Sales Promotion

The Marketers Dilemma

Sales Promotion Defined:

n A direct inducement that offers extra
value or incentive for the product to the
salesforce, distributors, or the ultimate
consumer with the primary objective of
creating "immediate" sales
– ExtraInducement Beyond Basic Offer
– Acceleration Tool
– Targeted to Different Parties

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The Tug-of-War
n Push Strategies n Pull Strategies
– Trade – Consumer
Promotions Promotions

Shifting Promotional Mix

100%
90%
80%
70%
Advertising 60%
Consumer Promotion Percent 50%
Trade Promotion 40%
30%
20%
10%
0%
1981
1983
1985
1987
1989
1991
1993
1995
1997

Year

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 Why the Shift to Sales
Promotion?
nRetailer Power nBrand Proliferation
nDeclining Brand nShort-Term Focus
Loyalty nIncreased
nIncreased Promotion Accountability
Sensitivity nCompetition
nFragmentation of nClutter
Consumer Market nSplintering of Mass
Media

Advertising Versus Sales

Promotion
n Advertising n Sales Promotion
Dominates Dominates
– More Profitable – LessProfitable
Brands Brands
– Premium Priced – Low- Med. Priced
Brands Brands
– High Growth – Low Growth Brands
Brands

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Types of Sales Promotion
Sales Promotion

Trade-Oriented Promotions

Trade Allowances
Point-of-Purchase Displays
Contests and Dealer Incentives
Training Programs
Trade Shows
Cooperative Advertising
Consumer-Oriented Promotions

Samples
Coupons
Premiums
Refunds/rebates
Contests/Sweepstakes
Bonus Packs
Price-offs
Event Sponsorship

Trade-Oriented Promotion
Objectives
lMaintain trade support for established
or new brands

lEncourage retailers/wholesellers to
display and promote brand

lBuild retailer/wholeseller inventories

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Trade-Oriented Sales Promotions
n Trade Allowances
– Buying Allowances
– Slotting Allowances (entry fees, street
money, stock allowance)
èFacings

– Exit Fees (deslotting allowances, failure

fees)
– Promotional Allowances
– Displays/P-O-P Allowances

Trade-Oriented Sales Promotions

n Cooperative Advertising & Vendor
Support Programs (VSPs)
– Cooperative Advertising
èVertical Coops

– Vendor Support Programs

èHorizontal Coops

èIngrediant-sponsored Coops

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Trade-Oriented Sales Promotions
n Trade Contests & Incentives

– Trade Contests: sales goals

– Trade Incentives: tasks

– Push Money (spiffs): units sold

Reseller Salesperson Sales

Promotion
n Product or Program Sales
– Selling a specified number of cases or number of units
– Selling a specified number of promo. programs
n New Account/Store Placements
– Number of new accounts opened
– Number of new accounts ordering a min. number of cases
or units
– Promo. programs placed in new accounts
n Merchandising Efforts
– Est. promotional programs (themes, etc.)
– Placement of display racks, counter displays, etc.

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Trade-Oriented Sales Promotions
n Training Programs/Efforts
– Face-to-face
– Printed literature
– Videos

Trade-Oriented Sales Promotions

n Trade Shows
– Sales
Objectives
– Communication Objectives
n Specialty Advertising
"useful articles to carry the
advertiser's identification and
message to its target market"
– Unstructured/Random Dist.
– Structured Dist.

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Consumer-Oriented Promotion
Objectives
lObtain trial and/or repurchase
lIncreasing consumption of an established
brand
lDefending current users (franchise
holding)
lEnhancing advertising & other marketing
efforts

Consumer Promotions used by

Large & Small Firms
Couponing - direct 100%
100%
Cents-off 85%
89%
Refunds/Rebates 75%
78%
Premiums 85%
59%
Coop. Coupons 80%
56%
Sample New Brand 80%
52%
Sweepstakes 85%
48%
Couponing - Elec. 65%
37%
Pre-Priced Shippers 45%
44%
Sample Est. Bran 55%
33%
Contests 55%
30%

0% 20% 40% 60% 80% 100%

Large Firms Small Firms

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Sampling: actual or trial sized
n Direct Mail
n Door-to-door

n Flat samples in print media

n In- or On-package of another product

n High traffic locations

n In store

n Sample Packs (co-op package dist.)

Guidelines for Sampling

n Superior brand (relative advantage)
n Difficult to communicate features

n Budget to generate quick trial

n Low unit value

n Divisible

n Short purchase cycle

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Couponing
n Certificate providing consumer with
cost saving (cents-off) upon purchase
and redemption
– 95% of all consumers have used coupons
– 65% - 85% (avg. 70%) of redemptions are
current customers
– Face value (value to consumer) averages
about 50¢; Retailers gets 8¢ on average for
redeeming coupon; Typical cost to
manufacture is 97¢

Couponing Alternatives
n Point-of-Purchase Coupons
– InstantCoupons (25% redemption)
– Shelf-delivered Coupons (24% redemption)
– Scanner-delivered Coupons (14%
redemption)
n Mail-delivered Coupons
– Co-op mailings $10 - $15 CPM
– Solo $100 CPM

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Couponing Alternatives
n Media-Delivered Coupons
– ROP (run-of-paper): Newspapers or
Magazines
– Free Standing Inserts (FSI)
– CPM approximately 50% less than mail
n In- or On- Package
– Bounce-Back Coupons
– Cross-ruffing Coupons

Coupon Redemption
Consumer

Retailer

Clearinghouse

Redemption Center

Manufacturer

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Factors Affecting Coupon
Redemption
n Method of Dist. n Area of country
n Product class size n Competitive activity
n Audience Reached n Size of Coupon Drop
n Brand's Mkt. Share n Size of purchase required
n Degree of Loyalty n Level of ad. support
n Retail Availability n Consumer Product Usage
n Face Value n Period of Dist.
n New or Old Brand n Growth Trend
n Coupon Design n Season
n Discount offered n Demographics
n Misredemption

Coupon Redemption Rates

D. Paper ROP Solo 2%

D. Paper Co-op 1%
Sun. Paper FSI 3%
Sun. Supple. 2%
Mag. On Page 1%
Mag. Insert 2%
Direct Mail 5%
Elec. Dispensed 10%
Handouts 4%
Reg. In-pack 13%
Reg. On-pack 11%
In-pack Cross Ruff 3%
On-Pack Cross Ruff 4%
Instant On-Pack 35%

0% 5% 10% 15% 20% 25% 30% 35% 40%

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Coupon Misredemption
n Misredemption runs from 15% - 40%
n Managers typically allocate 20% - 25%

n Gang-Cutting, Gang-Tearing, Clip-house

n Bankchecks

n Copy-stop

Premiums
n Articles of merchandise or services
offered by manufacturer to induce action
on the part of salesforce, trade
representatives, or consumers

n Types
– Free-in-the-mail Premiums (2% - 4%)
– Self-liquidating Premiums (.1%)
– In-, On-, or Near-Pack Premiums

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Price-Off Promotions (Deals)
lReward Users
lGet users to purchase increased quantity
lEstablish repeat purchase
lEnsure promotions reach consumers
lObtain off-shelf display (w/allowances)
lHelp salesforce to obtain retailer support

FTC on Price-off Deals

1. Brand must be in distribution with established
prices
2. Limited to 3 price-off deals per year per brand
size
3. 30 days must occur between price-off deals where
brand is sold at regular price
4. No more than 50% of volume in 12 months can be
sold at price-off deals
5. Must include display to announce price-off deal
6. Dealer must show regular price in addition to
price-off label

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Refunds/Rebates
n Cash discounts for proof of purchase
– Immediate
– Delayed
n Typically used for franchise holding but
sometimes for new customers.

Sweepstakes and Contests

n Sweepstakes
– Purely
by chance
èProof of purchase CAN NOT be required

èPreferred over contests: inexpensive, easy

execution, accomplish variety of objectives

when used with other promotion
n Contests
– Solve
contest problem
èMAY require proof of purchase

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Event Sponsorship
n IRS is reviewing tax status for corporate
sponsorship of nonprofit events &
organizations
n Approximately $3.3 billion in 1992

Event Sponsorship
Ent. Tours
10.0%
Festivals,
Fairs
8.6%
Cause mkt.
8.0%

Sports Arts/Cultural
67.3% 6.1%

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Other Sales Promotion Terms
n Overlay
– Two or more sales promotion techniques
used in combination (combination
programs)
n Tie-Ins
– Simultaneous promotion of multiple brands
in a single promotion effort
èIntra-Company Pooling or Tie-Ins

èInter-Company Pooling or Tie-Ins

Sales Promotion: The Marketers

Dilemma

OurFirm
All Other Firms Cut back Maintain
promotions Promotions
Cut back Higher Profits Market share goes
Promotions for all to our firm

Maintain Market share goes Market share stays

Promotions to all constant; profits
other firms stay low

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