Sales Promotion

1. Sales Promotion MKT 846 Professor West

2. Agenda • Thinking beyond creating awareness, interest, and an image for your brand • Providing incentives to purchase • Battling for shoppers in the aisle

3. Sales Promotions • Advertising has a long and colorful history • Many of the images created by advertisers have become cultural icons • The Marlboro Man, Ronald McDonald, Pillsbury Doughboy, Energizer Bunny, AFLAC duck...

4. Sales Promotions • Sales promotion also has a very rich history • Coupons have been around since 1895 when C.W. Post began using penny-off coupons to sell Grape Nuts • P&G began using coupons in 1920 good for discounts or BOGOF. • In 1912 Cracker Jack began offering a prize in every box • Oscar Mayer introduced the first “Wienermobile” in 1936, eight still cruise the highways playing versions of the jingle. • Pepsi launched their “Pepsi Challenge” in 1975 as one of the most successful promotions ever used to attract users of a competing brand

5. Sales Promotions • Sales promotion also has a very rich history • Pillsbury launched its first “Bake-off” in 1949, it has since become an institution and the nation’s most prestigious cooking competition • In 1981 American Airlines AAdvantage frequent flier program was launched and created a new currency for travelers

6. Sales Promotion • Sales promotion is used to provide a direct inducement that offers extra value to the sales force, distributor, retailer, or end consumer with the primary objective of boosting sales. • While advertising appeals to the minds and hearts to give consumers a reason to buy, promotions appeal to the pocketbook and provide an incentive to buy.

7. Consumer-Oriented Coupons & Rebates Samples Bonus packs Price-offs Contests & Sweepstakes Frequency programs Event marketing Trade-Oriented Dealer incentives Contests Trade Allowances POP displays Training programs Trade shows Co-op advertising Sales Promotion

8. Trends • Consumer sales promotion increased from $56 billion in 1991 to nearly $100 billion in 2001. An additional $150 billion is targeted to retailers and wholesalers. • Starting in the late ’80s a shift in marketing budgets has boosted sales promotion sharply. Currently, marketers spend between 60 and 75 percent of their budget on sales promotion, with the remainder allocated to media advertising. Seventeen percent of advertising is devoted to promotional messages.

9. Reasons for Growth • Mature industry and increased accountability… manager’s pay depends on sales relative to cost • Growing power of retailers (optical scanners, consolidation) • Market saturation (nearly 30,000 products are launched each year compared to 2,700 on 1980) • Advertising clutter & fragmentation (regional efforts and targeted markets are better suited to promotions) • Short-term Focus …it generates immediate and measurable results

10. Slippery slope… • Increased promotional sensitivity • Forty-two percent of package-good volume was purchased on promotion. Twenty-fourpercent involved the use of a coupon. • More than seventy percent of purchase decisions are made in the store, where people are likely to respond to POP offers. (1999 study by Promotion Decisions Inc. tracked 33,000 consumers)

11. Slippery slope… • Declining brand loyalty • Consumers tend to have more than one brand in their “repertoire” and have been conditioned to switch when deals are offered. • What is this doing to the brand equity companies have paid so dearly to build?

12. Prisoner’s Dilemma

13. Non-franchise Building Promotions • Price oriented “deals,” such as coupons, samples, bonus packs, and discounts are useful mechanisms for encouraging trial and acquiring new customers… • However, you run the risk of eroding profits and increasing consumer price sensitivity • Price discounts don’t allow you to discriminate between price sensitive and insensitive buyers • Coupons allow you to price discriminate, but they tend to be used by your loyal consumers • Consumers tend to forward buy, or stockpile when deals are offered

14. Franchise Building Promotions • Rather than using a one-time offer, many companies are developing frequency programs that encourage repeat purchase and long-term patronage • In order for this to be effective you have to make sure that the rewards are meaningful and are actually generating additional revenue

15. Franchise-Building Promotions • Contests are used to energize the brand • Trade promotions can be used to create win-win opportunities

16. “Brawny Man” contest took the Reggie • Despite over 90% awareness, Georgia-Pacific recognized that the Brawny Man icon no longer seemed relevant to consumers, and it needed to work out a new regimen to increase sales • They launched a summertime contest that asked women to send in photos and 150-word descriptions explaining why their guy is as rugged as the product. • One dozen semi-finalists traveled to New York City for photo sessions, and the grand-prize winner got a Dodge Durango and a limited run as the packaging model. Dedicated TV spots, print ads in USA Today and People magazine, and an eight-market mobile tour supported.

17. Results • During the promotion period (May-October), brand volume grew more than 12.3%, five times more than the entire category • Brand share increased from 10.5% to 11.5% during these months • At the campaign's peak in June 2002, brand volume was up 31% vs. the year before and Brawny had its highest monthly dollar (13.2%) and unit (12.8%) share for the year. • Profits for Brawny increased $5 million as a direct result of the promotion.

18. Nike at the Finish Line • Choose to play campaign… • Target Market: 19 year-old action addicted college students who are role models for teenagers and adults wistfully recalling their college days. • Objectives: • To support Nike brand as a leader in exciting, stylish, innovative and high performance footwear and apparel among 65 percent of Finish Line customers. • Create a competitive advantage for Finish Line and the destination for Nike products among 85 percent of target consumers.

19. Nike at the Finish Line • Choose to play campaign… • Objectives: • Increase retail store traffic and web traffic by 20 percent • Increase sale of Nike brand products through Finish Line by 15 percent in one year.

20. Other Elements • Finish Line “Magalog” featured articles on athletes such as MJ, Mia Hamm, and Derek Jeter • Training of sales associates using Nike’s “Ekins” • Direct mail and winner’s circle frequency program

21. Results • Overall sales of Nike brand through Finish Line increased by 20 percent • Calls to Finish Line store locator increased by 200 percent following the first run of print advertising • Retail traffic increased by 17 percent • FL customer tracking study showed that the percentage of customers viewing FL as the best destination for Nike increased from 20 to 62 percent after one year.

22. Battling for shoppers in the aisles • Marketers make their products “shout” at consumers from the store shelves • The Portable Shopping System is being issued to consumers upon entering the store • Upload shopping lists via the internet • Lets you know when your prescriptions, photos, and deli orders are ready • Floor mat ads make audio announcements when people step on them

23. Battling for shoppers in the aisles • Stores are trying to reduce the clutter of marketing messages (shopping spam) delivered in the stores. • Supermarkets are being designed more around the consumer’s mind-set rather than the traditional warehouse. • Trader Joes & Central Market

24. Battling for shoppers in the aisles • Retailer’s new mantra is to brand the shopping experience so customers are aware of where they’re shopping.

25. Next Week… • Dr. Osei Appiah will be here on Monday to talk about advertising research and copy testing methods • Ken Levy will be here to talk about measuring advertising effectiveness and return on investment