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Sales Promotion

Chapter 18. Sales Promotion. Sales Promotion. Using incentives to create a perception of greater brand value Consumer Market Induce household consumers to purchase a firm’s brand Trade-Market Motivate distributors, wholesalers, and retailers to stock and feature a brand Business Buyer

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Sales Promotion

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  1. Chapter 18 Sales Promotion

  2. Sales Promotion • Using incentives to create a perception of greater brand value • Consumer Market • Induce household consumers to purchase a firm’s brand • Trade-Market • Motivate distributors, wholesalers, and retailers to stock and feature a brand • Business Buyer • Cultivate buyers in large corporations who make purchase decisions Ch 18: Sales Promotion 2

  3. Sales Promotion Examples Coupons Trade Shows Contests Gift Cards Allowances Sweepstakes Incentives Sampling Price-off deals Premiums Brand placements Ch 18: Sales Promotion 3 Loyalty Programs

  4. Importance of Sales Promotion • $100 billion in 2000 • Growth rate: 9 – 12 percent • Reasons for growth: • Demand for accountability • Short-term orientation • Consumer response to promotions • Proliferation of brands • Increased power of retailers • Media clutter Ch 18: Sales Promotion 4

  5. Objectives for Consumer-Market Sales Promotion 1. Stimulate trial purchase 2. Stimulate repeat purchases 3. Stimulate larger purchases 4. Introduce a new brand 5. Combat or disrupt competitors 6. Contribute to IMC Ch 18: Sales Promotion 5

  6. Consumer-Market Sales Promotion Techniques • 1. Coupons 2. Price-off deals • 3. Premiums 4. Contests/sweeps • 5. Samples & trials 6. Phone gift cards • Brand placements 8. Rebates • Frequency programs • Event sponsorship Ch 18: Sales Promotion 6

  7. Coupons are the most widely used form of consumer sales promotion

  8. Coupons • Entitles a buyer to a price reduction for a product or service • Advantages • Give a discount to price sensitive consumer while selling product at full price to others • Induce brand switching • Timing and distribution can be controlled • Stimulates repeat purchases • Gets regular users to trade up within a brand array Ch 18: Sales Promotion 8

  9. Coupons • Disadvantages • Time of redemption cannot be controlled • No way to prevent current customers from redeeming coupons • Coupon programs require costly administration • Fraud is a serious, chronic problem Ch 18: Sales Promotion 9

  10. Price-Off Deals • Offers consumer reduced price at point of purchase through specially marked packages • Advantages • Controllable by manufacturer • Can effect positive price comparisons • Consumers believe it increases value of a known brand • Disadvantage • Retailers believe it creates inventory and pricing problems Ch 18: Sales Promotion 10

  11. Premiums and Advertising Specialties • Premiums: free or at a reduced price with another purchase • Free premiums provide item at no cost • Self-liquidating premiums require consumers to pay most of the cost of the item • Advertising specialties: • A message placed on a free, useful item Ch 18: Sales Promotion 11

  12. Premiums attract attention to a brand and offer the consumer something for free

  13. Contests and Sweepstakes • Contests: consumers compete for prizes based on skill or ability. • Sweepstakes: winners picked by chance • Both create excitement and interest • But . . . • Legal and regulatory requirements are complex • Consumers may focus on the game rather than the brand • Difficult to get an IBP message across in a game Ch 18: Sales Promotion 13

  14. Samples and Trial Offers • Sampling: Giving consumer an opportunity to use a brand on a trial basis with little or no risk • Types of sampling • In-store Newspaper • Door-to-door On-package • Mail Mobile • Trial offers • Used for more expensive items • Consumer tries product for a fixed time Ch 18: Sales Promotion 14

  15. Phone and Gift Cards • Manufacturers offer either for free or for purchase debit cards • with phone time • or preset spending limits • Examples include offers from Lexus, Oldsmobile, and The Gap. Ch 18: Sales Promotion 15

  16. Rebates • Money back offer requiring the buyer to mail a request for money back from the manufacturer • Often tied to multiple purchases • Many consumers fail to bother sending the request Ch 18: Sales Promotion 16

  17. Frequency Programs • Also known as continuity programs • Offers customers discounts or free products for repeat patronage • Common in airline, travel, and restaurant businesses Ch 18: Sales Promotion 17

  18. Event sponsorship • When a firm sponsors or cosponsors an event, the brand gains credibility with the event audience • Now the fourth most popular form of promotion in U.S. • Most preferred venue: sporting events Ch 18: Sales Promotion 18

  19. Sales Promotion Directed at Trade and Business Buyers • Objectives:Use a “push” strategy: Push the product into the distribution channel to the consumer • Obtain initial distribution • Increase order size • Encourage cooperation with consumer market sales promotions • Increase store traffic Ch 18: Sales Promotion 19

  20. Trade-Market Sales Promotion Techniques • Point-of-purchase displays • Incentives: Push money • Allowances: Merchandise allowances, slotting fees, bill- back allowances, off-invoice allowances • Sales Training Programs • Cooperative (Co-Op) Advertising Ch 18: Sales Promotion 20

  21. Business Market Sales Promotion Techniques • Trade Shows • Business gifts • Premiums and advertising specialties • Trial offers • Frequency programs Ch 18: Sales Promotion 21

  22. Trial offers are very effective in the business market. Why?

  23. Sales Promotion, the Internet, and New Media • Big tech companies give away their products • Sampling removes risk associated with consumer trial • Internet firms use incentives to make Web sites “sticky” • Internet is used to implement sales promotions Ch 18: Sales Promotion 23

  24. Risks of Sales Promotion • Create a price orientation • Borrow from future sales • Alienate consumers • Time and expense • Legal considerations Ch 18: Sales Promotion 24

  25. Coordination Challenge • Message coordination • Media coordination • Research conclusions • -Short term effects can be dramatic • -Short term effects are often not profitable • -Rare for long-term effects to occur • -Most power effects result from advertising • and sales promotion being used together Ch 18: Sales Promotion 25

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