SALES PROMOTION MKT 3310 Lecture 9, 2012 1 Lecture objective By the end of today’s class you should: • understand the role of sales promotion in a company’s integrated marketing communications program. • understand the different types of consumer and trade-oriented sales promotion tools, and the reasons for using them. 2 Lecture format • Defining sales promotion, types of sales promotion • Strengths and weaknesses of sales promotion • Exercise •Sales promotion and consumer behavior •Sales promotion aimed at distributors •Key learning points from the lecture 3
DEFINING 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 4 Types of Sales Promotion Consumer-Oriented (i. e. pull) Distributor-Oriented (i. e. push) Samples Coupons Premiums (i. e. free gifts) Premiums Contests/sweepstakes Refunds/rebates Sales contests Contests, dealer incentives Trade allowances Point-of-purchase displays Training programs
Trade shows Trade shows Cooperative advertising Bonus packs Packs Price-off deals Frequency programs Loyalty programs Demonstrations 5 6 Sales Promotion Strengths – gives an extra incentive to act, because it changes the price/value relationship – gives a sense of immediacy to act – encourages a behavioral response – builds databases – motivates trade support – produces measurable results, at least in terms of behavioral response 7 Sales Promotion Weaknesses – clutter – if a price cut is used, consumers may expect it for the long term i. e. ome consumers won’t buy except on price deal – forward buying/cheating by the trade – fraudulent coupon redemption – sometimes it is difficult to get trade cooperation to support the sales promotion campaign – damage brand image – it might take time to administer and manage the campaign – some consumers just want the free gift or benefit, and not the product itself (see contestalley. com, freebiedot. com, promomagazine. com) – for products with a long purchase cycle (e. g cable TV), giving a special deal to new customers might make existing customers and past customers angry 8
Exercise (20 minutes) What sales promotion vehicles would you recommend to: 1) BU’s Pacific Coffee (to attract more students and staff to go their at off-peak times) 2) BU’s Chinese medicine clinic (to attract more students and staff to go there) Be creative! 9 Looking specifically at sales promotion targeted at consumers (pull)……….. 10 Sales promotion can • invigorate/help sales of a mature brand • facilitate introduction of a new brand • increase shelf space • neutralize ; preempt competition • stimulate salesforce enthusiasm, and, most importantly… • change consumer behavior 11
Sales promotion can not • compensate for a poorly trained salesforce or lack of advertising • give consumers a long-term reason to continue to buy the product • permanently stop an established brand’s declining sales • change an unacceptable product into an acceptable one 12 There has been a growth of sales promotion targeted at consumers because: • increase in (sales) promotional sensitivity of consumers • many many brands (no loyalty) • marketing managers evaluated on short term results • there is renewed emphasis on marketing productivity (which is often measured in terms of sales) • advertising clutter and advertising avoidance 13
As mentioned earlier, sales promotion can help to change consumer behavior. For instance, sales promotion may encourage consumers to: • experience trial • switch brands • stockpile/load-up • accelerate their purchase process • spend more than they normally would These are all behavioral responses. 14
Looking at the next slide, research of consumers in Hong Kong suggests that: • “Buy one get one free”, and price discounts, are the most effective tools to induce purchase acceleration, stock piling, and spending more • In store demonstrations are mainly effective in encouraging product trial • Coupons are mainly effective in inducing stock piling and purchase acceleration • Sweepstakes and games are relatively ineffective in generating any change in consumer behavior. The lesson: know your objective before the choose a sales promotion technique! 5 Price Discount In-store Demonstration Coupons Sweepstakes and Games “Buy-one-getone-free” Brand switching Purchase acceleration 3. 922a 5. 041a 3. 712a 3. 612c 3. 253b 4. 251b 2. 682c 2. 951d 3. 893a 4. 861a Stockpiling Product trial Spend more Total Average 5. 011a 4. 082a 4. 991a 23. 04 4. 61 3. 483c 4. 051a 3. 682d 18. 53 3. 71 4. 221b 3. 492b 4. 211c 19. 42 3. 88 3. 041d 2. 762c 3. 061e 14. 49 2. 90 5. 011a 3. 694b 4. 582b 22. 03 4. 41 Note 1: 1= strongly disagree and 7 = strongly agree Note 2: Superscripts denote the ranking of the means.
Numeric superscripts represent the result of vertical comparison of the buying behaviors induced by one particular promotional tool, with 1 denoting the most effective. No significant difference was found between behaviors if their numeric superscripts are the same. Alphabetic superscripts represent the results of a horizontal comparison of the effectiveness of the five promotional tools in inducing one particular buying behavior, with “a” denoting the most effective. No significant difference was found between tools with the same alphabetic superscript. 6 Source: Shi, Prendergast, and Cheung, International Journal of Advertising. 24 (4). For years sales promotion was considered to be suitable for achieving behavioral objectives only, rather than communication objectives (such as cognition and affection). But now marketers are recognizing the image-building potential of sales promotion. Academics have yet to catch-up with this reality, and still primarily focus their research on behavioral objectives. 17 Behavioral (intention to purchase/purchase
Cognitive (awareness, knowledge) Affective (liking, preference) 18 Looking specifically at sales promotion targeted at distributors (push).. …… 19 Objectives of distributor-oriented sales promotion • make the job easier for salespeople • encourage new distributors to handle an existing product • encourage existing distributors to handle a new product • offset competitive promotions • maintain distributor support over time (loyalty) • encourage distributors to hold more stock (loading) RETAILERS!
WIN A CHANCE TO GO TO MIAMI! 20 KEY LEARNING POINTS FROM THE LECTURE • Sales promotion is a member of the IMC mix, although it tends to be viewed primarily as a tool for achieving behavioral rather than communication objectives. We need more research on the communication effects of sales promotion. • Sales promotion offers cannot save a dying product or an inadequate marketing mix. • There are different sales promotion tools for consumers (pull) and the trade (push), each with their own strengths and weaknesses. 21
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