Sales Promotions Chapter 12 Chapter Overview Consumer promotions

Sales Promotions Chapter 12

Chapter Overview • Consumer promotions § Directed to individuals/ businesses that use product • Trade promotions § Directed to channel members • Can differentiate a brand • Use varies – product life cycle

Push/Pull Promotions Manufacturer Wholesaler/ distributors Retailers Pull: aimed at consumers – consumer promotions Consumers Push: aimed at channel members – trade promotions

Consumer Promotions • • Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs

Coupons • • Over 188 billion distributed Less than 1% redeemed Averagevalue ~ $1. 50 Savings of$2. 25 billion

Coupon Usage • Coupon usage § 80% of households use § 67% willing to switch brands • • Always ~ 21% Sometimes ~ 37% Rarely ~ 17% Never ~ 25%

Influencing Brand Purchases On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer. • • • Sampling Word-of-mouth Coupons Advertising Contests 7. 8 7. 2 5. 9 5. 6 1. 2 Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http: //www. santella. com/marketing. htm).

Types of Coupons • Instant redemption § Lead to trial purchase • Bounce back § Encourage repeat purchase • Scanner-delivered § Encourage brand switching § Cross-ruffing

Coupon Distribution • Manufacturers issue about 80% • Freestanding inserts – 88% • Freestanding and print most popular § Createbrandawareness § Encourage next trip purchase • Digital coupons growing § Users more affluent, better educated

Coupon Distribution • Print media (90%) § FSI (88%) • Direct mail • On- or in-package • In-store § Scanner-delivered • Digital • Employee/Sales staff

Percentage of Sales with a Coupon Product category % of sales using manufacturer’s coupon Disposable diapers ~17% Detergents ~15% Meal starters ~14% Dough products (refrigerated)~14% Cereal ~13% Wrapping materials, bags ~13% Oral hygiene products ~12% Household cleaners ~12%

Coupon Redemption Rates Type of coupon • • Instant redeemable Bounce-back, In-Pack Electronic shelf Instantredeemable – cross ruff On-pack Direct mail Handout Free-standing inserts Source: Santella & Associates Percent Redeemed ~39% ~23% ~18% ~17% ~5% ~4% ~3% ~1%

Problems with Coupons • Reducedrevenues • Used by brand preference consumers (80 %) • “Necessaryevil”

Premiums • • Free-in-the-mail In- or on-package Store or manufacturer Self-liquidating • Don’t expect premiums to increase short-term profits

Contests and Sweepstakes • Contests § Require activity, skill § Can require purchase • Sweepstakes § § Random chance Must publish odds Cannot require purchase Enter as many times as desired

Refunds and Rebates • • • Refunds – soft goods Rebates – hard goods Hassle to redeem Now expected by consumers Redemption rates § 30% overall § 65% for rebates over $50

Sampling • • • In-store distribution Direct sampling Response sampling Cross-ruff sampling Professional sampling • 33% who tried a sample made a purchase during same shopping trip • 58% would buy product again • 25% bought product instead of intended brand

Benefits of Sampling Target specific markets/audience! • • • Introducenew products Encourage trial Generateleads Collectinformation Boost sales

Bonus Packs • • • Increase usage of product Match or preempt competition May lead to stockpiling Develop customer loyalty Attract new users Encourage brand switching Typical bonus packs are special multi-packs or packages with extra 20 - 100 % of product.

Price-Offs Temporary price reduction Benefits: • • Stimulate sales Entice trial Reducescustomer financial risk Encourages brand switching, stockpiling Problems: • Negative impact on profit • Encourages price-sensitivity • Potential impact on brand image

Planning Consumer Promotion (Pull) Advertising vs. Sales Promotion • Advertising more profitable, high growth, and premium priced brands. • Sales Promotion significant in less popular, low growth, mid to lower priced brands.

Planning Consumer Promotion (Pull) Retailers’ incentive to participate: • • Increase store traffic Increase store sales Attract new customers Increase basket size

Trade Promotions (Push) • Types of trade promotions • • Trade allowances Trade contests Trade incentives Trade shows For manufacturers, trade promotions • • • Accounts for 70% of marketing budget Often 2 nd largest expense Accounts for 17. 4% of gross sales

Trade Allowances Trade allowances: financial incentives to channe members – may be passed on to other members of channel Types: • Off-invoice allowance § Price discount § 35% of all trade dollars • Slotting fees • Exit fees

Slotting & Exit Fees • Retailer justification § § Cost to add new products to inventory Requires shelf space Simplifies decision about new products Adds to bottom line • Manufacturer objections § Form of extortion § Divert money from advertising and marketing § Detrimental to small manufacturers 4% of retailers use exit fees, 82% use slotting fees

Trade Allowance Complications • Failure to pass allowances on to retail customers § Only occurs 52% of the time § Retailers like only one brand on-deal at a time • Forwardbuying § Pass savings on or pocket higher margin § Additional carrying costs • Diversion § Segmentation strategy nullified § Additional shipping costs

Trade Contests • • • Used to achievespecific salestargets. Funds known as “spiff money. ” Rewards can be prizes or cash. Can be designed for various channel members Some channel members do not allow trade contests because of possible conflict of interests.

Trade Incentives • Cooperative merchandising agreement Trade Incentives • Premium or bonus pack • Co-op advertising programs 12 -28

Cooperative Merchandising Agreement • Formal agreement • Popular with manufacturers § Retailer must perform marketing functions § Manufacturer maintains control § Longer-term commitments • Benefit retailers § Schedule calendar promotions

Cooperative Advertising • Manufacturer pays part of retailer’s costs • Retailer must follow specific guidelines § No competing brands • Retailers accrue monies § Amount is based on sales • Allows retailers to expand advertising • Manufacturers gain exposure in local markets

Trade Shows • Business to Business venue § Consumer & Bt. B goods • Few deals finalized • Increasein internationalshows • National shows being replaced by regional and niche shows • Nicheshows § better prospects, Lower costs

Trade Shows - Attendees • • • Education seekers Reinforcement seekers Solution seekers Buying teams Power buyers Competitive interests