Chapter 12Chapter 12

Promotion Through the Marketing Channels

Major Topics for Major Topics for Promotion through Marketing Promotion through Marketing

ChannelsChannels1.Marketing Communication Tools2.Promotion Objectives3.Push Promotion and Pull

Promotion**1) Push/Pull Ratio Considerations2) Push/Pull and Channel Cooperation

4.Push Promotion5.Research Findings on Push

Promotion*6.Pull Promotion

1. Marketing Communication Tools

• Advertising

• Direct Marketing

• Sales Promotion*

• Publicity/Public Relations

• Personal Selling**

cf) Another Categorizations of Sales Promotion

Channel Member SupportChannel Member Support 1122

Why is channel member support program one of the major tools of the manufacturer’s

promotional mix?

Why is channel member support program one of the major tools of the manufacturer’s

promotional mix?

Most products and services are not sold directly to final customers.

Most products and services are not sold directly to final customers.

5

2. Promotional Objectives• Stimulating (more) sales• Differentiating offerings• Sharing information• Accentuating a market offering’s value• Stabilizing seasonal demand These are all for Consumer Promotions

For Trade (Channel) Promotion• More Reseller Compliance (“More Effort”)• More Reseller Representation (“Right Effort”)

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Pull Strategy

3. Pull Strategy &3. Pull Strategy &Push StrategyPush Strategy

Push Strategy

Manufacturer builds strong consumer demand for a

product to force members to automatically promote

the manufacturer’s product because it is in their obvious

self-interest to do so.

Manufacturer builds strong consumer demand for a

product to force members to automatically promote

the manufacturer’s product because it is in their obvious

self-interest to do so.

Manufacturer develops mutual effort & cooperation in the

development & implementation of promotional strategies by working directly with members to develop

strong & viable promotional support.

Manufacturer develops mutual effort & cooperation in the

development & implementation of promotional strategies by working directly with members to develop

strong & viable promotional support.

1212 Promotional Strategies in Promotional Strategies in Channels**Channels**

Pull Strategy

Manufacturer

Channel members

Final users(consumer or industrial)

Final users(consumer or industrial)

Channel members

Manufacturer

Push Strategy

1*

2

3

*Numbers indicate sequence of flows

Promotion flowNegotiation flowProduct flow

1

2 3

8

Push/Pull Ratio Considerations*

1. Promotion Objectives

2. Budgetary constraints

3. Nature of the product offering

4. Product life cycle

5. Product valuation

6. Relative Power in Channel

12124. Push Promotion: 4. Push Promotion: Promotion Promotion ThroughThrough Channel Channel

MembersMembers

Stand a higher probability of being favorably received by the channel members

Strategies that are part of an overall

program of manufacturer support of channel

member needs

Strategies that are part of an overall

program of manufacturer support of channel

member needs

Strategies that involve channel members

Strategies that involve channel members

&

Basic Push Promotional Basic Push Promotional StrategiesStrategies

1.Cooperative Advertising2. Promotional Allowances3. Slotting Fees4. Displays & Selling Aids5. In-store Promotions6. Contests & Incentives*7. Special Promotional Deals &

Merchandising Campaigns All involves “money”

1122Cooperative AdvertisingCooperative Advertising

TypicalStrategy:

A sharing in the cost on a 50–50basis up to some percentage of

the retailer’s purchases from the manufacturer

Administration:1. Effective administration by

manufacturer is necessary to avoid abuses & to help securecooperation from channel members

2. Channel manager must be sensitive

to channel members’ primary concern

about this strategy

Promotional AllowancesPromotional Allowances 1122

TypicalStrategy:

Manufacturer offers channel membera direct cash payment or a certain

percentage of the purchases on particular products

Administration: Manufacturer should conductresearch to determine whether it

is getting its money’s worth interms of retailer cooperation and

follow-through

Slotting FeesSlotting Fees 1122

TypicalStrategy:

Payments by manufacturers to persuade channel members, especially

retailers, to stock, display, andsupport new products

Administration: Joint sponsorship of researchbetween retailers and manufacturerson effects of slotting fees on varioustopics could help alleviate conflict

* Antitrust implication

Displays & Selling AidsDisplays & Selling Aids 1122

TypicalStrategy:

Include point-of-purchase (POP) displays, dealer identification signs,

promotional kits, special in-store displays, & mailing pieces

Administration: Channel manager should make the effort to see whether the firm’s

selling aids and displays are serving any useful purpose

In-Store PromotionsIn-Store Promotions 1122

TypicalStrategy:

Short-term events designed to createadded interest and excitement for the manufacturer’s products

Administration: The planning of a successfulin-store promotion should always

include considerations of thepotential benefits for the

retailers involved.

Contests & IncentivesContests & Incentives 1122

TypicalStrategy:

Techniques that manufacturers useto stimulate channel member sales

efforts for their products

Administration:Manufacturer should put much

effort into determining the view of channel members

toward this form of promotion

Special Promotional Deals & Special Promotional Deals & Merchandising CampaignsMerchandising Campaigns

1122

TypicalStrategy:

Include a variety of push-type promotional deals such as discounts to channel members to encourage

them to order more products

Administration: Manufacturers need to developcarefully planned strategies that are

based on knowledge of channelmember needs and that take a

long-term perspective on promotionthrough the marketing channel

1212““Kinder & Gentler” Kinder & Gentler” Push Promotion Toos Push Promotion Toos

Training Programs

Quota Specification

Missionary Selling*

Trade Shows

Nonmonetary Promotions

1212Training ProgramsTraining Programs

Wholesale: Help wholesalers’ knowledge, selling techniques,and skill in counseling customers they call on

Retail: Help retailer’s product knowledge, selling techniques,

and counseling customers on product usage

Pro• Manufacturers can assist wholesalers & retailers by helping to offset the cost.

Con• Distributors have often little time for training.

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Sales volumes that manufacturers specify for channel members to generate during a certain time period

Pros• Can amount to asubstantial sum and can make a major difference in the dealers’ overall profit picture• Can be effective in improving channel member promotional support

Cons• If presented in a coercive fashion, it can produce ill will and conflict rather than support• Channel members may ignore quota if manufacturer’s line does not make up an important part of the member’s product mix

Quota SpecificationQuota Specification

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Manufacturer’s salespeople who are specially assigned to supplement the selling activities of channel members

Pros• A useful strategy when channel members lack sales capacity or competence to handle tasks assigned to them• Useful when channel members desire this service

Cons• Expensive• Can cause conflicts in the channel• Some members view these salespeople as intruding on the time of their own sales force

Missionary SellingMissionary Selling

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Annual events organized by associations in particular industries

Pros• Opportunity for manufacturer to sell existing & new channel members substantial quantities of new products face-to-face• A chance for manufacturers to socialize with channel members • Creates a sense of pride and belonging in channel members that sell its products

Trade ShowsTrade Shows

23

Promotional Strategies & Channel Cooperation

• Major Factors Driving the Extent of a Reseller’s Support for a Manufacturer’s Promotion: Big Issue Now**– Item importance– Promotion elasticity– Manufacturer’s brand support– Manufacturer’s reputation– Promotion wearout

**: My Research Findings

12125. Push Promotion Research 5. Push Promotion Research Findings*Findings*

Ad hoc, quick-fix, and frequently offered

push promotions do not foster high levels

of channel member support on aconsistent basis.

1.

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Push promotions should be viewed as

part of strategic channel management

rather than as mere tactical actions.

2.

Push Promotion Research Push Promotion Research FindingsFindings

Push Promotion Research Push Promotion Research FindingsFindings

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Manufacturers should study channel

members’ needs carefully beforelaunching major push

promotions.*

3.

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Post-promotion research is needed if

manufacturers expect to make steady

progress in improving theeffectiveness of push promotions.*

4.

Push Promotion Research Push Promotion Research FindingsFindings

6. Pull Promotion*

• Advertising (to consumers):– Important for demand generation purpose – Market pull through strong brand equity

• Sales Promotion (to consumers)

• Can be done by a Manufacturer and/or a Retailer

Point-of-PurchaseDisplays

Point-of-PurchaseDisplays

PremiumsPremiums

Price PacksPrice Packs

Cash RefundsCash Refunds

CouponsCoupons

SamplesSamples

Short-Term Incentives to Encourage Purchase or Sales of a Product or Service.

Consumer-Promotion Objectives

Consumer-Promotion Tools

Patronage Rewards

Patronage Rewards

GamesGames

RebatesRebates

ContestsContests

AdvertisingSpecialties

AdvertisingSpecialtiesPatronage Rewards

Entice Consumers to Try a New Product

Entice Consumers to Try a New Product

Lure Customers AwayFrom Competitors’ Products

Lure Customers AwayFrom Competitors’ Products

Get Consumers to “Load Up’on a Mature Product

Get Consumers to “Load Up’on a Mature Product

Hold & Reward Loyal Customers

Hold & Reward Loyal Customers

Consumer Relationship Building

Consumer Relationship Building

Consumer Sales Promotion

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An Example: Car Marketing Channel*

FordFord

Dealer*Car

Buyer

Pull: Consumer Promotion (Cash back) Advertising

Push by a Maker: Incentive to Dealers

Push by a Dealer:Dealer Promotion

* Pass-through issue