Chapter 18 Sales Promotion 2006 Thomson South Western Power Struggles and Sales Promotion Sales promotion plays a key strategic role in the channel of distribution Big name brands need to supported with sales promotion and POP in order to get the support of retailers through self space allocation The top 10 retailers control 43 percent of all packaged goods sales so they are in a position to dictate which brands get how much shelf space Brand marketers are spending heavily 30 billion a year on sales promotion and POP to gain favored retailer treatment and provide incentives to household consumers and business buyers Ch 18 Sales Promotion 2 2006 Thomson South Western Sales Promotion Using incentives to create a perception of greater brand value Consumer Market Induce household consumers to purchase a firm s brand Trade Market Motivate distributors wholesalers and retailers to stock and feature a brand Business Buyer Cultivate buyers in large corporations who make purchase decisions 2006 Thomson South Western Ch 18 Sales Promotion 3 1 Sales Promotion Examples Coupons Trade Shows Contests Gift Cards Allowances Sweepstakes Incentives Sampling Price off deals Premiums Brand placements Loyalty Programs Ch 18 Sales Promotion 4 2006 Thomson South Western Sales Promotion vs Advertising Short term demand vs long term demand Encourage brand switching vs brand loyalty Induce trial use vs encourage repeat purchase Promote price vs promote image Immediate results vs long term effects Measurable results vs difficult to measure Ch 18 Sales Promotion 5 2006 Thomson South Western Importance of Sales Promotion 107 billion in 2003 Growth rate 4 8 percent Reasons for growth 2006 Thomson South Western Demand for accountability Short term orientation Consumer response to promotions Proliferation of brands Increased power of retailers Media clutter Ch 18 Sales Promotion 6 2 Objectives for ConsumerMarket Sales Promotion 1 Stimulate trial purchase 2 Stimulate repeat purchases 3 Stimulate larger purchases 4 Introduce a new brand 5 Combat or disrupt competitors 6 Contribute to IMC Ch 18 Sales Promotion 7 2006 Thomson South Western Consumer Market Sales Promotion Techniques 1 Coupons 2 Price off deals 3 Premiums 4 Contests sweeps 5 Samples trials 6 Phone gift cards 7 Brand placements 8 Rebates 9 Frequency programs 10 Event sponsorship Ch 18 Sales Promotion 8 2006 Thomson South Western Coupons Entitles a buyer to a price reduction for a product or service Advantages Give a discount to price sensitive consumer while selling product at full price to others Induce brand switching Timing and distribution can be controlled Stimulates repeat purchases Gets regular users to trade up within a brand array 2006 Thomson South Western Ch 18 Sales Promotion 9 3 Coupons Disadvantages Time of redemption cannot be controlled No way to prevent current customers from redeeming coupons Coupon programs require costly administration Fraud is a serious chronic problem Ch 18 Sales Promotion 10 2006 Thomson South Western Price Off Deals Offers consumer reduced price at point of purchase through specially marked packages Advantages Controllable by manufacturer Can effect positive price comparisons Consumers believe it increases value of a known brand Disadvantage Retailers believe it creates inventory and pricing problems 2006 Thomson South Western Ch 18 Sales Promotion 11 Premiums and Advertising Specialties Premiums free or at a reduced price with another purchase Free premiums provide item at no cost Self liquidating premiums require consumers to pay most of the cost of the item Advertising specialties A message placed on a free useful item 2006 Thomson South Western Ch 18 Sales Promotion 12 4 Contests and Sweepstakes Contests consumers compete for prizes based on skill or ability Sweepstakes winners picked by chance Both create excitement and interest But Legal and regulatory requirements are complex Consumers may focus on the game rather than the brand Difficult to get an IBP message across in a game Ch 18 Sales Promotion 13 2006 Thomson South Western Samples and Trial Offers Sampling Giving consumer an opportunity to use a brand on a trial basis with little or no risk Types of sampling In store Door to door Mail Newspaper On package Mobile Trial offers Used for more expensive items Consumer tries product for a fixed time 2006 Thomson South Western Ch 18 Sales Promotion 14 Phone and Gift Cards Manufacturers offer either for free or for purchase debit cards with phone time or preset spending limits Examples include offers from Lexus Oldsmobile and The Gap 2006 Thomson South Western Ch 18 Sales Promotion 15 5 Rebates Money back offer requiring the buyer to mail a request for money back from the manufacturer Often tied to multiple purchases Many consumers fail to bother sending the request 2006 Thomson South Western Ch 18 Sales Promotion 16 Frequency Programs Also known as continuity programs Offers customers discounts or free products for repeat patronage Common in airline travel and restaurant businesses 2006 Thomson South Western Ch 18 Sales Promotion 17 Objectives for Promotions in the Trade Market Objectives Use a push strategy Push the product into the distribution channel to the consumer Obtain initial distribution Increase order size Encourage cooperation with consumer market sales promotions Increase store traffic 2006 Thomson South Western Ch 18 Sales Promotion 18 6 Trade Market Sales Promotion Techniques Incentives Push money Allowances Merchandise allowances slotting fees billback allowances off invoice allowances Sales Training Programs Cooperative Co Op Advertising 2006 Thomson South Western Ch 18 Sales Promotion 19 Business Market Sales Promotion Techniques Trade Shows Business gifts Premiums and advertising specialties Trial offers Frequency programs 2006 Thomson South Western Ch 18 Sales Promotion 20 Trial offers are very effective in the business market Why 2006 Thomson South Western 7 Sales Promotion the Internet and New Media Sampling removes risk associated with consumer trial Internet firms use incentives to make Web sites sticky Internet is used to implement sales promotions and distribute coupons 2006 Thomson South Western Ch 18 Sales Promotion 22 Risks of Sales Promotion Create a price orientation Borrow from future sales Alienate consumers Time and expense Legal considerations 2006 Thomson South Western Ch 18 Sales Promotion 23 P O P Advertising 1 Materials used in the retail setting to attract shoppers