Sales Promotion

1. 16 Sales Promotion

2. Subway Case Study • Sandwich sales dropped on weekends • Created $5 foot long promotion • Simple theme • Five fingers / hands spread for foot long • Catchy jingle • Lots of publicity on TV / websites / media • Subway Five dollar Foot Long Commercial (Hula) - YouTube 16-2

3. Sales Promotion Defined • A direct inducement • that offers an extra value or incentive for the product • to the sales force, distributors, or ultimate consumer • with the primary objective of creating an immediate sale 16-3

4. Reese’s Promotion Offer • Opportunity to win $2,500,000 instantly • Influences consumers to buy • THIS candy versus competition 16-4

5. Key Aspects of Sales Promotion • Extra incentive to buy • Coupon / price reduction / contest • Acceleration tool • Speed up selling process • Purchase larger quantity • Shorten purchase cycle • Provide short expiration date • Targeted to different parties • Consumer or Trade Oriented 16-5

6. Sales Promotion Vehicles Consumer-Oriented Trade-Oriented Samples Contests, incentives Coupons Trade allowances Premiums POP displays Contests/sweepstakes Sales training programs Refunds/rebates Trade shows Bonus Packs Cooperative advertising Price-off deals Frequency programs Event marketing 16-6

7. Delivery of a Promotional Message • Promotions can be delivered • Print ads • On pack • On line 16-7

8. Reasons for Sales Promotion Increases Growing power of retailers Declining brand loyalty Increased promotional sensitivity Like promos Brand proliferation Fragmented consumer markets Local promos Short-term focus of marketers Increased accountability ROI Competition Clutter Stand out 16-8

9. Sale Promotion Concerns Negative impact of sales promotions Fewer dollars to build brand equity Encourages consumers to purchase on the basis of price Detracts from the value of the brand Sales promotion increases come at the expense of brand equity 16-9

10. Consumer Franchise-Building Promotions Communicate distinctive brand attributes Build long-term brand preference Premium offers that reinforce brand image & build equity “Frequency” programs promote repeat purchase Promotional Objectives Develop and reinforce brand identity Techniques and Practices Sweepstakes & contests build equity, increase involvement 16-10

11. Example of Franchise-Building Promotion • Marlboro Gear • Reinforces brand image • Loyalty program • Builds brand equity 16-11

12. Nonfranchise-Building Promotions Objectives Accelerate the purchase decision process Generate an immediate sales increase Limitations Do not identify unique brand features Do not contribute to brand identity or image 16-12

13. Example of Non-Franchise Building Promotion Does nothing to enhance the image of the brand 16-13

14. Objectives of Consumer-Oriented Promotions Increase consumption of an established brand Recipe Books Obtain trialand purchase Defend (maintain) current customers Sample and coupon Load up with product Enhance IMC efforts and build brand equity Target aspecific segment 16-14

15. Targeting a Specific Segment 16-15

16. Criteria for Effective Sampling Sampling WorksBest When Products are of relatively low unit value, so samples don’t cost much Products are divisible and can be broken into small sizes that reflect the products features and benefits Purchase cycle is relatively short so the consumer can soon purchase again 16-16

17. “Free Fryday” Promotion 16-17

18. Sampling Methods Door-to-door Methods Direct mail In-store On package Events Newspaper/magazine insert 16-18

19. Samples are Often Distributed With Newspapers 16-19

20. Armor All Uses On-Package Samples 16-20

21. Couponing The most effective sales promotion tool The oldest and most widely used sales promotion tool 85% of consumers use coupons; 21% use them regularly Nearly 240 billion distributed each year in the US 16-21

22. Pros and Cons of Coupons Advantages Disadvantages Appeals to price sensitive consumers Hard to tell how many consumers will use them and when Can offer discounts without retailer cooperation Often used by loyal consumers who would purchase anyway Effective way to induce trial of products Low redemption rates and high costs Defends market share and encourages repurchase Misredemptionand fraud 16-22

23. Most Often Used Coupons DisposableDiapers LaundrySoap Cereal Consumers use coupons most often in these product categories 16-23

24. Coupon Misredemption and Fraud Customer redemption for a product or size not specified on the coupon Salesclerk redemption of coupons for cash Store managers gathering and redeeming coupons without the accompanying sale Criminals gather or print coupons and sell them to unethical merchants Web-source fraud, whereby coupons are produced and distributed online 16-24

25. Coupon Distribution • In order of usage: • Freestanding inserts (86%) • In-store couponing (6%) • Direct mail (2%) • Magazines (2%) • Newspapers (1%) • Coupons inside/outside product (1%) 16-25

26. FSIs are the Most Popular Coupon Type 16-26

27. Types of Coupons In/On-Pack In-Store Bounce-back Tear-off pads Cross-ruff Handouts Instant Dispensers Register printout 16-27

28. Bounce-back Coupons Delivered either on pack or in pack: “Good on your next purchase of the product” 16-28

29. Cross-Ruff Coupons • Redeemable on the purchase of a different product • Used as a tie-in with other manufacturers or • at a company that has a wide product line 16-29

30. Instant Coupon • Rip off coupon • and • use immediately • Provides • immediate • Point-of-Purchase • incentive 16-30

31. In Store Coupons 16-31

32. Coupons are Available Electronically 16-32

33. Premiums Types of Premiums Free: Only requires purchase of the product Self-liquidating: consumer required to pay some or all of the cost of the premium An offer of an item, merchandise, or service, free or at a low cost, that is an extra incentive for customers 16-33

34. Example of Free Premium • FREE cards inside • specially marked • boxes of cereal 16-34

35. Contests and Sweepstakes Sweepstakes Promotion where winners aredetermined purely by chance Cannot require proof of purchaseas a condition for entry Winners chosen by random selection from pool of entries or generation of a number to match those held by game entrants Consumers compete for prizes or money on the basis of skills or ability Winners determined by judging entriesor ascertaining which entry is closestto predetermined criteria Contest 16-35

36. More Consumer-Oriented Promotions Price-off Deals Refunds and rebates Bonus packs Loyalty programs Event marketing 16-36

37. Examples of Loyalty Programs • The more you spend, • the more points you get • to redeem for • merchandise, • airline flights, etc. 16-37

38. Examples of Event Marketing • Promotion where brand is linked to an event … … or where a themed activity is developed for the purpose of creating experiences for consumers 16-38

39. Trade Oriented Promotions Obtain distribution for new products Objectives Maintain support for established brands Encourage display of products Build retail inventories Before peak selling season 16-39

40. Types of Trade Oriented Promotions Contests and incentives Co-op Advertising Trade allowances POP displays Buying Sales training Promotional Trade shows Slotting Types Reduction on merchandise Put up display To handle new product 16-40

41. Cooperative Advertising The cost of advertising is shared by more than one party 16-41

42. Sales Promotion Abuse Over-use of sales promotions Looking for quick sales fixes Easier to drop prices than to differentiate your product Negative impact A brand that is constantly promoted may lose perceived value Purchases based on discounts, not a favorable attitude Sales promotion trap or spiral 16-42

43. Sales Promotion Trap When all competitors use promotions extensively Makes it difficult for any ONE company to STOP using promotions Cosmetics industry: gift with purchase Fast food industry: $1 items 16-43