Sales
Promotions
Chapter 12
12-1
Chapter Objectives
1. What are the two main categories of
sales promotions and how do they differ?
2. What are the advantages and
disadvantages of the various types of
consumer promotions?
3. What are the major categories of trade
promotions and how are they used?
4. How can a marketing team tie consumer
promotions to trade promotions and
other elements of the promotional mix?
5. What are the potential limitations when
sales promotions programs are being
developed for international customers?
12-2
Sales Promotions and Hook Fans
Corpus Christi Hooks Double A
Affiliate of Houston Astros
Attendance 7,000 per game
Thrives on consumer promotions
30 promotional nights (72 home
games)
Discounts and giveaways
Sponsorships and trade promotions
Whataburger Field
Postgame catch and Kids Day
Fun, family entertainment
12-3
Chapter Overview
Consumer promotions
Individuals/businesses that use
product
Trade promotions
Directed to channel members
Possible erosion of brand equity
Can differentiate a brand
Use varies product life cycle
12-4
Consumer Promotions
Coupons
Premiums
Contests and sweepstakes
Refunds and rebates
Sampling
Bonus packs
Price-offs
12-5
Coupons
323 billion distributed
3 billion redeemed (0.93%)
Average value was 89 cents
Savings of $3.47 billion
Coupon usage
78% of households use
64% willing to switch brands
12-6
Coupon Usage
Always 20.7%
Sometimes 37.7%
Rarely 17.0%
Never 24.6%
12-7
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
7.78
Word-of-mouth
7.18
Coupons
5.91
Advertising
Contests
1.24
5.61
Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella
& Associates (Http://www.santella.com/marketing.htm).
12-8
Coupon Distribution
Print media (90%)
FSI (88%)
Direct mail
On- or in-package
In-store
Sampling
Scanner-delivered
Cross-ruffing(Acouponoffer
delivered on one product that is redeemable for
the purchase of another product. The other
product is usually one made by the same
company but may involve a tie in with another
manufacturer.)
Response offer
Internet
Fax
Sales staff
12-9
Types of Coupons
Instant redemption
Bounce back
Scanner-delivered
Cross-ruffing
Response offer
12-10
Coupon Redemption Rates
Type of coupon
Instant redeemable
Percent Redeemed
39.3%
Bounce-back(Abounce backoffer is a discount orcouponthat's given to a customer that has just
made a purchase from you. The goal is to get them to purchase again. This time at a discount.)
Instant redeemable cross ruff
Electronic shelf
Electronic checkout
In-pack
On-pack
Direct mail
Handout
Free-standing inserts
17.2%
17.1%
10.2%
7.8%
5.8%
4.7%
3.5%
3.1%
1.3%
Source: Santella & Associates
12-11
Problems with Coupons
Reduced revenues
Used by brand preference
consumers (80%)
Necessary evil
$500 million illegally redeemed
Mass cutting
Counterfeiting
Misredemption
12-12
Premiums
Free-in-the-mail
In- or on-package
Store or manufacturer
Self-liquidating
12-13
Keys to Successful Premiums
Match premium to target market
Carefully select the premium
Pick premium that reinforces
product and image
Integrate premium with other IMC
tools
Dont use premiums to increase
short-term profits
12-14
Contests and Sweepstakes
Contests
Require skill
Sweepstakes
Random chance
Rewards
Extrinsic
Intrinsic
12-15
Goals of
Contests and Sweepstakes
Coordinate with other
marketing
Encourage customer traffic
Boost sales - questionable
Intrinsic rewards draw
customers back
Increase in brand awareness
12-16
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
12-17
Sampling
In-store distribution
Direct sampling
Response sampling
Cross-ruffing sampling
Media sampling
Professional sampling
Selective sampling
12-18
Benefits of Sampling
Introduce new
products
Generate interest
Generate leads
Collect information
Internet sampling
Boost sales
12-19
Sampling Programs
Problems
Cost
Distribution
Effective sampling
Component of IMC plan
Stimulate trial usage
Target audience of sample
12-20
Bonus Packs
Increase usage of product
Match or preempt competition
Stockpiling of product
Develop customer loyalty
Attract new users
Encourage brand switching
12-21
Price-Offs
Temporary price reduction
Stimulating sales
Reduces financial risk
Brand switching
Stockpiling
12-22
Price-offs
Proven to be successful
Appeal of monetary savings
Reward is immediate
Problems
Can have a negative impact on
profit
Encourages consumers to become
more price-sensitive
Potential image on brand image
12-23
Promotion Combinations
Overlay
Intra-company tie-in
Inter-company tie-in
12-24
Planning Consumer
Promotions
Types of consumers
Promotion prone
Brand loyal
Price sensitive
Retailer incentives
Increase store traffic
Increase store sales
Attract new customers
Increase basket size
IMC Plan
12-25
Trade Promotions
Types of trade promotions
Trade
Trade
Trade
Trade
allowances
contests
incentives
shows
For manufacturers, trade
promotions
Accounts for 70% of marketing budget
Often 2nd largest expense
Accounts for 17.4% of gross sales
12-26
Trade Allowances
Off-invoice allowance
Price discount
35% of all trade dollars
Slotting fees
Exit fees
12-27
Slotting 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
12-28
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
Retailers can schedule and promote on-deal
brands
Forward buying
Pass savings on or pocket higher margin
Additional carrying costs
Diversion
Pass savings on or pocket higher margin
Additional shipping costs
12-29
Trade Contests
Used to achieve sales targets.
Funds known as spiff money.
Rewards can be prizes or cash.
Can be designed for various channel
members.
Some organizations do not allow trade
contests because of possible conflict of
interests.
12-30
Trade Incentives
Cooperative merchandising
agreement
Premium or bonus pack
Co-op advertising programs
12-31
Cooperative Merchandising
Agreement
Formal agreement
Popular with manufacturers
Retailer must perform marketing
functions
Manufacturer maintains control
Longer-term commitments
Benefit retailers
Schedule calendar promotions
12-32
Cooperative Advertising
Manufacturer pays part of retailers ad
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
12-33
Trade Shows
Few deals finalized at trade show
International attendees want to make
deals
Increase in international trade shows
National shows being replaced by
regional and niche shows
Niche shows
Provide better prospects
Lower costs
12-34
Trade Show Attendees
Education seekers
Reinforcement seekers
Solution seekers
Buying teams
Power buyers
12-35
Concerns of Trade Promotions
Corporate reward structure
Used for short-term sales goals.
Tend to be used outside of IMC Plan.
Costs
Over-reliance to push merchandise.
Difficult to reduce competitive
pressures
Potential erosion of brand image.
12-36
