Major Decisions

In using sales promotion, a company must establish its objectives, select the tools, develop the program, implement and control it, and evaluate the results.

Establishing Objectives Sales promotion objectives derive from communication objectives, which derive from basic marketing objectives for the product. For consumers, objectives include encouraging more frequent purchases or purchase of larger-sized units among users, building trial among nonusers, and attracting switchers away from competitors’ brands. Ideally, consumer promotions have short-run sales impact and long-run brand equity effects.21 For retailers, objectives include persuading retailers to carry new items and more inventory, encouraging off-season buying, encouraging stocking of related items, offsetting competitive promotions, building brand loyalty, and gaining entry into new retail outlets. For the sales force, objectives of promotion include encouraging support of a new product or model, encouraging more prospecting, and stimulating off-season sales.

Selecting Consumer Promotion Tools The main consumer promotion tools are summarized in Table 15.2. Manufacturer promotions in the auto industry, for instance, are rebates, gifts to motivate test drives and purchases, and high-value trade-in credit. Retailer promotions include price cuts, feature advertising, retailer coupons, and retailer contests or premiums.22

Selecting Trade Promotion Tools Manufacturers use a number of trade promotion tools (see Table 15.3).23 They award money to the trade (1) to persuade the retailer or wholesaler to carry the brand; (2) to persuade the retailer or wholesaler to carry more units than the normal amount; (3) to induce retailers to promote the brand by featuring, display, and price reductions; and (4) to stimulate retailers and their sales clerks to push the product.

Selecting Business and Sales Force Promotion Tools Companies spend billions of dollars on business and sales force promotion tools (see Table 15.4 on page 268) to gather leads, impress and reward customers, and motivate the sales force.24 They typically develop budgets for tools that remain fairly constant from year to year. For many new businesses that want to make a splash to a targeted audience, especially in the B-to-B world, trade shows are an important tool, but the cost per contact is the highest of all communication options.

TABLE 15.2 Major Consumer Promotion Tools

Samples: Offer of a free amount of a product or service delivered door to door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer.

Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific product: mailed, enclosed in other products or attached to them, or inserted in magazine and newspaper ads.

Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at the retail shop: Consumer sends a specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by mail.

Price Packs (cents-off deals): Offers to consumers of savings off the regular price of a product, flagged on the label or package. A reduced-price pack is a single package sold at a reduced price (such as two for the price of one). A banded pack is two related products banded together (such as a toothbrush and toothpaste).

Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. A with-packpremium accompanies the product inside or on the package. A free in-the-mailpremium is mailed to consumers who send in a proof of purchase. A self-liquidating premium is sold below its normal retail price to consumers who request it.

Frequency Programs: Programs providing rewards related to the consumer’s frequency and intensity in purchasing the company’s products or services.

Prizes (contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips, or merchandise as a result of purchasing something. A contest calls for consumers to submit an entry to be examined by a panel of judges who will select the best entries. A sweepstakes asks consumers to submit their names in a drawing. A game presents consumers with something every time they buy—bingo numbers, missing letters—which might help them win a prize.

Patronage awards: Values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors.

Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they will buy.

Product Warranties: Explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer’s money during a specified period.

Tie-in Promotions: Two or more brands or companies team up on coupons, refunds, and contests to increase pulling power.

Cross-Promotions: Using one brand to advertise another noncompeting brand.

Point-of-Purchase (P-O-P) Displays and Demonstrations: P-O-P displays and demonstrations that take place at the point of purchase or sale.

Developing the Program In deciding to use a particular incentive, marketers must determine the size of the incentive, the conditions for participation, the duration of the promotion, the distribution vehicle, the timing, and the total sales promotion budget. Next, the marketing manager establishes the timing of the promotion and, finally, the total sales promotion budget. The cost of a particular promotion consists of the administrative cost (printing, mailing, and promoting the deal) and the incentive cost (cost of premium or cents-off, including redemption costs),

TABLE 15.3 Major Trade Promotion Tools

Price-Off (off-invoice or off-list): A straight discount off the list price on each case purchased during a stated time period.

allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way.

An advertising allowance compensates retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special product display.

Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size.

TABLE 15.4 Major Business and Sales Force Promotion Tools

Trade Shows and Conventions: Industry associations organize annual trade shows and conventions. Participating vendors can generate new sales leads, maintain customer contacts, introduce new products, meet new customers, sell more to present customers, and educate customers with publications, videos, and other audiovisual materials.

Sales Contests: A sales contest aims at inducing the sales force or dealers to increase sales results over a stated period, with prizes (money, trips, gifts, or points) going to those who succeed.

Specialty advertising: Specialty advertising consists of useful, low-cost items bearing the company’s name and address, and sometimes an advertising message, that salespeople give to prospects and customers. Common items are ballpoint pens, calendars, key chains, flashlights, tote bags, and memo pads.

multiplied by the expected number of units sold. The cost of a coupon deal recognizes that only a fraction of consumers will redeem the coupons.

Implementing and Evaluating the Program For each promotion, implementation and control plans must cover lead time (for preparation before launch) and sell-in time (beginning at launch and ending when 95 percent of the deal merchandise is in consumers’ hands). Manufacturers can evaluate the program using sales data (including scanner data showing who bought and later behavior toward the brand), consumer surveys (about recall, attitudes, and behavior), and experiments (varying incentive value, duration, or distribution media).

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