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Chapter 12
Sales Promotion
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Chapter Questions
1. What are the differences between consumer and trade promotions?2. How can the various forms of consumer promotions help to pull
consumers into the stores and push products onto the store shelves?
3. How do different types of customers respond to consumer promotions?
4. What types of trade promotions can help push products onto retailersshelves and eventually to end users?
5. What concerns exist for manufacturers considering trade promotionsprograms?
6. What issues complicate international sales promotions programs?
Sales Promotions
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2Overview1Consumerspromotion
Directly offeres to acustomer or a potentialcustomer.
Individuals orhouseholds.
Tradepromotions
Used by manufacturersand other members ofthe marketing channelto purchase goods for
eventual re-sale. Help push productsthrough to retailers.
All the incentives offered to customers and channel members to encourageproduct purchases.12-5
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Types or ConsumerPromotions
Coupons
Premiums
Contests and sweeptakes
Refunds and rebates
Bonus packs
Price-offs12-6
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Coupons
188 billion printed1.6 billion redeemed (0.85%)Average value was $1.41Savings of $2.25 billionCoupon usage80% of households use
2/3 willing to switch brands
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Source: Karen Holt, Coupon Crimes,Promo
, Vol. 17, No. 5 (April 2004), pp. 23-29.
24%
21%
17%
38%
Percentage of Consumers Coupon
Usage
Never Always Rarely Sometimes
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Coupon Distribution
Manufacturers issue about 80%Freestanding inserts 88%
Freestanding and print most popular
Consumer makes conscious effort to clipCreate brand awareness
Encourage purchase next trip to store
Digital coupons growing in popularityUsers more affluent, better educated
Cell phone coupons12-9
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Print media Freestanding inserts (FSIs) (88%)
Direct mail
On- or in-package
In-store Scanner-delivered
Digital
Samples
Employee delivered
Methods of Distributing Coupons
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Percentage of Sales
with a CouponProduct category % of sales usingmanufacturers coupon
Disposable diapers 17.1
Detergents 15
Meal starters 14.2
Dough products(refrigerated)
13.6
Cereals 13.4
Wrapping materials, bags 12.8
Oral hygiene products 11.7
House hold cleaners 11.712-12
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Types of Coupons
Instant redemption
Lead to trial purchases
Bounce-back
Encourages repeatpurchases
Scanner-delivered
Encourages brand switchingCross-ruffing
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Coupon Redemption
Rates Instant redeemable 39.3%
Bounce-back 17.2%
Instant redeemable cross ruff 17.1%
Electronic shelf 10.2%
Electronic checkout 7.8%
In-pack 5.8%
On-pack 4.7%
Direct mail 3.5%
Handout 3.1%
Free-standing inserts 1.3%
Type of coupon Percent Redeemed
Source: Santella & Associates, August 2009
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Disadvantages ofCoupons
Reduced revenues
80% used by brandpreference consumers
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http://www.google.com.mx/url?sa=i&rct=j&q=necessary%20evil&source=images&cd=&docid=2VVkIPqAC2VNkM&tbnid=b-DWVD26_kZ7SM:&ved=0CAUQjRw&url=http://www.6arrows.com/?tag=necessary-evil&ei=gM44Usr0GeTz2QWIk4DgCw&bvm=bv.52164340,d.b2I&psig=AFQjCNFxFt3TSy7h9thfWBfs7FUcbDQQGA&ust=1379540926900298http://www.google.com.mx/url?sa=i&rct=j&q=necessary%20evil&source=images&cd=&docid=2VVkIPqAC2VNkM&tbnid=b-DWVD26_kZ7SM:&ved=0CAUQjRw&url=http://www.6arrows.com/?tag=necessary-evil&ei=gM44Usr0GeTz2QWIk4DgCw&bvm=bv.52164340,d.b2I&psig=AFQjCNFxFt3TSy7h9thfWBfs7FUcbDQQGA&ust=1379540926900298http://www.google.com.mx/url?sa=i&rct=j&q=necessary%20evil&source=images&cd=&docid=2VVkIPqAC2VNkM&tbnid=b-DWVD26_kZ7SM:&ved=0CAUQjRw&url=http://www.6arrows.com/?tag=necessary-evil&ei=gM44Usr0GeTz2QWIk4DgCw&bvm=bv.52164340,d.b2I&psig=AFQjCNFxFt3TSy7h9thfWBfs7FUcbDQQGA&ust=1379540926900298 -
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Types of Premiums
Free-in-the-mail
In- or on-packageStore or
manufacturer
Self-liquidating
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Match the premium to the target market
Carefully select the premium
Avoid fads, try for exclusivity
Premium reinforce the firms product andimage
Integrate the premium with other IMC tools
Especially advertising and POP displays
Dont expect premiums to increase short-term profits
Keys to Successful Premium Programs
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Contests andSweepstakes
ContestsRequire activity, skill
Can require purchase to enter
Some states illegalSweepstakes random chance
Must publish odds of winning
Cannot require purchaseCan enter as many times as desired
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Contests andSweepstakes
Components of Prizes
Consumers selective
Perceived value important
Extrinsic value attractiveness of prize
Intrinsic value fun, skill
Small, incremental rewards
Scratch-and-win tickets
Internet and Social Media
Popular venue
Increase intrinsic value interactive games
Data-capturing capabilities
Lower costs
Goals
Encourage traffic
Boost sales questionable
Intrinsic rewards draw consumers back
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Refunds andRebates
Refunds soft goods
Rebates hard goods
Hassle to redeemNow expected by consumers
Redemption rates
30% overall
65% for rebates over $5012-20
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SamplingDelivery of free good or service
Business-to-business to prospects
Service sampling
Consumer survey
33% who tried a sample made purchaseduring shopping trip
58% would buy product again
25% bought sample instead of intendedbrand
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In-store distribution
Direct sampling
Response sampling
Cross-ruff sampling
Media sampling
Professional sampling
Selective sampling
Types of Sampling
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Benefits of
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Benefits ofSampling
Introduce newproducts
Generate interest
Generate leads
Collect information
Internet samplingBoost sales
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Successful SamplingPrograms
Central part of IMC plan
Encourage trial purchases
Most effective for
New products
New versions of current products
Current products to new markets
Target right audience at right venue
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Bonus Packs
Extra product in special package Typical bonus
20% to100% percent
Most common
30% bonus Increase usage of a product
Match or preemptcompetition
Stockpile the product
Develop customer loyalty
Attract new users
Encourage brand switching12-25
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Price-OffsTemporary price reduction
Benefits of price-offs
1. Excellent for stimulating
sales2. Entice trial purchases3. Lower financial risk4. Encourage brand
switching5. Encourage stockpiling
Problems with price-off
1. Negative impact on
profits2. Encourages greater price
sensitivity3. Potential negative impact
on brand image
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Impact of Price-off onConsumer Purchase
Source: Studies Indicate Coupons are an Effective Promotional Tool, Santella &
Associates (http://www.santella.com/coupon.htm, August 2009)
Consumer unaware item was on sale.
51%
Consumer purchased because of sale price
9%
Consumer would have purchased item anyway
40%
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Overlays and Tie-Ins
Overlay 2 or more promotions
Intra-company tie-in Products within a company
Inter-company tie-in Partnering with another company
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Planning ConsumerPromotions
Support brand image and position strategyConsider target audience
Promotion-prone
Respond to deals
Brand-loyal Purchase only preferred brand
Brand-preferred
Small set of preferred brands
Deals for one of preferred brands
Price-sensitive
Price primary factor in purchases
Deals that reduce price
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Retail IncentivesConsumer Promotions
Increase store traffic
Increase store sales Attract new customers
Increase the basket size
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Trade Promotions Account for 70% of marketing budget
Often 2nd largest expense Account for 17.4% of gross sales
Trade
Promotions
Trade Allowances
Trade Incentives
Trade Contests
Trade Shows
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Trade Allowances
Financial incentives to channel members Off-invoice allowances
Discount
Encourages order by channel members
Account for 35% of all trade dollars
Retailers reluctant to purchase off-deal
Competitive pressure to continue
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Slotting and Exit Fees Slotting fees
Funds charged by retailers to stock items
Retailer justification
Cost to add new products to inventory
Requires shelf space
Simplifies decision about new products
Adds to bottom line
Manufacturer objections
Form of extortion
Divert money from advertising and marketing
Detrimental to small manufacturers
Exit fees
Monies paid to remove items from shelves12-33
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Trade AllowanceComplications
Failure to pass allowances on to retail customers
Only occurs 52% of the time
Retailers like only one brand on-deal at a time
Retailers can schedule and promote on-dealbrands
Forward buying
Pass savings on or pocket higher margin
Additional carrying costs
Diversion
Pass savings on or pocket higher margin
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Trade ContestsUsed to achieve sales targets
Funds known as spiff money
Rewards can be prizes or cash
Can be designed for various channels
Some organizations do not allow tradecontests because of possible conflict of
interests.
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Trade Incentives Cooperative merchandising agreement
Formal agreement
Popular with manufacturers
Retailer must perform marketing functions
Manufacturer maintains control
Longer-term commitments
Benefit retailers
Schedule calendar promotions
Premiums and bonus packs
Free merchandise for orders
Cooperative Advertising
Manufacturer pays part of retailers ad costs
Retailer must follow specific guidelines
No competing brands
Retailers accrue monies
Amount is based on sales
Allows retailers to expand advertising
Manufacturers gain exposure in local markets
Channel members must perform some marketing function to receive funds.
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Trade Shows
Manufacturers (sellers)
Display merchandise
Seek prospects
Retailers (buyers)
Compare merchandise
Seek vendors
Few deals finalized at trade show International attendees want to make deals Increase in international trade shows
Regional and niche shows Provide better prospects Lower costs
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Education seekers
Reinforcement seekers
Solution seekers
Buying teams
Power buyers
Categories of Buyers at Trade Shows
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Concerns Trade
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Concerns TradePromotions
Corporate reward structureUsed for short-term sales goals
Tend to be used outside of IMC Plan
Costs
Over-reliance to push merchandise
Difficult to reduce competitive
pressuresPotential erosion of brand image
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International
Implications
Adapt to each country
Legal restrictions vary
Cultural values differ
Emphasis will vary
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