Chapter 18 Sales Promotion Sales Promotion Using incentives

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Chapter 18 Sales Promotion

Chapter 18 Sales Promotion

Sales Promotion • Using incentives to create a perception of greater brand value •

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 Ch 18: Sales Promotion 2

Sales Promotion Examples Coupons Trade Shows Contests Gift Cards Allowances Sweepstakes Incentives Sampling Price-off

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 3

Importance of Sales Promotion • $100 billion in 2000 • Growth rate: 9 –

Importance of Sales Promotion • $100 billion in 2000 • Growth rate: 9 – 12 percent • Reasons for growth: – – – Demand for accountability Short-term orientation Consumer response to promotions Proliferation of brands Increased power of retailers Media clutter Ch 18: Sales Promotion 4

Objectives for Consumer. Market Sales Promotion 1. Stimulate trial purchase 2. Stimulate repeat purchases

Objectives 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 Ch 18: Sales Promotion 5

Consumer-Market Sales Promotion Techniques 1. Coupons 2. Price-off deals 3. Premiums 4. Contests/sweeps 5.

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 6

Coupons are the most widely used form of consumer sales promotion

Coupons are the most widely used form of consumer sales promotion

Coupons • Entitles a buyer to a price reduction for a product or service

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 Ch 18: Sales Promotion 8

Coupons • Disadvantages – Time of redemption cannot be controlled – No way to

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 9

Price-Off Deals • Offers consumer reduced price at point of purchase through specially marked

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 Ch 18: Sales Promotion 10

Premiums and Advertising Specialties • Premiums: free or at a reduced price with another

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 Ch 18: Sales Promotion 11

Premiums attract attention to a brand offer the consumer something for free

Premiums attract attention to a brand offer the consumer something for free

Contests and Sweepstakes • Contests: consumers compete for prizes based on skill or ability.

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

Samples and Trial Offers • Sampling: Giving consumer an opportunity to use a brand

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 Ch 18: Sales Promotion 14

Phone and Gift Cards • Manufacturers offer either for free or for purchase debit

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. Ch 18: Sales Promotion 15

Rebates • Money back offer requiring the buyer to mail a request for money

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 Ch 18: Sales Promotion 16

Frequency Programs • Also known as continuity programs • Offers customers discounts or free

Frequency Programs • Also known as continuity programs • Offers customers discounts or free products for repeat patronage • Common in airline, travel, and restaurant businesses Ch 18: Sales Promotion 17

Event sponsorship • When a firm sponsors or cosponsors an event, the brand gains

Event sponsorship • When a firm sponsors or cosponsors an event, the brand gains credibility with the event audience • Now the fourth most popular form of promotion in U. S. • Most preferred venue: sporting events Ch 18: Sales Promotion 18

Sales Promotion Directed at Trade and Business Buyers • Objectives: Use a “push” strategy:

Sales Promotion Directed at Trade and Business Buyers • 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 Ch 18: Sales Promotion 19

Trade-Market Sales Promotion Techniques • Point-of-purchase displays • Incentives: Push money • Allowances: Merchandise

Trade-Market Sales Promotion Techniques • Point-of-purchase displays • Incentives: Push money • Allowances: Merchandise allowances, slotting fees, billback allowances, off-invoice allowances • Sales Training Programs • Cooperative (Co-Op) Advertising Ch 18: Sales Promotion 20

Business Market Sales Promotion Techniques • • • Trade Shows Business gifts Premiums and

Business Market Sales Promotion Techniques • • • Trade Shows Business gifts Premiums and advertising specialties Trial offers Frequency programs Ch 18: Sales Promotion 21

Trial offers are very effective in the business market. Why?

Trial offers are very effective in the business market. Why?

Sales Promotion, the Internet, and New Media • Big tech companies give away their

Sales Promotion, the Internet, and New Media • Big tech companies give away their products • Sampling removes risk associated with consumer trial • Internet firms use incentives to make Web sites “sticky” • Internet is used to implement sales promotions Ch 18: Sales Promotion 23

Risks of Sales Promotion • Create a price orientation • Borrow from future sales

Risks of Sales Promotion • Create a price orientation • Borrow from future sales • Alienate consumers • Time and expense • Legal considerations Ch 18: Sales Promotion 24

Coordination Challenge • Message coordination • Media coordination • Research conclusions -Short term effects

Coordination Challenge • Message coordination • Media coordination • Research conclusions -Short term effects can be dramatic -Short term effects are often not profitable -Rare for long-term effects to occur -Most power effects result from advertising and sales promotion being used together Ch 18: Sales Promotion 25