Chapter 12 Promotion Through the Marketing Channels Major

Chapter 12 Promotion Through the Marketing Channels

Major Topics for Promotion through Marketing Channels 1. Marketing Communication Tools 2. Promotion Objectives 3. Push Promotion and Pull Promotion** 1) Push/Pull Ratio Considerations 2) Push/Pull and Reseller Support 4. Push Promotion 5. 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

12 Key Issue: Gaining Channel Member Support 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.

2. Promotional Objectives • • • Stimulating (more) sales Differentiating product/service 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”) 5

3. Pull Strategy & Push Strategy Pull 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. 12 Push Strategy Manufacturer develops mutual effort & cooperation in the development & implementation of promotional strategies by working directly with members to develop strong & viable promotional support.

Promotional Strategies in Channels** Pull Strategy Push Strategy Manufacturer 1* 3 Channel members 2 Final users (consumer or industrial) *Numbers indicate sequence of flows 1 Channel members 2 3 Final users (consumer or industrial) Promotion flow Negotiation flow Product flow 12

Push/Pull Ratio Considerations* 1. 2. 3. 4. 5. 6. Promotion Objectives Budgetary constraints Nature of the product offering Product life cycle Product valuation Relative Power in Channel 8

4. Push Promotion: Promotion Through Channel Members Strategies that are part of an overall program of manufacturer support of channel member needs & Strategies that involve channel members Stand a higher probability of being favorably received by the channel members 12

Basic Push Promotional Strategies 1. Cooperative Advertising 2. Promotional Allowances 3. Slotting Fees 4. Displays & Selling Aids 5. In-store Promotions 6. Contests & Incentives* 7. Special Promotional Deals & Merchandising Campaigns All promise “money” to Resellers

Cooperative Advertising Typical Strategy: Administration: A sharing in the cost on a 50– 50 basis up to some percentage of the retailer’s purchases from the manufacturer 1. Effective administration by manufacturer is necessary to avoid abuses & to help secure cooperation from channel members 2. Channel manager must be sensitive to channel members’ primary concern about this strategy 12

Promotional Allowances Typical Strategy: Administration: Manufacturer offers channel member a direct cash payment or a certain percentage of the purchases on particular products Manufacturer should conduct research to determine whether it is getting its money’s worth in terms of retailer cooperation and follow-through 12

Slotting Fees Typical Strategy: Administration: Payments by manufacturers to persuade channel members, especially retailers, to stock, display, and support new products Joint sponsorship of research between retailers and manufacturers on effects of slotting fees on various topics could help alleviate conflict * Antitrust implication 12

Slotting Fees • Thousands of new grocery products per year • Grocery stores often stock 30 -45 thousand items • There is room for only about 5% of 15, 000 new grocery products each year. • Slotting fees help ensure grocer profits on a product, help balance risk of trying unknown product. • Grocery is a narrow margin business, slotting fees can represent a significant revenue source.

Displays & Selling Aids Typical Strategy: Administration: Include point-of-purchase (POP) displays, dealer identification signs, promotional kits, special in-store displays, & mailing pieces Channel manager should make the effort to see whether the firm’s selling aids and displays are serving any useful purpose 12

In-Store Promotions Typical Strategy: Administration: Short-term events designed to create added interest and excitement for the manufacturer’s products The planning of a successful in-store promotion should always include considerations of the potential benefits for the retailers involved. 12

Contests & Incentives Typical Strategy: Administration: Techniques that manufacturers use to stimulate channel member sales efforts for their products Manufacturer should put much effort into determining the view of channel members toward this form of promotion 12

Special Promotional Deals & Merchandising Campaigns Typical Strategy: Administration: Include a variety of push-type promotional deals such as discounts to channel members to encourage them to order more products Manufacturers need to develop carefully planned strategies that are based on knowledge of channel member needs and that take a long-term perspective on promotion through the marketing channel 12

“Kinder & Gentler” Push Promotion Toos Training Programs Quota Specification Missionary Selling* Trade Shows Nonmonetary Promotions 12

Training Programs 12 Wholesale: Help wholesalers’ knowledge, selling techn and skill in counseling customers they call Retail: Help retailer’s product knowledge, selling techn and counseling customers on product usag Pro • Manufacturers can assist wholesalers & retailers by helping to offset the cost. Con • Distributors have often little time for training.

Quota Specification 12 Sales volumes that manufacturers specify for channel members to generate during a certain time period Pros • Can amount to a substantial sum and can make a major difference in the dealers’ overall profit picture • Can be effective in improving channel member promotional 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

Missionary Selling 12 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 Cons • Expensive • Can cause conflicts in the channel • Some members view these salespeople as intruding on the time of their own sales force

Trade Shows 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 12

Promotional Strategies & Channel Cooperation • Major Factors Driving the Extent of a Reseller’s Support for a Manufacturer’s Promotion Program: Big Issue Now** – Item importance – Promotion elasticity – Manufacturer’s brand support – Manufacturer’s reputation – Promotion wearout **: My Research Findings 24

12 5. Push Promotion Research Findings* 1. Ad hoc, quick-fix, and frequently offered push promotions do not foster high levels of channel member support on a consistent basis.

Push Promotion Research Findings 2. Push promotions should be viewed as part of strategic channel management rather than as mere tactical actions. 12

Push Promotion Research Findings 3. Manufacturers should study channel members’ needs carefully before launching major push promotions. * 12

Push Promotion Research Findings 4. Post-promotion research is needed if manufacturers expect to make steady progress in improving the effectiveness of push promotions. * 12

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

Consumer Sales Promotion Short-Term Incentives to Encourage Purchase or Sales of a Product or Service. Consumer-Promotion Objectives Entice Consumers to Try a New Product Lure Customers Away From Competitors’ Products Get Consumers to “Load Up’ on a Mature Product Hold & Reward Loyal Customers Consumer Relationship Building Consumer-Promotion Tools Samples* Coupons Cash Refunds Price Packs Premiums Advertising Specialties Patronage Rewards Contests Rebates Games Point-of-Purchase Displays

An Example: Car Sales Channel* Push Promotion by a Maker: Incentive to Dealers Push Promotion by a Dealer: Dealer Promotion Ford Dealer* Ford Car Buyer Pull Promotion: Consumer Promotion (Cash back) Advertising * Pass-through issue 31