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UNC-Chapel Hill JOMC 170 - Sales Promotion

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1Sales PromotionChapter 18© 2006 Thomson/South-WesternCh 18: Sales Promotion 2Power Struggles and SalesPromotionSales promotion plays a key strategic role inthe channel of distribution• Big name brands need to supported with sales promotion andPOP in order to get the support of retailers through self spaceallocation.• The top 10 retailers control 43 percent of all packaged goodssales so they are in a position to dictate which brands gethow much shelf space.• Brand marketers are spending heavily--$30 billion a year—onsales promotion and POP to gain favored retailer treatmentand provide incentives to household consumers andbusiness buyers.© 2006 Thomson/South-WesternCh 18: Sales Promotion 3Sales PromotionUsing incentives to create aperception of greater brand value• Consumer Market– Induce household consumers to purchase a firm’sbrand• Trade-Market– Motivate distributors, wholesalers, and retailers to stockand feature a brand• Business Buyer– Cultivate buyers in large corporations who makepurchase decisions© 2006 Thomson/South-Western2Ch 18: Sales Promotion 4Sales Promotion ExamplesCouponsPrice-off dealsPremiumsContestsSamplingSweepstakesBrand placementsIncentivesLoyalty ProgramsTrade ShowsAllowancesGift Cards© 2006 Thomson/South-WesternCh 18: Sales Promotion 5Sales 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© 2006 Thomson/South-WesternCh 18: Sales Promotion 6Importance of SalesPromotion• $107 billion in 2003• Growth rate: 4-8 percent• Reasons for growth:– Demand for accountability– Short-term orientation– Consumer response to promotions– Proliferation of brands– Increased power of retailers– Media clutter© 2006 Thomson/South-Western3Ch 18: Sales Promotion 7Objectives for Consumer-Market 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© 2006 Thomson/South-WesternCh 18: Sales Promotion 8Consumer-Market SalesPromotion Techniques1. Coupons 2. Price-off deals3. Premiums 4. Contests/sweeps5. Samples & trials 6. Phone gift cards7. Brand placements 8. Rebates9. Frequency programs10.Event sponsorship© 2006 Thomson/South-WesternCh 18: Sales Promotion 9Coupons• Entitles a buyer to a price reductionfor a product or service• Advantages– Give a discount to price sensitiveconsumer while selling product at fullprice to others– Induce brand switching– Timing and distribution can be controlled– Stimulates repeat purchases– Gets regular users to trade up within abrand array© 2006 Thomson/South-Western4Ch 18: Sales Promotion 10Coupons• Disadvantages– Time of redemption cannot becontrolled– No way to prevent current customersfrom redeeming coupons– Coupon programs require costlyadministration– Fraud is a serious, chronic problem© 2006 Thomson/South-WesternCh 18: Sales Promotion 11Price-Off Deals• Offers consumer reduced price atpoint of purchase throughspecially marked packages• Advantages– Controllable by manufacturer– Can effect positive price comparisons– Consumers believe it increases valueof a known brand• Disadvantage– Retailers believe it creates inventoryand pricing problems© 2006 Thomson/South-WesternCh 18: Sales Promotion 12Premiums and AdvertisingSpecialties• Premiums: free or at a reducedprice with another purchase• Free premiums provide item atno cost• Self-liquidating premiums requireconsumers to pay most of thecost of the item• Advertising specialties:– A message placed on a free, usefulitem© 2006 Thomson/South-Western5Ch 18: Sales Promotion 13Contests and Sweepstakes• Contests: consumers compete for prizesbased on skill or ability.• Sweepstakes: winners picked by chance• Both create excitement and interest• But . . .– Legal and regulatory requirements arecomplex– Consumers may focus on the game ratherthan the brand– Difficult to get an IBP message across in agame© 2006 Thomson/South-WesternCh 18: Sales Promotion 14Samples and Trial Offers• Sampling: Giving consumer anopportunity to use a brand on a trialbasis with little or no risk• Types of sampling– In-store Newspaper– Door-to-door On-package– Mail Mobile• Trial offers– Used for more expensive items– Consumer tries product for a fixed time© 2006 Thomson/South-WesternCh 18: Sales Promotion 15Phone and Gift Cards• Manufacturers offer either for freeor for purchase debit cards– with phone time– or preset spending limits• Examples include offers fromLexus, Oldsmobile, and The Gap.© 2006 Thomson/South-Western6Ch 18: Sales Promotion 16Rebates• Money back offer requiring the buyerto mail a request for money back fromthe manufacturer• Often tied to multiple purchases• Many consumers fail to bother sendingthe request© 2006 Thomson/South-WesternCh 18: Sales Promotion 17Frequency Programs• Also known as continuityprograms• Offers customersdiscounts or free productsfor repeat patronage• Common in airline, travel,and restaurant businesses© 2006 Thomson/South-WesternObjectives for Promotionsin the Trade Market• Objectives:Use a “push” strategy:Push the product into thedistribution channel to theconsumer– Obtain initial distribution– Increase order size– Encourage cooperation withconsumer market sales promotions– Increase store trafficCh 18: Sales Promotion 18© 2006 Thomson/South-Western7Ch 18: Sales Promotion 19Trade-Market SalesPromotion Techniques• Incentives: Push money• Allowances: Merchandise allowances, slotting fees, bill-back allowances, off-invoice allowances• Sales Training Programs• Cooperative (Co-Op) Advertising© 2006 Thomson/South-WesternCh 18: Sales Promotion 20Business Market SalesPromotion Techniques• Trade Shows• Business gifts• Premiums and advertising specialties• Trial offers• Frequency programs© 2006 Thomson/South-WesternTrial offers are veryeffective in the businessmarket. Why?© 2006 Thomson/South-Western8Ch 18: Sales Promotion 22Sales Promotion, theInternet, and New Media• Sampling removes risk associated withconsumer trial• Internet firms use incentives to make Websites “sticky”• Internet


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UNC-Chapel Hill JOMC 170 - Sales Promotion

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