Professor Chip Besio

Cox School of Business

Southern Methodist
University

What Is Sales
Promotion tool that offers short-term
Promotion?
incentives to encourage customers to

purchase, resulting in immediate

increases in sales of a product or service.

Reasons for rapid growth in sales

promotion:

Product managers are facing more pressure

to increase current sales,

Companies face more competition in mature
markets,
Advertising efficiency has declined,
Consumers have become more deal oriented.

How Important Are

Promotional Sales?
For a traditional high-low

retailer, the sales from items in

the ad represent approximately
25% of weekly grocery sales
100 - 200 items out of @ 40,000
are therefore responsible for
one-quarter of a stores volume
Source: Center for Retail
Management, Northwestern
University

Types of Sales
Promotions
Consumer Promotions
Manufacturer to consumer

Trade Promotions
Manufacturer to retailer/wholesaler
Retailer Promotions
Retailer to consumer

Business Promotions
Manufacturer to business buyer

How Significant Are

Trade Promotions?

Total Advertising and Promotion Budget

% by Spending type -2008

Source: A.C. Nielsen

A comparison of push and pull promotional

strategies

Effects of Sales
Promotion
on
Expand category volume
Consumer
Behavior
Cause brand switching
Cannibalization

Change purchase timing

Cause stockpiling

Sales promotions can be used to achieve many objectives

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Coupons

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Deals

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Premiums

Self-Liquidating: Free Toy

in Happy Meal

Deal-Prone & Value Seeking Consumers

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Contests

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Sweepstakes
Value-Based Prizes
Experience-Based Prizes

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Samples

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Loyalty Programs

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Point-of-Purchase Displays

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Rebates

SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Product Placement

SALES PROMOTION
TRADE-ORIENTED SALES PROMOTION

Allowances and Discounts

Merchandise Allowance
Case Allowance
Free Goods
Finance Allowance
Floor Stock Protection
Freight Allowance

Display Allowance

SALES PROMOTION
TRADE-ORIENTED SALES PROMOTION

Cooperative Advertising

Training of Distributors Sales Forces

Buy-Back Guarantees
Push Money Spiffs

Contests

Retailer Promotions
Short-Term Incentives by the Retailer that

Encourage Purchase of a Product or Service

Retailer-Promotion
Objectives
Generate
GenerateStore
StoreTraffic
Traffic
Improve
Improvethe
theRetailers
RetailersPrice
Price
Image
Image
Generate
GenerateProfits
Profitsfrom
from
Consumers
and
Consumers and
Manufacturers
Manufacturers
Reinforce
Reinforcethe
theStores
Stores
Positioning
and
Positioning andImage
Image

Retailer-Promotion
Tools
Price-Cuts
Price-Cuts

Free
FreeGoods
Goods

Displays
Displays

Retailer
Coupons

Feature
Feature
Advertising
Advertising

Contests/
Contests/
Premiums
Premiums

Business Promotions
Short-Term Incentives That are

Directed to Industrial Customers

Business-Promotion
Objectives

Business-Promotion
Tools

Generate
GenerateBusiness
BusinessLeads
Leads

Conventions
Conventions

Stimulate
StimulatePurchases
Purchases

Trade
TradeShows
Shows

Reward
RewardCustomers
Customers

Sales
SalesContests
Contests

Motivate
MotivateSalespeople
Salespeople

Source: Prentice Hall

Key Issues in Executing a

SalesSizePromotion
of the incentive (depth of discount)
Size of the incentive (depth of discount)
What
Whatare
arethe
theconditions
conditionsfor
for
participation?
participation?
Structure
Structureand
anddistribution
distributionof
ofthe
the
promotion
promotionprogram
program
Length
Lengthof
ofthe
theprogram
program(limited
(limitedtime)
time)
How
Howto
toevaluate
evaluatesuccess
successof
ofthe
the
program
program
Source: Adapted from Prentice Hall