Promotion

1. Promotion Product ManagementMK 7790

2. Promotion Designed to achieve an active response over a short period of time. Has been increasing relative to advertising 57% in 1981 in 1994 72% of A/P. See Lehmann chart on percent sold on deal. Trade and consumer promotion target different players. Promotions can be offensive (trial) or defensive (Stove Top). Promotion used to bridge trial gap. Objectives: Buy more, buy now, loyality, capture switchers, get nonuser trial, awareness and build image.

3. Promotion When do brands spend a lot. Standard product Many end users Purchase amount is small sales made through channels Premium price High contribution margin Small market share Types of Promotions Product based - bonus pack, sampling, onpack, inpack Price based - sale, coupons, refunds, rebates, frquency, terms Premiums Displays Games

4. Promotion Impact: Buy sooner? New users? Discount to loyal users? Tracking - Pre-post anlysis with control Trend analysis Redemption rates Payback analysis Modeling - PROMOTER Basline volume vs. actual sales on promotion Modeling - Single source data

9. Marketing Spending Principles 1. The spending strategy is derived from and must be consistent with the role of the specific business in the corporation�s strategic portfolio. 2. Incremental effectiveness of spending determines appropriate levels of support against the franchise. Growth: maximum effective levels of incremental spending (long-term payback) Share maintenance: minimum effective levels to sustain franchise health and profitability. Always base on the product�s life cycle stage.

10. Marketing Spending Principles 3. The leverage available from alternative spending strategies for a brand varies within the national market from one region to another because of differences in brand franchise strength, the competitive situation, and the retail environment. 4. The consumer franchise is the target of all marketing spending. Each brand�s consumer franchise reflects its own peculiar attitude and behavior characteristics. Advertising and promotion are complementary towards one another with each delivering separate and unique brand support.

11. Marketing Spending Principles 5. Trade deals that generate shipments in excess of consumer demand and build inventories substitute future shipments for current shipments. 6. It is not usually efficient or desirable to execute significant short-term shifts in the marketing mix other than to reflect major environmental changes. Short-term shifts represent strategy changes and should be recognized as such.

12. Marketing Spending Principles 7. Consumer response to a change in advertising expenditure occurs over a relatively long period of time. Consumers can only respond to a change in advertising weight when their media habits provide for exposure and when the change in exposure has had its cumulative effect on attitudes. 8. Continuity of advertising support at effective levels is basic to long-term franchise maintenance and/or growth. There is always a consequence of a lack of continuity. The adverse effect of a hiatus is related to the level of a brand�s franchise development and the competitive environment.

13. Marketing Spending Principles 9. The absolute level of marketing expenditures, regardless of the corresponding share of spending, should be consistent with strategic objectives and the position of a brand in its category. 10. Advertising is essential for building consumer preference for new products. Introductory spending-level requirements are determined by market elements (market size, brand shares, brand margins, and price/value relationships) and by the degree of change in consumer behavior required to ensure attainment of full trial potential and adequate repeat-buying levels.

14. Marketing Spending Principles 11. Introductory price incentives reduce consumer resistance to try a new product and thereby permit advertising to work more efficiently. 12. Marketing expenditures in support of brand line extensions impact on consumer preference for the total brand line, either by reinforcing current behavior or by changing behavior.

15. Marketing Spending Principles 13. Product sampling maximizes trial among potential buyers immediately and, when reinforced with required levels of brand advertising, establishes preference for the brand. 14. Product quality and uniqueness are the most critical elements in maximizing the leverage of marketing spending. Product improvements can increase the profitability of expenditures for marketing.

16. Marketing Spending Principles 15. Consumer preference for a product is the aggregate of product attributes: name, packaging, position, and so on. Product formulation and/or positioning changes will influence preferences. Advertising spending is required to build consumer preferences for the changed product among new users to the brand and sustain preferences of current users while they adapt to the changes. Price incentives are also important in attracting new users and holding old users.

17. Marketing Spending Principles 16. Competitive response to new product introductions increases the minimum spending needed for a product to attain its full share potential. 17. Substantial competitive thrusts cannot be prevented from achieving shares and sales volumes commensurate with competitive investment. All directly competing products will yield share and volume in accordance with their defense posture. Defending a brand franchise is an increase in the cost of doing business.

19. Reasons for Promotions Consider the product life cycle before you design a promotion. If yours is a parity product, you must promote if competition promotes to prevent a price gap between your product and theirs. Method to decrease your price temporarily to induce trial. Method to increase volume to keep the retailers satisfied. (Retailers make a profit from the number of times they can turn their inventory.)

20. Reasons for Promotions �Load up� customer with product to prevent him or her from buying the competition. Method to manage distribution if you promote by product size. Motivate the channel to push your product.

21. Promotion Dangers Incentive for people who would have already bought the product at the higher price. Denigrates brand equity. Can cause cannibalization of your other product line. Easy to emulate. Retailer can �load� the warehouse. Trade and consumers can get �hooked� on promotion and won�t buy at regular prices. Can cause bottlenecks if consumer consumption is steady, but your promotions pushes extra product.