16

Sales Promotion

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion
A direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.

An extra incentive to buy

A tool to speed up sales

Targeted to different parties

Sales Promotion Vehicles

Consumer-Oriented
Samples

Trade-Oriented
Contests, incentives
Trade allowances Point-of-purchase displays Training programs Trade shows Cooperative advertising

Coupons
Premiums Contests/sweepstakes Refunds/rebates

Bonus Packs
Price-off deals Frequency programs Event marketing

Long-Term Budget Allocations

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 94 95 96 97 '98 99 00 01 02 03 04 05

Consumer Promotions Media Advertising Trade Promotions

% of Total Promotional Dollars, 3-yr Moving Average

Sales Promotion Increases

Growing power of retailers

Reasons

Declining brand loyalty

Increased promotional sensitivity Brand proliferation Fragmentation of consumer markets Short-term focus of marketers

Increased accountability
Competition Clutter

Strategic view on Sales Promotion

Altering long term brand value or brand Franchise Brand Franchise determines how likely consumers are likely to buy a particular product rather than the competitors products , all else (price , distribution) remaining equal Sales Promotion has a residual market value, i.e there may be a long term effect on brand franchise after the promotion is over
Real Price of the product ? Habit forming ?

Objectives of Consumer-Oriented Promotions

To increase consumption of an established brand To obtain trial and purchase To defend (maintain) current customers

Objectives

Enhance IMC efforts and build brand equity

To target a specific segment

Consumer Franchise-Building Promotions

Promotional Objectives
Communicate distinctive brand attributes Develop and reinforce brand identity Build long-term brand preference

Techniques and Practices

Frequency programs encourage repeat purchase Sweepstakes & contests to build equity, increase involvement Premium offers that reinforce the brand image and help build equity

Contests Can Build Brand Equity

The companys promotional agency developed the Do you know a Brawny Man? contest, asking women to send in a photo and a 150-word description explaining why their guy is as rugged as the product

The goals of the contest were to build brand equity by leveraging the Brawny man icon, as well as to gain insight into the modern womans opinions as to what makes a man brawny.

Sweepstakes Contests and sweepstakes promotions create excitement by promising something for nothing Enhance engagement

Contests & Sweepstakes Contests and sweepstakes can draw attention to a brand like no other sales promotions technique. In a contest has consumers compete for prizes based on skill or ability. Winners in a contest are determined by a panel of judges or based on which contestant comes closest to a predetermined criterion for the contest.

Contests /sweepstakes Contests were very often used earlier where people has to write slogans, poems, stories etc. generally I like the product because and the best ones won prizes. But off lately, contests are becoming less and sweepstakes increasing. People are more willing to play on luck rather than participate by showing their abilities.

Sweepstakes /contests A sweepstake is a promotion in which winners are determined purely by chance. Consumers need only to enter their names in the sweepstakes as a criterion for winning. Some popular types of sweepstakes also use scratch-off cards.

Contest & sweepstakes Britannia khao world cup jao campaign has taken the market by a swing. Under the offer you collect points available on Britannia biscuit packets and exchange 100 points for a scratch card, which has various gifts and the 100 world cup tickets.

Premiums

An offer of an item, merchandise, or service, free or at a low cost, that is an extra incentive for customers

Types of Premiums
Self-liquidating: consumer required to pay some or all of the cost of the premium

Free: Only requires purchase of the product

Premiums
A premium is a tangible reward for a particular act , usually purchasing a product or visiting a point of purchase Premiums are either free or low price Kinder joy premium Mcdonalds- Happy Meal Instore ) retail site test drive .. in pack ( factory) , on pack ( placed on outside of package

Container premium Package is the premium nestle ice tea Shoddy premium ?

Premiums
Instore given at the retail site test drive in pack ( factory)

on pack ( placed on outside of package

Container premium Package is the premium nestle ice tea

Specialites Brand on something that is always a reminder Calendars , pens , pencils

Nonfranchise-Building Promotions

Objectives Accelerate the purchase decision process Generate an immediate sales increase

Limitations Do not identify unique brand features Do not contribute to brand identity or image

Price-off deals, bonus packs, and rebates are examples of nonFranchise building sales promotion techniques.

Nonfranchise-Building Promotions
May Include . . .
Price-off deals

Bonus packs

Rebates or refunds

Shortcomings
Customers may buy price rather than brand equity

Trade promotions benefits may not reach customers

If they do, they may lead only to price reductions

Price Deals
A temporary price reduction or a sale price Rs X off : reduction in the normal price charged Price Pack Deals :Provides consumer with something extra through the package itself - Example : Kellogs with a goody - Bonus Pack : Contain additional amounts of the product free when consumers purchase standard size - Banded Packs : More units of a product sold at a lower price than if they were brought at regular single price - Eg : pack of 3 bars of soap - Pack of 6 cold drinks

 Colgate fresh energy ice blue gel (Colgate India) 50 gm pack, Rs. 5.50 off on normal price, now available at Rs. 12.50 only.

Price off deals Price discounts are communicated through POP advertising, window displays, sales people, advertising in newspapers, magazines and TV ads. Such promotions work very well in gaining the attention of consumers, particularly at the point of purchase among similar brands and may also encourage unplanned or impulse buying.

Bonus Pack Godrej Colour Gloss triple action shampoo, offers 20% extra free. 100ml +20ml. Sunsilk shampoo (HLL) 400ml bottle gives 33% more free. Dettol shaving cream get 40% extra free. Bisleri 20% extra free (Bada Bottle, Same price)

Banded pack

Refunds And Rebates Refund is the repayment of total money paid for purchase Refund offers seems to work very well in guaranteeing the trial of a product or service since there is no risk involved for the customer because of the promise of total refund of the purchase amount.

 Refunds and Rebates play an important role in the consumer durable segment because the product price is reduced to a great extent because of the rebate offer. Example: Taj mahal Tea guaranteed its taste by openly telling the public of its offer that agar chai pasand nahi aaie, toh pure paise vaapas!

Price offs Price off should be significant Should be visible on the pack Loyal users will respond as they are already using Switchers -

Objectives of Consumer-Oriented Promotions

To increase consumption of an established brand To defend (maintain) current customers

To obtain trial and purchase

Objectives

Enhance IMC efforts and build brand equity

To target a specific segment

Sampling
Sure way of putting the product in the consumers hand Achieve Trial and retrial Very useful when product has a demonstrable difference or advantage over competition Or where benefit cannot be realised over advertising , and needs to be demonstrated

Sampling

Sampling Works Best When

The products are of relatively low unit value

The product can be broken into a small piece or size that reflects the full features and benefits

The purchase cycle is relatively short

Sampling Extremely useful when the consumers are loyal to competitor product may be the only way to induce product trial Low brand awareness or low market share Helps to build long term brand value

Low side Extremely expensive and cannot be run for long

Sampling Methods

Door-to-door

Methods

Direct mail In-store On package Event

Newspaper/magazine insert
Internet sites

Distributing Samples With Newspapers

Armor All Uses On-Package Samples

Coupons A coupon entitles a buyer to a designated reduction in price for a product or service. Coupons are the oldest and most widely used form of sales promotions. Coupons bear an expiry date and cannot be redeemed after the cut off date.

Coupons The main Advantages of coupons are: 1.Encourage brand switching 2.Stimulate trial for a product 3.Take off the attention from price Fair and Lovely dark circle removal cream to create more product trials has coupons in the newspapers and magazines which avail you of Rs.10/off on a 40 gm pack.

Pros and Cons of Coupons

Advantages
Appeals to price sensitive consumer Can offer price break without retailers co-op Effective way to induce trial of products

Disadvantages
Hard to tell how many consumers use them and when Often used by loyal consumers who may purchase anyway Declining redemption rates and high costs of couponing Misredemption and fraud

Can be way to defend market share and encourage repurchase

Coupons are Available Electronically

More Consumer-Oriented Promotions

Contests and sweestakes Refunds and rebates

Bonus packs
Loyalty programs Price-off Deals Event marketing

Airline Miles are a Popular Incentive : Continuity Programs

Trade Oriented Promotions

Objectives

Obtain distribution for new products

Maintain support for established brands Encourage display of products Build retail inventories

Types of Trade Oriented Promotions

Contests and incentives Types

Co-op Advertising
Trade allowances

POP displays
Sales training

Trade shows

Buying allowance A discount on the purchase of a brand at a certain time. on a specifiied quantity Objective
Retain retail distribution Or give a lower shelf price to the consumer Ward off competition or load the channel prior to an anticipated competitive trade deal Retailer may absorb the discount !! least action at consumer level

Off invoice Allowance Off invoice discount normally refers to the price reduction for a certain period of time , irrespective of quantity Allowance is deducted directly from the invoice period : July 1 to Aug 15 Drawback : Retailer may stock pile and sell later at greater margins , old stocks in market .

Free Goods In free goods offer , the manufacturer offers an additional free amount of the product on purchase of a minimum quantity 10 + 1 free Usually for a limited period of time Manufacturers like it only cost is the cost of the free good offered

Cash Rebate
The manufacturers agrees to give the retailer a cash discount of some sort provided the retailer does a mutually agreed upon task .
Stock the product Increase shelf space Purchase or display the full range

Proof of task is required for payment Sometimes retailers may be compensated by a rebate on purchases made

Trade Promotions Help to create a spike in sales Most useful when infrequent and run for a short period of time Works well when product being promoted has high holding costs for retailer chances of being passed on to the consumer . Eg cold drinks

Trade Promotions Motivational /Incentives Dealer conferences /sales meetings Contests Trade shows Supportive POP displays

Sales Force promotion Where the rubber meets the road .. Sales Promotion activities directed at firms sales force and is intended to motivate the salespeople to strive for optimum sales goals . Short term goals
New dealers Promoting seasonal or focus products Increase order size

Supportive : Sales force promotion Trainings : Sales meeting : Local /international Provide supportive material for sales

Motivational Sales Force Promotion Objective

Improve work habits Reduce sellings costs Offset competitive promotions Increase total sales volune

Steps for designing incentives 1 Determine the objectives of the incentive program Overarching is usually to get more sales effort from everyone Linked to past performance & Future potential Quota is are very important the wisdom of setting quotas may determine the success of the program

Steps for designing incentives Step 2 Communicate to the sales force what they are expected to achieve and how they will achieve it
A fixed number of awards for top volume Unit sales on absolute basis A fixed number of awards Performance in relation to Quota Unlimited awards based on percentage of quota performance

Steps for designing incentives Step 3 . Deciding on which sales force should participate Account type Current achievement levels is it relaistic for all ?

Steps for designing incentives Step 4 . Time Decisions Step 5 : Type of awards or incentives
Travel White goods Cash Honor ASPIRATIONAL

Steps for designing incentives Step 6 : Select a theme The incentive has to be sold Spark their imagination A theme provides a frame for the entire picture of the incentive pogram Example : RRR Rejoice, reward , revital Circle of excellence , Hundred point club

Coordinating Sales, Advertising, IMC Tools

Budget allocation

Coordination of themes

Media support and timing

Problems With Sales Promotion

Aspects of Consumer Promotions

Economic

Informative

Affective