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