Sales Promotion: Personal Selling Advertising

Sales Promotion

PERSONAL SELLING

ADVERTISING

PUBLICITY

SALES PROMOTION

Sales Promotion Importance Growth in United States • Exceeds $250 billion dollars a year • Increasing percentage of promotional dollars • Consumer goods companies spend more on sales promotions than advertising

Sales Promotion Definition: any activity or material used as a direct inducement to purchase Objective: Bolster/complement other

promotional mix elements during a specific time period

Targeted toward: • Sales force • Wholesalers and retailers • Consumers

Sales Promotion Methods for Consumers Product sampling, demonstrations Coupons, refunds Rebates, cents-offContests, games & sweepstakes

Sales Promotion Methods for Consumers Premiums Multiple purchase offers, Frequent-user incentives P-O-P material Product placements/tie-ins

Classifying Types of Sales Promotion Promotional pricing • • • •

Price reductions Free goods Tied offers Money off next purchase • Loss leader pricing • Cheap credit

Non-price promotions

• • • • •

Sampling

• Most effective in Contests the early stages of a new product launch Free gifts Self-supporting offers (#1 use for coupons) • Important for food Multi-brand promos s products Guarantees and added • Very expensive services

Rebates: A Consumer Information Source • Buyers fill out rebate forms with names, addresses and household data about customers - directly targets price cuts to customers - 5-10% are redeemed (A Phantom discount)

Pepsi offers a $5 rebate on the Home Alone video

Rebates are often effective at changing purchase probabilities, even for big-ticket items

Coupons, too, can be effective at getting consumers to purchase specific products

Number of Coupons Redeemed Per (International) Household in 1992 Europeans lag in coupon redemption

90

80

•

70

60

50

40

30

20

10

0 Series1

U.S.

Canada

Belgium

U.K

Italy

Spain

France

80.9

32.7

18.5

15.9

4.3

1.5

1.4

USA Coupon Redemption Distribution

1990 1992 1993 1994 1995 279 310 300 310 292

Redeemed

7.1% 7.7

6.8

6.2

5.8%

Snapple ‘Yard Sale’ Refreshes Sales Drive • “The idea is about brand loyalty, getting more people to buy bottles, collect caps and buy stuff at the Snappleton yard sale, an online town on Snapple.com” Ms. Bernstein, Senior V.P. • • • •

Involvement: Collecting bottle caps. Silver cap (16 oz.)- ice tea products Yellow caps (Lemonade products) White caps (20-32 oz. bottles.) Source: Direct Mktg News, 2004

Snappleton ‘Yard Sale’ • Unique merchandise like Quicksilver apparel, Lite-Bright, Nintendo Game Boy Advance and Piaggio Scooter. • Objectives: Increase users aged -15 to 24. • Use the internet to pique curiosity in a competitive U.S. beverage market, (Coca-Cola Co. and Pepsi Co.)

• “Snapple operates off a really low budget , doing more with less.”

Sales Promotion Methods for the Trade • • • •

Trade shows Contests, free merchandise Display equipment, P-O-P materials Cooperative advertising & promotions – Vertical - channel members – Horizontal - group of retailers

• Allowances (buying vol., buy-back, scan-back, merchandise) • Premium or push money, slotting allowances

Trade Shows Selling objectives Non-selling objectives Current customers

Maintain relationship Transmit messages to key accounts Remedy problems Add-on sales

Maintain image Test products Gather competitive intelligence Widen exposure

Potential customers

Contact prospects Determine needs Transmit messages Commit to call back or sale

Contact prospects Foster image building Test products Gather competitive intelligence

Proportion of Promotional Expenditures 60% 50% 40% 30% 20% 10% 0%

1985

1987

1989

Trade sales promotion Advertising

1991

1993

1995

Consumer sales promotion

Sales Promotion, Pro and Con •Advantages:

•Disadvantages:

•Motivation method for special efforts •Short-term sales increase •Defined target audience •Defined role/objectives •Indirect roles (e.g., wider distribution)

•Only short-term •Hidden costs •Confusion •Price cutting -Brand image •Postponement effect •Significant government regulation •Lack of effectiveness sometimes (learning effect)

A Benefit Congruency Framework of Sales Promotion Effectiveness Are monetary savings the only explanation for consumer response to sales promotions? If not, how do the different consumer benefits of sales promotion influence its effectiveness? Six Benefits Savings Quality Convenience Value expression Exploration Entertainment JrlMktg,Oct.2000

Positioning Map

Sales Promotions Benefit Matrix High

*

Free Gifts

Hedonic

Free Product Offers * * Sweepstakes

* Coupons

* *Price Reductions Rebates

Low Low

Utilitarian

High

Study #4: Design and Procedure 2 P ro d u c ts

1 H e d o n ic

No P ro m o tio n

M o n e ta ry L /E B ra n d

1 U tilita ria n

N o n m o n e ta ry L /E B ra n d

M o n e ta ry H /E B ra n d

N o n m o n e ta ry H /E B ra n d

Study #4, Conclusions 1. Monetary saving is not the only consumer benefit 2. Consumers distinguish six benefits 3. Six benefits grouped between Utilitarian and Hedonic 4. All six (except quality) are significant predictors of overall evaluation 5. Monetary promos provide more Utilitarian benefits than Hedonic benefits

Study #5: Benefit Congruency Effect Design and Procedure 2 H ig h E n d P r o d u c t s 1 H e d o n ic a n d 1 U t ilit a r ia n N o n m o n e ta ry P r o m o t io n s 2 F r e e G if t s

2 S w e e p s ta k e s

M o n e ta ry P r o m o t io n s 2 Coupons

2 R e b a te s

Study #5, Conclusions 1.Sales promo’s provide benefits beyond monetary savings 2.Nonmonetary promos provide more Hedonic benefits 3.For High End brands, sales promos are more effective 4.Monetary promos can destroy market share when offered with incongruent high equity hedonic brands competing against low-priced brands

Discussion of Studies 4 and 5  Proof of congruency between needs of products and monetary promotions  Negative effects of some promotion were due to lack of relevance

Role of The Promotion Mix • Promotion is an organization’s unique set of communications (stimuli) designed to influence (inform, persuade & remind) selected target audiences into desirable responses. • Who says what to whom, in what setting , by which channels, with what purposes. • Promotion facilitates (efficient) exchange