Chapter Sixteen Sales Promotion Management Marketing Oriented Public
Chapter Sixteen Sales Promotion Management, Marketing. Oriented Public Relations, and Sponsorships
Chapter Sixteen Objectives • Describe the nature and purposes of sales promotion • Explain the factors that account for the increased investment in promotions, especially those that are trade oriented • Explain the tasks that promotions can and cannot accomplish
Chapter Sixteen Objectives • Understand nine empirical generalizations about promotions • Discuss the circumstances that determine when promotions are profitable
Introduction to Sales Promotion What Exactly is Sales Promotion? Any incentive used by manufacturers to induce the trade and/or consumers to buy a brand encourage sales force to aggressively sell it
Introduction to Sales Promotion What Exactly is Sales Promotion? The incentive is additional to the basic benefits provided by the brand temporarily changes its perceived price or value
Introduction to Sales Promotion Targets All three groups – the sales force, retailers and consumers – are targets of sales promotional efforts
Sales Promotion Sales Force Retailers Pull Push Encourage Brand-Level Advertising and Sales Promotion Mix Consumers
Increased Budgetary Allocations to Promotions • Advertising spending as a percentage of total marketing communications expenditures has declined in recent years • Promotional spending, however, has steadily increased
Increased Budgetary Allocations to Promotions
Push Vs. Pull Push Strategy Using promotional efforts to push product through the selling chain Pull Strategy Using Consumer advertising to pull product through the channel of distribution
Push Vs. Pull Advertising to Sales Promotion. Consumers Advertising to Retailers Sales Promotion to Consumers Personal Selling to Retailers Personal Selling Sales Promotion to Consumers Sales Promotion to Retailers Advertising to Consumers
Factors Accounting for the Shift • Balance-of-power shift from manufacturers to retailers • Increased brand parity and price sensitivity • Reduced brand loyalty • Splintering of the mass market and reduced media effectiveness • Short-term orientation and corporate reward structures • Consumer responsiveness
Sales Promotions - Can • • • Stimulate sales force Invigorate mature brand sales Facilitate introduction of new products Increase merchandising space Neutralize competitive ads Obtain trail purchases Hold current users Increase product usage Preempt competition Reinforce advertising
Sales Promotions - Can’t • Compensate for lack of training and advertising • Give a long-term reason for repeat purchases of the brand • Permanently stop an established brand’s declining sales or basic nonacceptance
Generalizations About Promotions 1. Temporary retail price reductions increase sales 2. The greater the frequency of deals, the lower the height of the deal spike 3. The frequency of deals changes the consumer’s reference price 4. Retailers passthrough less than 100% of trade deals 5. Higher market share brands are less deal elastic
Generalizations About Promotions 6. Advertised promotions can result in increased store traffic 8. Promotions in one product category affect sales of complementary and competitive products 7. Feature advertising and displays operate synergistically to influence sales of discounted brands 9. The effects of promoting higher-and lower-quality brands are asymmetric
A Segmentation Model of Consumer Response to Sales Promotion Deals All Consumers On- and Off-Deal Consumers Loyalists On-Deal Only Consumers (S 8) Switchers Non-Deal-Prone Loyalists (S 1) Deal-Prone Loyalists Stockpiling Loyalists (S 2) Exceptionist Loyalists (S 3) S 1 - S 8 = Segment 1 - Segment 8 Non-Deal-Prone Switchers (S 5) Deal-Prone Switchers Stockpiling-Exceptionist Loyalists (S 4) Nonstockpiling Switchers (S 6) Stockpiling Switchers (S 7)
Purchase Patterns
Promotion Insensitives Shampoo Sales Syn. Active Market Share Off Deal On Deal • Insensitive to promotional deals • Unprofitable to place Syn. Active on deal Off Time Deal
Stockpiling Loyalists Shampoo Sales Depression Due to Syn. Active Promotions Syn. Active Market Share Off Deal On Deal Off Deal Time • Loyal to Syn. Active and will stockpile on deal • Unprofitable to place Syn. Active on deal • Sales increase is borrowed from future sales
Nonstockpiling Promotion Sensitives Shampoo Sales Depression Due to Syn. Active Promotions Syn. Active Market Share SD SN Off Deal On Deal Off Deal • Loyalists and switchers but don’t stockpile • Profitable only if R x MD > MN (R= SD/SN, M: Margin) Time
Stockpiling Promotion Sensitives • Switch among brands and stockpile • Syn. Active baseline sales are depressed both by its own dealing activity and by competitive dealing • If Syn. Active dealing activity is profitable when consumers do not stockpile, then stockpiling behavior will lead to even greater profitability
On-Deal-Only Consumers • Only buy on deal • Profitable to place Syn. Active on deal • Profit would equal the number of units(Q) sold times the profit margin(MD) : Q x MD
In Conclusion
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