Consumer and Trade Sales Promotion

1. 18 Consumer and TradeSales Promotion

2. Learning Objectives • After studying this chapter, you should be able to: • Explain the role and significance of sales promotion in the marketing communications mix. • Understand why sales promotion expenditures account for a significant portion of many firms’ marketing communications budgets. • Discuss the objectives and techniques of consumer sales promotion. • Discuss the objectives and techniques of trade sales promotion. • Explain the limitations of sales promotion. • Realize how deceptive and fraudulent sales promotion victimizes both consumers and marketers.

3. McDonald’s • McDonald’s, long a leading user of special promotions to attract consumers to its stores, made industry headlines with its Monopoly game promotion in 2004. • McDonald’s teamed with WildTangent, a major manufacturer of online games, which produced online demo games modified to include McDonald’s product placements. • McDonald’s then used the games as prizes in its Monopoly contest, and promotion partner WildTangent benefited from the introduction of its games to millions of prospective game customers.

4. The Role of Sales Promotion Sales Promotion Consists of media and nonmedia marketing communications employed for a predetermined, limited time to stimulate trial, increase consumer demand, or improve product availability. Consumer sales promotion is directed at consumers. Trade sales promotion is directed at resellers.

5. Sales Promotion Sales Promotion Expenditures Consumer Factors The Significance of Sales Promotion Increased Retail Power Impact of Technology

6. 10 Commandments of Sale Promotion • 1. Set specific objectives. Undisciplined, undirected creative work is a waste of time and resources. • 2. Know how basic promotion techniques work. A sweepstakes shouldn’t be used to encourage multiple purchases or a refund to get new customers. A price-off deal can’t reverse a brand’s downward sales trend. • 3. Use simple, attention-getting copy. Most promotions are built around a simple idea: “save 75 cents.” Emphasize the idea, and don’t try to be cute. • 4. Use contemporary, easy-to-track graphics. Don’t expect to fit 500 words and 20 illustrations into a quarter-page, freestanding insert. • 5. Clearly communicate the concept. Words and graphics must work together to get the message across.

7. 10 Commandments of Sale Promotion • 6. Reinforce the brand’s advertising message. Tie promotions to the brand’s ad campaign. • 7. Support the brand’s positioning and image. This is especially important for image-sensitive brands and categories, like family-oriented Kraft. • 8. Coordinate promotional efforts with other marketing plans. Be sure to coordinate schedules and plans. A consumer promotion should occur simultaneously with a trade promotion; a free-sample promotion should be timed in conjunction with the introduction of a new line. • 9. Know the media you work through. Determine which media will work best. Should samples be distributed in stores, door-to-door, or through direct mail? Does the promotion need newspaper or magazine support? • 10. Involve the trade. Build relationships with key resellers.

8. Consumer Sales Promotion • Objectives of Consumer Sales Promotion: • Stimulate trial • Increase consumer inventory and consumption • Encourage repurchase • Neutralize competitors • Increase sales of complementary products • Stimulate impulse purchasing • Allow flexible pricing

9. more Consumer Sales Promotion Techniques Price Deals A price deal is a temporary reduction in the price of a product. There are two primary types of price deals: cents-off deals and price-pack deals. Coupons A coupon is typically a printed certificate giving the bearer a stated price reduction or special value on a specific product, generally for a specific period.

10. more Consumer Sales Promotion Techniques Rebates A rebate is a cash reimbursement to a buyer for purchasing a product. The consumer must mail a rebate form, the purchase receipt, and proof of purchase to the manufacturer. Cross- Promotions A cross-promotion (tie-in), is the collaboration of two or more firms in a sales promotion. Crosspromotions enhance the communications effort of all the participating firms.

11. more Consumer Sales Promotion Techniques Contests, Games A contest offers prizes based on the skill of contestants. A sweepstakes offers prizes based on a chance drawing of participants’ names. Games are similar to sweepstakes, but they cover a longer period. Premiums An item given free or at a bargain price to encourage the consumer to buy is called a premium.

12. Consumer Sales Promotion Techniques Sampling A sample is a small size of a product made available to prospective purchasers, usually free of charge. Advertising Specialities An advertising specialty, also called a promotional product, is an item of useful or interesting merchandise given away free of charge and typically carrying an imprinted name or message.

13. Trade Sales Promotion • Objectives of Trade Sales Promotion: • Gain/maintain distribution • Influence resellers to promote product • Influence resellers to offer price discount • Increase reseller inventory • Defend against competitors • Avoid reduction of normal prices

14. more Trade Sales Promotion Techniques Trade Allowances Trade allowances are short-term special allowances, discounts, or deals granted to resellers as an incentive to stock, feature, or in some way participate in the cooperative promotion of a product. Dealer Loaders A dealer loader is a premium given to a reseller to encourage development of a special display or product offering.

15. more Trade Sales Promotion Techniques Trade Contests A trade contest typically associates prizes with sales of the sponsor’s product. Trade contests generate interest, which makes them useful for motivating resellers. Point-of-Purchase Display Point-of-purchase displays are generally used at the retail level to call customer attention to a featured product.

16. more Trade Sales Promotion Techniques Trade Shows A trade show is a periodic, semi-public event at which suppliers rent booths to display products and provide information to potential buyers. Training Programs Some manufacturers sponsor or pay for training programs for customer employees.

17. Trade Sales Promotion Techniques Push Money Push money, also called spiffs (for special promotional products incentive funds), is what a manufacturer pays retail sales- people to encourage them to promote its products over competitive brands.

18. Limitations of Sales Promotions • It typically cannot reverse a genuine declining sales trend. • Marketers cannot reasonably expect sales promotion to convert rejection of an inferior product into acceptance. • Sales promotion may even weaken the brand image. • Sales promotion has also been blamed for encouraging competitive retaliation. • Short-term volume gain at the sacrifice of profits.

19. more Ethical and Legal Issues Fake Storefront A scam artist rents space cheap, sets up a store, then starts sending in coupons to manufacturers for payment. Soon the store’s shelves are bare, but the “owner” is still sending in coupons obtained illegally. Stuffing the Ballot Box A retailer legitimately obtains cash from clearinghouses and manufacturers for coupons handed in by shoppers, but boosts the take illegally by sending in extra coupons purchased at steep discounts from various sources.

20. Ethical and Legal Issues Playing the Middleman An ambitious operator makes money supplying other operators—collecting coupons by the pound and selling them to retailers, buying and selling proofs of purchase, or counterfeiting coupons and proofs of purchase. Redemption Scam Manufacturers offer big cash rebates on large items to shoppers who mail in forms, together with proofs of purchase—receipts, labels, or box tops. A con artist uses the rebate forms and proofs of purchase, real or counterfeit, to illicitly collect refunds without buying products.

21. Summary • After studying this chapter, you should be able to: • Explain the role and significance of sales promotion in the marketing communications mix. • Understand why sales promotion expenditures account for a significant portion of many firms’ marketing communications budgets. • Discuss the objectives and techniques of consumer sales promotion. • Discuss the objectives and techniques of trade sales promotion. • Explain the limitations of sales promotion. • Realize how deceptive and fraudulent sales promotion victimizes both consumers and marketers.