations• Sales meetings• Incentive programs• Samples• Fairs and trade shows

Direct Marketing• Catalogs• Mailings• Telemarketing• Electronic shopping• TV shopping• E-mail• Voice mail• Blogs• Websites

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Word-of-Mouth Marketing

• Person-to-person• Chat rooms• Blogs

What is Sales Promotion?

Sales promotions consist of a collection of incentive tools, mostly short term, designed to

stimulate quicker or greater purchase of particular products or services by consumers

or the trade.

Sales Promotion Tactics

Consumer-directed Samples Coupons Cash refund offers Price offs Premiums Prizes Patronage rewards Free trials Tie-in promotions

Trade-directed Price offs Allowances Free goods Sales contests Spiffs Trade shows Specialty advertising

Sales Promotion Tactics

• Consumer promotion is a short term incentive directed at consumer and consists of coupons, discounts, gifts, patronage rewards and other gifts. It can be considered as pull promotion.

• Trade promotions are financial incentives given by the manufacturer to a retailer for better displays and price promotions. It can be considered as push promotion.

Key questions regarding Sales promotions

• Some of the key questions that are of paramount importance to sales promotions are:– Are they increasing sales to their maximum?– Are they really as much profitable as thought to

be?– How sensitive is consumer response to the design

and communication of sales promotion?– What are long-term impact of sales promotion?

Impact of Sales promotions

• Sales promotions impacts customers through three different routes:– Changing the product utility associated with

product purchase ( the economic route).– Influencing consumer’s belief about product,

brand or industry( the informative/benefit route).– Affecting the feelings and emotions aroused in the

consumer( the affective route).

Economic Route

• Economic affects pertains to a monetary or non-monetary gain or loss that a sales promotions provides to a customer.– Monetary benefits could be the price discounts

and bundling.– Non-monetary benefits are the reduced order

taking time, reduced delivery time, innovative channel of service or product delivery that actually reduces the cost (e-commerce).

Informational Route

• Communication of direct or inferential knowledge derived from exposure to a promotion.– Increased awareness and increased brand recall

are the resulting phenomenon of exposure to a sales promotion.

– It also enables consumer’s to draw inferences about price-quality, product, product personality etc.

Affective Route

• Affective influences of sales promotions are the feelings and emotions aroused due to typical sales promotions like cause related marketing.

• It’s effects can be both general or specific.• General effects could be the positive impact of

the ambiance on the hedonic customer looking for adventure and exploration.

Affective Route

• Specific effects could be the inferences consumer’s make about themselves like being smart, ethical, lucky etc.

Economic value Informative valueAffective value

Sales Promotion

Deal Evaluation, Purchase Intention/Sale

Managerially Controllable contextual factors

The three routes of affective promotions

Computing Consumer Promotion’s Profitability

• Promotion Profit= Economic value + Affective value – Opportunity lost – Promotional Expenses – Other variable expenses

• Economic Value = Incremental volume due to promotion (Margin – Discount)

• Affective Value = Incremental volume (Margin)• Opportunity lost = Baseline volume expected

to be sold without promotion (Discount)

Using Sales Promotions

Establish objectives

Select tools

Develop program

Pretest

Implement and control

Evaluate results

Giant Consumer Products

Case Analysis

Case Summary

• Mike Needs strategy to allocate fund to– Dinardo’s 16 oz pack– Dinardo’s 32 oz pack– Natural meals– Do nothing

• Problem: 2008 GCP’s frozen division was not able to earn desired profitability. They were evaluating options for sales promotion.

Organization structure

• A rough look into the structure reveals the following hierarchy (who is answerable to whom)

• Allan (CEO): Raises concerns on adverse impact of sales promotion– Potential for Cannibalization– Eroding Brand equity– Competitor may take advantage

• Below Allan is Flatt (VP Sales): Suggests for Sales promotion

Organization structure

• Below Flatt is Mary (GM for FFD): Flatt Consults Mary for effective use of funds

• Below or may be on the same hierarchy with Mary is Mike (VP Marketing for FFD): Mary asks Mike to do the fund allocation for Flatt.

Brand Line

• FFD is the brand under which they have two types Dinardo’s and Natural Meals.

• This forms the length of the Product line.• Under Dinardo’s they have D32, D16 & D8&6.• This forms the depth of the Product.• Under Natural meals they have no depth. For

this they followed Lifestyle based segmentation.

Analysis of the Competitors

• A look into their competitors reveals the following information:– Daft: Competitor for Natural Meal (Organic

Product for Niche segment)– Restaurants: Competitor for all brands– Supermarkets: Competitor for all brands

Market Analysis for GCP

• Market is growing @ 2.8%• Channel is Manufacturers to Retailers• Channel Conflict identified from past for running

sales promotions are– Not passing benefits to consumers– Passing for the offer period and once offer is over

selling the same stock for higher– Selling it at discount even after the discounting period.

• The last two is case of forward purchasing and piling of stock.

Mike’s Planning for Promotion

• Objective was to increase volume and thus profitability. Vehicle for communication was weekly circular and end aisles displays. Sales promotion was scheduled for 1 week period.

• Mike and Mary firmly believed that sales promotion is only a push strategy and to pull the customer for the longer period of time they need to focus on:– AIDA model of selling– New Product Introduction– Attractive Packaging

Solution for Dinardo 16 & 32

• From Exhibit 3 (template 1) considering promotional impact on the promoted item it is clear that – Running promotion in D32 would generate profitable

margin. ($718,986)– Running promotion on D16 would give negative

margin (-$526,946)• From this template the company can conclude

to run promotional campaign for D32 not D16.

Solution for Dinardo 16 & 32

• From Exhibit 3 (template 2) considering within brand cannibalization it is clear that:– Incremental volume in D32 is largely due to the

cannibalization of D16

Solution for Natural Meals

• Change in the margin as a result of promotion is 12% for Natural Meal.

• Go ahead with the promotion for Natural meals as there are no chances of cannibalization.

• Natural Meal also do not have mass appeal so sales promotion may help the brand to get better mass appeal and increase its awareness and persuade customers to buy the same.

Thank You