ALL YOU NEED TO KNOW ABOUT SALES PROMOTION

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ALL YOU NEED TO KNOW ABOUTSALES PROMOTION

• BY
• Reshma Gala Jae-Yeon Joo
• Shawn Kline Amol Chopra
• MKTG-652
• Marketing Information Management Research
• Drexel University

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What is Sales Promotion?

• Sales Promotion consists of a diverse collection
  of incentive tools, mostly short-term, designed
  to stimulate quicker or greater purchase of
  particular products or services by consumers or
  traders.

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Purpose of Sales Promotion

• Yield faster, more measurable results in sales
• Stimulate consumer trial
• Attract new triers or brand switchers
• Reward loyal customers
• Increase repurchase rate of occasional users
• Enhance Brand Image (E.g.. Toro Snow Blowers)

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Two major categories of Sales Promotion

• Consumer Sales Promotion
• Directed to consumers of goods and service
• Trade Sales Promotion
• Directed to distributors and retailers

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Consumer Sales Promotion

• Objectives
• Obtaining trial and repurchase
• Increasing consumption of an established brand
• Defending current customers
• Enhancing advertising and marketing efforts

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Consumer Sales Promotion

• Sampling
• Give some quantity of product for no charge to
  induce trial
• Excellent way of inducing a trial of both new
  brand and already established products
• Could be costly
• Door-to-door sampling, sampling through the
  mails, in-store sampling, on-package sampling,
  demonstrating/sampling the products at a retailer
  store

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Consumer Sales Promotion

• Coupons
• A certificate that entitles consumers to an
  immediate price reduction when product bought
• Most widely used and effective promotion
• Used for both new product trial and established
  product
• Costly only about 2 redeemed by consumers
• Distributed through media deliveries in
  newspapers and magazines, direct mail, in or on
  packages, in stores, and at point-of-purchase

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Consumer Sales Promotion

• Premiums
• An offer of an extra item of merchandise or
  service either free or at a low price. An
  incentive for purchase
• High impulse value
• Consumers most preferred types of promotion
• With pack premium
• Free in-the-mail premium
• Self liquidating premium

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Consumer Sales Promotion

• Contests and Sweepstakes
• Contests consumers compete for prizes or money.
  Winners are determined by judging entries against
  some predetermined criteria. A purchase
  incentive(requires proof of purchase)
• Sweepstakes winners are determined purely by
  chance. No need for proof of purchase
• Both are effective ways of getting consumers
  become involved with the brand by making the
  promotion product relevant

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Consumer Sales Promotion

• Refunds and Rebates
• Offers to return some portion of product purchase
  price with proof of purchase
• Good in a way to get the information about
  consumers who bought the products from mail-in
  forms
• Allow marketers to achieve a price reduction for
  much less than in a direct price deal

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Consumer Sales Promotion

• Price Pack(price-off deal)
• Offers to consumers of savings off the regular
  price of products, flagged on the label or
  packaging
• Reduced-price pack buy one get one free
• Banded pack two related products banded together
• Used by retailers as well to reduce its
  inventories

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Consumer Sales Promotion

• Frequent Buyer Programs
• Promotions for loyal consumers
• Frequent flyer program
• Product Warranties
• Tie-in Promotions
• Cross Promotions
• Point of Purchase Display and Demonstrations

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Trade Sales Promotion

• Objectives
• Obtaining distribution and support for new
  products
• Maintaining trade support for established brands
• Encouraging retailers to display and promote
  established brands
• Building retail inventories

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Trade Sale Promotion

• Allowance
• Discount of deal offered to the retailer or
  wholesaler to encourage them to stock, promote,
  or display a manufacturers products
• Buying allowances price reduction on merchandise
  ordered during a fixed period
• Promotional allowances performing certain
  promotional or merchandising activities in
  support of their products
• Slotting allowances special allowance for
  agreeing to handle new products

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Trade Sales Promotion

• Trade shows and Conventions
• Exhibitions or forum where manufacturers display
  their products to current as well as prospective
  buyers
• Major opportunity to display and demonstrate
  products, interact with customers, identify new
  prospects, gather consumer and competitive
  information and even write new orders
• Big portion of annual promotion budget

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Trade Sales Promotion

• Sales Contests
• Aims at inducing the sales force or dealers to
  increase their sales results over a stated
  period, with prizes going to those who succeed
• Sales Training program
• Provides sales training assistance to retail
  sales people
• Complex products like computer industries

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Trade Sales Promotion

• Free goods
• Offers of extra cases of merchandise to
  intermediaries who buy a certain quantity or who
  feature a certain flavor or size
• Manufacturers might offer push money or free
  specialty advertising items to retailers that
  carry the companys name

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Major Decisions in Sales Promotion

• Establish Objectives
• Selecting the Appropriate Tools
• Developing the Program
• Pretesting, Implementing and Controlling the
  Program
• Evaluate Results

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Major Decisions Establishing Objectives

• Objectives for Consumers
• Purchase larger size units
• Lead nonusers to trial
• Attract switchers from competing brands
• Objectives for the Sales Force
• Encourage support of new products
• Encouraging more prospecting
• Stimulate off-season sales

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Major Decisions Establishing Objectives

• Objectives for Retailers
• Carry new items in stock
• Carry a higher level of inventory
• Off-season buying
• Stock related items
• Offset competitive promotions
• Build brand loyalty
• Enter new retail outlets

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Major Decisions Selecting the Appropriate Tools

• Consumer Promotion Tools
• Manufacturer Promotions
• Retailer Promotions
• Consumer-Franchise Building Promotions
• Non-Consumer-Franchise Building Promotions

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Major Decisions Selecting the Appropriate Tools

• Manufacturer Promotions
• Rebates
• Gifts
• Special Trade-in Deals

• Retailer Promotions
• Price Cuts
• Feature Advertising
• Retailer Coupons
• Retailer Contests and Premiums

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Major Decisions Selecting the Appropriate Tools

• Consumer-Franchise Building
• Reinforce consumers brand understanding
• Coupons
• Free samples
• Premiums (when related to product)

• Non-Consumer-Franchise Building
• Price-off packs
• Premiums (not related to product)
• Contests Sweepstakes
• Refunds
• Trade Allowances

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Major Decisions Selecting the Appropriate Tools

• Consumers like promotions
• High Equity Brand Use Promotion
• Low Equity Brand Promos have no effect
• Utilitarian brand Use monetary promotion
• Indulgence brand Use non-monetary promotion
• Participation is dependent upon satisfaction with
  retailers
• Source Northwestern University Study as cited
  in PRIMEDIA Business Magazine

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Major Decisions Selecting the Appropriate Tools

• Trade Promotion Tools
• Higher portion of promotion allocation
• Rationale
• Persuade retailer/wholesaler to carry brand
• Persuade retailer/wholesaler to carry more units
• Encourage retailers to promote brand
• Stimulate retailers to push product

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Major Decisions Selecting the Appropriate Tools

• Examples of Trade Promotion Tools
• Price-off
• Allowance (advertising/display)
• Free Goods

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Major Decisions Selecting the Appropriate Tools

• Sales Force/Major Business Promotion Tools
• Trade Shows Conventions
• Sales Contests
• Specialty Advertising

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Major Decisions Developing the Program

• Integration of various tools
• Factors
• Size of Incentive
• Conditions for Participation
• Duration
• Distribution
• Timing
• Total Sales-promotion Budget

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Major Decisions Pretesting, Implementation
Control

• Pretesting is important to ensure efficacy of
  promotion tools
• Implementation
• Lead time preparation prior to launch
• Sell-in time begins with promotional launch and
  ends when 95 of merchandise is distributed to
  consumers

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Tools used to evaluate Sales Promotion

• Sales data
• Consumer surveys
• Experiments
• Regression Analysis
• Choice and Purchase Timing Models
• Time Series Analysis

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Evaluation of Sales Promotion

• Brand switching
• Repeat purchasing
• Purchase acceleration
• Category expansion

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Experiments Sales Promotion

• Time Series Quasi-Experiments
• Sales are observed for some period of time, a
  promotion is then introduced and sales are
  observed both during and after the promotion
• The observation could be on a panel of customers,
  one or more cities or even one or more stores

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Experiments Sales Promotion

• Two-Group Pre-Post Experiments
• The experiment is conducted on 2 groups
• Groups are randomly assigned to experimental
  units such as stores
• The units have same characteristics, so that any
  unusual event if occurs, will occur in both units
• Sales promotion is done in these units and
  results are measured

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Experiments Sales Promotion

• Experiments involving more than one variable
• Randomized Blocks Dividing the units into
  different groups and then studying them
• Latin Squares
• Full and Fractional Factorials

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Sales Promotion Regression Analysis

• Regression Analysis can be applied on the data
  collected for analyzing Sales Promotion.
• The dependent variables can be brand sales,
  category sales or even market share
• The independent could be various promotions like
  features, deals, price, display, coupons and such

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Choice and Purchase Timing Models

• Choice Models
• focus on the individual consumer and modeling her
  choice behavior
• used to understand carry-over effects and
  heterogeneity in deal response
• focuses on which brand is purchased
• Purchase models
• used to analyze stockpiling behavior
• focuses on when a brand is purchased
• Combination used to understand sources of volume

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Sales Promotions Time Series Analysis

• Techniques designed to examine data that evolve
  over time
• Univariate time series analysis predict value
  of sales as a function of previous sales
• Transfer function analysis starts with
  univariate time series and then adds independent
  variables such as promotions
• Intervention analysis similar to transfer
  function analysis, but is particularly suited to
  the analysis of promotions.
• Promotions are viewed as short term pulses
  intervening with the normal progression of
  sales time series

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Examples

• Micromarketing An Individual Approach
  Pharmaceutical Executive (Dec 2001)
• Computing power of today's PC enables marketers
  to conduct analysis that were unthinkable just a
  few years ago, creating exciting new ways to
  approach and track promotions

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Examples

• Evaluating Promotions in Shopping Environments
  Decomposing Sales Response into Attraction,
  Conversion, and Spending Effects Marketing
  Science Vol.20, No.2, Spring 2001
• Proposes a framework that incorporates attraction
  effects, conversion effects and spending effects
  and examines the influence of sales promotions on
  store performance
• Price promotion
• have little impact on front traffic, but
  positively effects store entry and likelihood
  that a consumer will make a purchase
• The effect on consumers spending in a store is
  also significant, but varies in sign with the
  promotion employed
• Promotions with greater scope enhances store
  entry, promotions with narrow scope seem to have
  negative impact on store traffic

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Challenges for Sales Promotions

• Marketers are becoming too dependent on using
  sales promotion to produce short-term or
  immediate increases in sales
• Companies are investing in sales promotion at the
  expense of advertising and thus not building the
  long-term value of the brand franchise
• Brands are losing their perceived value from the
  perspective of consumers when they are purchased
  because of a promotional offer
• Consumers focus more on the promotion than the
  product. In fact, sometimes consumers are not at
  all loyal to the product but are attracted to the
  coupon, gift, or rebate

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Challenges for Sales Promotions

• Challenges with Trade Promotion
• Difficult to police retailers
• Forward buying
• Diverting
• No legal binding on retailers
• Difficulty in monitoring retailers (as regards to
  advertisement regarding the deals)

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Challenges for Sales Promotions

• Coupons consumer delays purchases
• Deals reduce perceived product value and delay
  in purchase
• Premiums consumers buy for premium not for
  product
• Contests requires creative or analytical
  thinking
• Sweepstakes sales drop after sweepstakes

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Challenges for Sales Promotions

• Samples high cost for companies
• Continuity program high cost for companies
• Point-of-purchase display hard to get retailer
  to allocate high-traffic space
• Rebates easily copied steal sales from future
  reduce perceived product value
• Product placement little control over
  presentation of product

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Examples

• Too Much Information Supermarket Business
  February 15, 2000
• Only 15 of the manufacturers surveyed indicate
  that retailers frequently share data with them.
• Main reason for the lack of openness include
  privacy issues, questions regarding the benefits
  of such relationship, and the lack of structured
  or established sharing program
• Knowing who the retailers consumers are and what
  theyre buying is only a small piece of puzzle.
  Understanding who they are is the real challenge

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Examples

• Battery ads run low Price battle saps dollars
  from category advertising budgets.
  Advertising Age, May 6, 2002
• Example of Duracell, which cut ad-spending by 38
  while increasing promotion, in response to steep
  deals started in1999 by its rivals. But, at the
  end of the fourth quarter they realized that
  despite a 6 gain in unit volume, dollar sales
  fell 3

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Examples

• Do We Care What Others Get ? A Behaviorist
  Approach to Targeted Promotions Journal of
  Marketing Research (Aug 2002)
• Increase in use of targeted promotions- the
  practice of offering different prices to
  prospective and present customers
• Consumer preference affected not just by prices
  the consumers are offered, but also by prices
  available to others
• Amazon was target promoting, but it stopped doing
  that as soon as customers started complaining
  about charging different prices to different
  customer.

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Current Trends in Sales Promotion

• Increase in share of sales promotion as part of
  marketing budget
• Did you know that a decade ago, the
  advertising-to-sales-promotion ratio was 6040?
• Today, in many consumer goods companies, sales
  promotion accounts for 65 to 75 of the combined
  budget!

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Current Trends in Sales PromotionSAMPLING

• Sampling 1.2 million industry
• Point-of-sweat sampling UNILEVER is getting
  aerobics instructors at Ballys Fitness Clubs to
  hand out Dove body wash, deos and face cloths to
  perspiring students.
• Point-of-thirst sampling Beverage companies
  doling out cold drinks on hot days. Starbucks
  recently had its chill patrol handing out
  frozen Frappuccino samples and two-for-one
  coupons on a hot summer afternoon in Manhattan.

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Current Trends in Sales Promotion SAMPLING

• Point-of-dirt sampling Stain remover and hand
  cleansing companies snaring consumers at mall
  food courts.
• Point-of-relief sampling Dr. Scholls bestowing
  blister treatment cushions to runners at the
  Chicago Marathon.
• Today, precision is needed to determine what,
  where and how you deliver samples.

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Current Trends in Sales PromotionEXPERIENTIAL
MARKETING

• Sampling agencies reinventing themselves to
  provide a brand experience.
• Using interactive elements to communicate with
  the market.
• Ex Adidas used street theatre and discount
  coupons to create a brand experience.
• Ex Marks and Spencer used live models as
  mannequins to display womens lingerie and had
  store employees to hand out discount coupons to
  passers-by.

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Current Trends in Sales PromotionBUZZ MARKETING

• Using sales promotion to create a buzz about the
  brand.
• Flashier promos, bigger budgets
• Ex Pepsi negotiating 35 million promo deal that
  would award winner a ride on Russian Soyuz space
  shuttle.

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Current Trends in Sales PromotionBUZZ MARKETING

• Uncle Ben offering consumers an interactive
  round-the-world trip on simulated plane before
  trying out recipes.

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Current Trends in Sales PromotionDISCOUNTING

• Discounting becoming popular tool post Sept.
  11th.
• Sharp drop in sales of full-price retailer,
  cancellation of orders and bulging inventories.
• Ex Ralph Lauren suits scaled down from 450 to
  169.98
• Ex K2 inline skates selling for 65 at Sams
  Club instead of 130

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Current Trends in Sales PromotionTARGETED
PROMOTIONS

• Proving different prices to prospective and
  present customers.
• Ex Amazon.com selling the same DVD movies for
  different prices to different customers.
• Ex Telephone companies offering lucrative
  bonuses to potential switchers.
• Internet provides ideal medium for targeted
  promos to thrive.

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Current Trends in Sales Promotion IMC

• Emphasis on integrating marketing communications
  tools to take advantage of combined effects.
• Advertising, direct-mail, sales promotion, public
  relations and personal selling.
• To create a consistent brand image and long term
  relationship with the consumer.
• IMC is not an option, but a requirement.

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THANK YOU!

• Any Questions?

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References

• Battery ads run low Price battle saps dollar
  from category advertising budget Advertising
  Age, May 6, 2002 (Slide 45)
• Too much information Super Market Business
  February 15, 2000(Slide 44)
• Evaluating promotions in shopping environments
  Decomposing sales response into attraction,
  conversion, and spending effects Marketing
  Science, Vol. 20, and No.2. Spring 2001 ( Slide
  39)
• Do we care what others get? A behaviorist
  approach to targeted promotions Journal of
  Marketing Research (August 2002) (Slide 46, 54)
• Micromarketing an individual approach
  Pharmaceutical Executive (December 2001) (Slide
  38)

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References

• http//www.campbell.edu/faculty/martine/cadv/files
  /TP/TP_10.html (Slide 4-17, 40)
• "Higher Learning," - PRIMEDIA Business Magazines
  Media (Apr-02)
• "Promotion-related research spending rose 1 in
  2001," - - PRIMEDIA Business Magazines Media
  (Apr-02) (Slide 24)
• Fast Casual Dining Ahead Bob Sperber Brandweek,
  NY Sept 2, 2002 Vol.43. Iss.31 pgs.16, 4
  (Slides 48, 49)
• Spending hits a wall Joanna Breitstein
  Pharmaceutical Executive, Eugene Sept 2002
  Vol.22, Iss.9 pgs 64, 4 (Slides 48, 49, 52)
• Evaluation is key to road show success Robert
  McLuhan Marketing, London Aug 22 pg.39, 1
  (Slides 50, 51, 52)

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References

• When Free Samples Become Saviors
  Point-of-Sweat, Point-of-Thirst Marketing Offers
  Freebies When They Are Most Needed By Geoffrey
  A. Fowler Wall Street Journal, New York, NY.
  Aug 14, 2001 Eastern edition pg B.1 (Slide 48,
  49)
• Taking the Free Out of Free Samples Cosmetic
  Makers Get Stingy With Makeup Giveaways How to
  Get Them Anyway By Sarah Ellison Wall Street
  Journal, New York, N.Y. Sept 25, 2002 Eastern
  edition pg. D.1 (Slides 48, 49, 54)
• As Sales Slow, Bargains Pile Up Full Price
  Stores Scale Back, Discounters Ask, Anyone For
  64 Inline Skates? By Erin White and Ann
  Zimmerman Wall Street Journal, New York, N.Y.
  Oct 8, 2001 Eastern Edition pg A.15 (Slide 53)

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References

• What do excellent service promoters do
  differently? Kim Shyan Fam The service
  Industries Journal, London Oct 2001 Vol. 21,
  Iss.4 pg. 1, 16 pgs (Slide 55)
• Pepsi wants a ride on Russian rocket Hillary
  Chura Electronic Media, Chicago Sept 23, 2002
  Vol. 21, Iss.38 pg.4 (Slide 51)
• "Ad Specialties Are Profitable Additions,"
  www.bfis.com (General)
• "Premium advice IT's better to give to your
  customers than receive," - Memphis Business
  Journal (General)
• Sales Promotion Concepts, Methods Strategies
  by Robert C. Blattberg and Scott A. Neslin (Slide
  32-37)
• Marketing 5 Lamb, Harir, McDaniel,
  South-Western College Publishing, page 570 576
  (Slide 4-17)
• Marketing Management by Kotler, 10th Edition
  (Slide 18-23, 25-29, 30,31)