Chapter 18

Sales Promotion

© 2006 Thomson/South-Western

Power Struggles and Sales

Promotion
Sales promotion plays a key strategic role in
the channel of distribution
• Big name brands need to supported with sales promotion and
POP in order to get the support of retailers through self space
allocation.
• The top 10 retailers control 43 percent of all packaged goods
sales so they are in a position to dictate which brands get
how much shelf space.
• Brand marketers are spending heavily--$30 billion a year—on
sales promotion and POP to gain favored retailer treatment
and provide incentives to household consumers and
business buyers.

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Sales Promotion
Using incentives to create a
perception of greater brand value
• Consumer Market
– Induce household consumers to purchase a firm’s
brand
• Trade-Market
– Motivate distributors, wholesalers, and retailers to stock
and feature a brand
• Business Buyer
– Cultivate buyers in large corporations who make
purchase decisions

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 Sales Promotion Examples

Coupons Trade Shows Contests

Gift Cards Allowances Sweepstakes

Incentives Sampling Price-off deals

Premiums Brand placements

Loyalty Programs

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Sales Promotion vs.

Advertising
• Short term demand vs. long term demand
• Encourage brand switching vs. brand loyalty
• Induce trial use vs. encourage repeat purchase
• Promote price vs. promote image
• Immediate results vs. long term effects
• Measurable results vs. difficult to measure

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Importance of Sales
Promotion
• $107 billion in 2003
• Growth rate: 4-8 percent
• Reasons for growth:
– Demand for accountability
– Short-term orientation
– Consumer response to promotions
– Proliferation of brands
– Increased power of retailers
– Media clutter

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 Objectives for Consumer-
Market Sales Promotion
1. Stimulate trial purchase
2. Stimulate repeat purchases
3. Stimulate larger purchases
4. Introduce a new brand
5. Combat or disrupt competitors
6. Contribute to IMC

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Consumer-Market Sales
Promotion Techniques

1. Coupons 2. Price-off deals

3. Premiums 4. Contests/sweeps
5. Samples & trials 6. Phone gift cards
7. Brand placements 8. Rebates
9. Frequency programs
10.Event sponsorship
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Coupons
• Entitles a buyer to a price reduction
for a product or service
• Advantages
– Give a discount to price sensitive
consumer while selling product at full
price to others
– Induce brand switching
– Timing and distribution can be controlled
– Stimulates repeat purchases
– Gets regular users to trade up within a
brand array

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 Coupons
• Disadvantages
– Time of redemption cannot be
controlled
– No way to prevent current customers
from redeeming coupons
– Coupon programs require costly
administration
– Fraud is a serious, chronic problem

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Price-Off Deals
• Offers consumer reduced price at
point of purchase through
specially marked packages
• Advantages
– Controllable by manufacturer
– Can effect positive price comparisons
– Consumers believe it increases value
of a known brand
• Disadvantage
– Retailers believe it creates inventory
and pricing problems

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Premiums and Advertising

Specialties
• Premiums: free or at a reduced
price with another purchase
• Free premiums provide item at
no cost
• Self-liquidating premiums require
consumers to pay most of the
cost of the item
• Advertising specialties:
– A message placed on a free, useful
item

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 Contests and Sweepstakes
• Contests: consumers compete for prizes
based on skill or ability.
• Sweepstakes: winners picked by chance
• Both create excitement and interest
• But . . .
– Legal and regulatory requirements are
complex
– Consumers may focus on the game rather
than the brand
– Difficult to get an IBP message across in a
game

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Samples and Trial Offers

• Sampling: Giving consumer an
opportunity to use a brand on a trial
basis with little or no risk
• Types of sampling
– In-store Newspaper
– Door-to-door On-package
– Mail Mobile
• Trial offers
– Used for more expensive items
– Consumer tries product for a fixed time

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Phone and Gift Cards

• Manufacturers offer either for free
or for purchase debit cards
– with phone time
– or preset spending limits
• Examples include offers from
Lexus, Oldsmobile, and The Gap.

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 Rebates
• Money back offer requiring the buyer
to mail a request for money back from
the manufacturer
• Often tied to multiple purchases
• Many consumers fail to bother sending
the request

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Frequency Programs
• Also known as continuity
programs
• Offers customers
discounts or free products
for repeat patronage
• Common in airline, travel,
and restaurant businesses

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Objectives for Promotions

in the Trade Market
• Objectives:Use a “push” strategy:
Push the product into the
distribution channel to the
consumer
– Obtain initial distribution
– Increase order size
– Encourage cooperation with
consumer market sales promotions
– Increase store traffic

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 Trade-Market Sales
Promotion Techniques
• Incentives: Push money
• Allowances: Merchandise allowances, slotting fees, bill-
back allowances, off-invoice allowances
• Sales Training Programs
• Cooperative (Co-Op) Advertising

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Business Market Sales

Promotion Techniques
• Trade Shows
• Business gifts
• Premiums and advertising specialties
• Trial offers
• Frequency programs

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Trial offers are very

effective in the business
market. Why?

© 2006 Thomson/South-Western

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 Sales Promotion, the
Internet, and New Media

• Sampling removes risk associated with

consumer trial
• Internet firms use incentives to make Web
sites “sticky”
• Internet is used to implement sales
promotions and distribute coupons

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Risks of Sales Promotion

• Create a price orientation

• Borrow from future sales
• Alienate consumers
• Time and expense
• Legal considerations

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P-O-P Advertising
1. Materials used in the retail setting to attract shoppers’
attention to a brand, to convey primary product
benefits, or highlight pricing information.

2. Objectives for Point-of-Purchase Advertising

• Draw consumers’ attention to a brand in the retail
setting.
• Maintain purchase loyalty among brand loyal users.
• Stimulate increased or varied usage of the brand.
• Stimulate trial use by users of competitive brands.

© 2006 Thomson/South-Western

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 P-O-P Advertising and the
Trade and Business Markets
• Product displays and information sheets encourage
retailers to support one distributor or manufacturer’s
brand over another.
• p-o-p promotions can help win precious shelf space
and exposure in a retail setting.
• A p-o-p display should be designed to draw attention
to a brand, increase turnover, and possibly distribute
coupons or sweepstakes entry forms.
• To combat losing business to online shopping,
retailers are trying to enliven the retail environment,
and point-of-purchase displays are one strategy.

© 2006 Thomson/South-Western

Coordination Challenge
• Message coordination
• Media coordination
• Research conclusions
-Short term effects can be dramatic
-Short term effects are often not profitable
-Rare for long-term effects to occur
-Most power effects result from advertising
and sales promotion being used together

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