the growth of sales promotion-1 (1)

7/25/2019 The Growth of Sales Promotion-1 (1)

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The Growth of Sales Promotion

While sales promotion has been part of the marketing process for a long time,

its role and importance in a companys integrated communications program have

increased dramatically over the past decade. Consumer sales promotion-related

spending increased from $56 billion in !! to nearly $"" billion in #"".arketers also spend an estimated $5" billion each year on promotions targeted at

retailers and %holesalers. Consumer packaged goods &rms continue to be the core

users of sales promotion programs and tools. 'o%ever, sales promotion activity is

also increasing in other categories, including health care, computer hard%are and

soft%are, consumer electronics, and service industries.

(ot only has the total amount of money spent on sales promotion increased,

but the percentage of marketers budgets allocated to promotion has gro%n as %ell.

)or many years advertising %as the ma*or component in the promotional mi+ of

most consumer-product companies. ntil the !"s, nearly half of marketers

promotional dollars %as spent on advertising campaigns designed to create orreinforce brand a%areness and build long-term loyalty. 'o%ever by the mid- to late

"s, a fundamental change had occurred in the %ay most consumer-product

companies %ere marketing their products. he proportion of the marketing budget

allocated to sales promotion rose sharply, %hile the amount spend on media

advertising declined. he increase on spending on sales promotion at the e+pense

of media advertising continued throughout the decade of the !"s and into the ne%

millennium. Currently, estimates are that marketers spend bet%een 6" and /5

percent of their promotional budgets on sales promotion, %ith the remainder being

allocated to media advertising.

0llocation of marketing budgets among consumer promotions, tradepromotions, and media advertising varies by industry and company. )or e+ample,

trade promotion accounts for nearly 5" percent of the budget for consumer

packaged-goods companies, %ith #/ percent going to consumer promotion and #1

percent to media advertising. oreover, a signi&cant amount of the monies that

marketers allocate to media advertising is spent on ads that deliver promotional

messages regarding contests, games, s%eepstakes, and rebate o2ers. 3urveys have

sho%n that marketrers devote about / percent of their ad budgets tp promotional

messages. 4romotional messagers are also used to help attract attention to image-

building ads.

Reasons for the Increase in Sales Promotion

he reallocation of the marketing budget concerned many marketers %ho still

vie%ed media advertising as the primary tool for brand building and sa% sales

promotion programs as little more than gimmicks that contributed little to brand

euity. 'o%ever, most have recognied that consumers may love certain brands but

often %ant an e+tra incentive to buy them. arketers also kno% they must partner


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e2ectively %ith trade accounts, and this often means providing them %ith an

additional incentive to stock and promote their brands and participate in various

promotional programs.

0 ma*or reason for the increase in spending on sales promotion is that the

promotional industry has matured over the past several decades. 7ncreasedsophistication and a more strategic role and focus have elevated the discipline and

its role in the 7C program of many companies. 7n the past, sales promotion

specialists %ould be brought in after key strategic branding decisions %ere made.

4romotional agencies %ere vie%ed primarily as tacticians %hose role %as to develop

a promotional program such as a contest or s%eepstakes or a coupon or sampling

program that could create a short-term increase in sales. 'o%ever, many

companies are no% making promotional specialists part of their strategic brand-

building team, a move that puts sales promotion on par %ith media advertising.

4romotional agencies have e+tended their integrated marketing capabilities as %ell

as their e+pertise in branding and helping their clients build relationships %ith their

customers.

here are also a number of other factors that have led to the increase in the

importance of sales promotion and the shift in marketing dollars from media

advertising to consumer and trade promotions. 0mong them are the gro%ing po%er

of retailers, declining brand proliferation, fragmentation of the consumer market,

the short-term focus of many marketers, increased accountability, competition, and

clutter.

Short-Term Focus

any businesspeople believe the increase in sales promotion is motivated bymarketing plans and re%ard system geared to short-term performance and the

immediate generation of sales volume. 3ome think the packaged-goods brand

management system has contributed marketers increased dependence on sales

promotion. 8rand managers use sales promotion routinely, not only to introduce

ne% products or defend against the competition but also to meet uarterly or yearly

sales and market share goals. he sales force, too, may have short-term uotas or

goals to meet and may also receive reuests from retailers and %holesalers for

promotions. hus, reps may pressure marketing or brand managers to use

promotions to help them move the products into the retailers stores.

any managers vie% consumer and trade promotions as the mostdependable %ay to generate short-term sales, particularly %hen they arte price-

related. he reliance on sales promotion is particularly high in mature and slo%-

gro%th markets, %here it is di9cult to stimulate consumer demand through

advertising. hus has led to concern that managers have become too dependent on

the uick sales &+ that can result from a promotion and that the brand franchise

may be eroded by too many details.


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Increased Accountability

7n addition to pressuring their marketing or brand managers and sales force

to produce short-term results, many companies are demanding to kno% %hat they

are getting for their promotional e+penditures. :esults from sales promotional

programs are generally easier to measure, accountable %ays to relate promotionale+penditures to sales and pro&tability. )or e+amples, ;raft )oods uses computeried

sales information from checkout scanners in determining compensation for

marketing personnel. 4art of the pay managers receive depends on the sales a

promotion generates relative to its cost.

anagers %ho are being held accountable to produce results often use price

discounts or coupons, since they produce a uick and easily measured *ump in

sales. 7t takes longer for any ad campaign to sho% some impact and the e2ects are

more di9cult to measure. arketers are also feeling pressure from the trade as

po%erful retailers demand sales performance from their brands. :eal-time date

available from computeried checkout scanners make it possible for retailers tomonitor promotions and track the results they generate on the daily basis.

Competition

0nother factor that led to the increase in sales promotion is manufacturers

reliance on trade and consumer promotions to gain or maintain competitive

advantage. he markets for many products are mature and stagnant, and it is

increasingly di9cult to boost sales through advertising.


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:etailers may use a promotional deal %ith one company as leverage to seek

an eual or better deal %ith its competitors. Consumer and trade promotions are

easily matched by competitors, and many marketers &nd themselves in a

promotional trap %here they must continue using promotions or be at a competitive

disadvantage.

Clutter

0 promotional o2er in an ad can break through the clutter that is prevalent in

most media today. 0 premium o2er may help attract consumers attention to an ad,

as %ill a contest or s%eepstakes. 3ome studies have sho%n that relationship scores

are higher for print ads %ith coupons than for ads %ithout them. 'o%ever, more

recent studies by 3tarch 7(:0 'ooper suggest that magaine ads %ith coupons do

not generate higher readership. 0 recent study found that promotional messages

are very prevalent in both magaine and ne%spaper ads, particularly the latter.

3%eepstakes, games, and contests %ere prevalent in magaine ads, %hile coupons

and sales o2ers %ere used the most in ne%spaper advertising.

the growth of sales promotion-1 (1)

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