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Prof. ( Dr.) Kao Kveng Hong, Ph.D, D.Litt. 12-1

Chapter -19

Sales Promotions

Sales PromotionsHook 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

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Sales PromotionsChapter 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

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Types of Consumer Promotions

• Coupons• Premiums• Contests and sweepstakes• Refunds and rebates• Sampling• Bonus packs• Price-offs

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F I G U R E 1 2 . 1

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

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F I G U R E 1 2 . 2Percentage of Consumers and Coupon Usage

Always 20.7%

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Rarely 17.0%

Someti

mes

37.7%

Never 24.6%

Source: Karen Holt, “Coupon Crimes,” Promo, Vol. 17, No. 5 (April 2004), pp. 23-29.

A coupon accompanies this informational Gold Bond advertisement.

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Influencing Brand PurchasesOn a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer.

Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).

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• Sampling 7.78• Word-of-mouth 7.18

• Coupons 5.91• Advertising 5.61• Contests 1.24

Percentage of Sales with a Coupon

Source: AC Nielson Scantrack, Santella & Associates

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Product category % of sales usingmanufacturer’s coupon• Disposable diapers 17.1%

• Detergents 15.0%• Meal starters 14.2%• Dough products (refrigerated) 13.6%• Cereal 13.4%• Wrapping materials, bags 12.8%• Oral hygiene products 11.7%• Household cleaners 11.7%

Methods of Distributing Coupons

• Print media (90%)• FSI (88%)

• Direct mail• On- or in-

package• In-store• Sampling• Scanner-

delivered• Cross-ruffing• Response

offer• Internet• Fax• Sales staff

F I G U R E 1 2 . 3

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Print and FSI Coupons

Reasons for using:

• Consumers must make conscious effort toclip coupon

• Creates brand awareness• Must purchase brand on next trip to retailer• More likely to recall brand name

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Types of Coupons

• Instant redemption• Bounce-back• Scanner-delivered• Cross-ruffing• Response offer

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Coupon Redemption Rates

Source: Santella & Associates

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Type of coupon• Instant redeemable

Percent Redeemed 39.3%

• Bounce-back 17.2%• Instant redeemable – cross ruff 17.1%• Electronic shelf 10.2%• Electronic checkout 7.8%• In-pack 5.8%• On-pack 4.7%• Direct mail 3.5%• Handout 3.1%• Free-standing inserts 1.3%

Problems with Coupons• Reduced revenues

• Used by brand preference consumers (80%)• “Necessary evil”

• $500 million illegally redeemed• Mass cutting• Counterfeiting

• Misredemption

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Types of Premiums

• Free-in-the-mail• In- or on-package• Store or

manufacturer• Self-liquidating

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Premium Offer

Click picture for video.

An ad by Haik Humble Eye Center offering a premium with the purchase of custom pair of eye glasses.

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Keys to Successful Premiums

• Match the premium to the target market• Carefully select the premiums

• Avoid fads, try for exclusivity

• Pick premium that reinforces firm’s product and image• Integrate the premium with other IMC tools

• especially advertising and POP displays

• Don’t expect premiums to increase short-term profits

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Source: Based on Don Jagoda, “The Seven Habits of Highly Successful Premiums,” Incentive, (August 1999), Vol. 173, Issue 8, pp. 104-105.

F I G U R E 1 0 . 4

Fast-food chains are well known for their in-store premiums.

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Contests and Sweepstakes• Contests – require activity, skill

• Can require purchase to enter• Some states illegal

• Sweepstakes – random chance• Must publish odds of winning• Cannot require purchase

• Rewards• Extrinsic• Intrinsic

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Contests and Sweepstakes• Rewards

• Extrinsic• Choosing the right prizes

• Intrinsic• Choosing the right contests and sweepstakes

• Alternative locations• Internet• Mobile phone

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Contests and SweepstakesGoals

• Coordinate with other marketing• Encourage customer traffic

• Boost sales - questionable

• Intrinsic rewards draws customers back• Increase in brand awareness

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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

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F I G U R E 1 2 . 6Types of Sampling

• In-store distribution• Direct sampling• Response sampling• Cross-ruff sampling• Media sampling• Professional sampling• Selective sampling

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Benefits of Sampling• Introduce new products• Generate interest• Generate leads• Collect information• Internet sampling• Boost sales

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ExperimentImpact of In-Store Sampling

Product Previous 4 weeks Sampling Week Following 4 weeks

Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In-Store Sampling on theSale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.

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• Meat product A 100% 430% 110%• Meat product B 100% 590% 123%• Meat product C 100% 185% 100%• Bread product 100% 170% 90%• Biscuit product A 100% 359% 64%• Biscuit product B 100% 201% 49%

ExperimentImpact of In-Store Sampling on Competitors

Product Previous 4 week Sampling week Following 4 weeks

Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In- Store Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.

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• Bread product 100% 170% 90%• Competitor A 100% 106% 105%• Competitor B 100% 79% 93%• Competitor C 100% 78% 86%

Sampling Programs• Problems

• Cost• Distribution

• Effective sampling• Component of IMC plan• Stimulate trial usage• Target audience of sample

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• Increase usage of a product• Match or preempt competition• Stockpile the product• Develop customer loyalty• Attract new users• Encourage brand switching

F I G U R E 1 2 . 7

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Reasons for Using Bonus Packs

Problems with Bonus Packs

• Rarely attract new customers• Some consumers skeptical

• Small bonus – price not changed• Large bonus – price increased first

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Price-Offs

• Temporary price reduction• Stimulating sales• Reduces financial risk• Brand switching• Stockpiling

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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

moreprice-sensitive

• Potential image on brand image

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Impact of Price-off onConsumer Purchase

Source: “Studies Indicate Coupons are an Effective Promotional Tool,” Santella &Associates (http://www.santella.com/coupon.htm)

Consumer purchased because of sale price9%

Consumer unaware item was on sale.

51%

Consumer would have purchased item anyway 40%

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Promotion Combinations

• Overlay• Intra-company tie-in• Inter-company tie-in

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Copyright © 2010 by Pearson Education, Inc. publishing as Prentice Hall 12-34

Planning Consumer PromotionsPromotion Prone

Brand Loyal Price Sensitive

Retail IncentivesConsumer Promotions

• Increase store traffic• Increase store sales• Attract new customers• Increase the basket size

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Trade Promotions• Account for 70% of marketing budget• Often 2nd largest expense• Account for 17.4% of gross sales

Trade Allowances

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TradePromotions

Trade Incentives

Trade Contests

Trade Shows

• Off-invoiceallowance• Price discount• 35% of all trade dollars

• Slotting fees• Exit fees

F I G U R E 12 . 10Trade Allowances

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SlottingFees• 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

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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

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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

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F I G U R E 12 . 11Trade Incentives

• Cooperative merchandising agreement

• Premium or bonus pack

• Co-op advertising programs

TradeIncentive

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Cooperative MerchandisingAgreement

• Formal agreement• Popular with manufacturers

• Retailer must perform marketing functions• Manufacturer maintains control• Longer-term commitments

• Benefit retailers• Schedule calendar promotions

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Cooperative Advertising• Manufacturer pays part of retailer’s 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

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Trade Shows• Manufacturers (sellers)

• Display merchandise• Seek prospects

• Retailers (buyers)• Compare merchandise• Seek vendors

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• Education seekers• Reinforcement seekers• Solution seekers• Buying teams• Power buyers

Source: English, “On Displays,” Business First - Western New York, (Nov. 29, 1999), Vol. 16, No. 31, pp. 31-32.

F I G U R E 12 . 12Categories of Buyers at Trade Shows

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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

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Concerns 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

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