Sales Promotions

1. Sales Promotions Chapter 12

2. Consumer promotions • Directed to individuals/ businesses that use product • Trade promotions • Directed to channel members • Can differentiate a brand • Use varies – product life cycle Chapter Overview

3. Push: aimed at channel members – trade promotions Manufacturer Push/Pull Promotions Wholesaler/ distributors Retailers Pull: aimed at consumers – consumer promotions Consumers

4. Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs

5. Coupons • Over 188 billion distributed • Less than 1% redeemed • Average value ~ $1.50 • Savings of $2.25 billion

6. Coupon usage • 80% of households use • 67% willing to switch brands Coupon Usage Always ~ 21% Sometimes ~ 37% Rarely ~ 17% Never ~ 25%

7. On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer. Influencing Brand Purchases • Sampling 7.8 • Word-of-mouth 7.2 • Coupons 5.9 • Advertising 5.6 • Contests 1.2 Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).

8. Types of Coupons Instant redemption Lead to trial purchase Bounce back Encourage repeat purchase Scanner-delivered Encourage brand switching Cross-ruffing

9. Manufacturers issue about 80% • Freestanding inserts – 88% • Freestanding and print most popular • Create brand awareness • Encourage next trip purchase • Digital coupons growing • Users more affluent, better educated Coupon Distribution

10. Print media (90%) • FSI (88%) • Direct mail • On- or in-package • In-store • Scanner-delivered • Digital • Employee/Sales staff Coupon Distribution

11. Product category % of sales using manufacturer’s coupon Percentage of Sales with a Coupon Disposable diapers ~17% Detergents ~15% Meal starters ~14% Dough products (refrigerated) ~14% Cereal ~13% Wrapping materials, bags ~13% Oral hygiene products ~12% Household cleaners ~12%

12. Type of couponPercent Redeemed Coupon Redemption Rates • Instant redeemable ~39% • Bounce-back, In-Pack~23% • Electronic shelf ~18% • Instant redeemable – cross ruff ~17% • On-pack~5% • Direct mail ~4% • Handout ~3% • Free-standing inserts ~1% Source: Santella & Associates

13. Problems with Coupons • Reduced revenues • Used by brand preference consumers (80%) • “Necessary evil”

14. Premiums Free-in-the-mail In- or on-package Store or manufacturer Self-liquidating Don’t expect premiums to increase short-term profits

15. Contests and Sweepstakes Contests Require activity, skill Can require purchase Sweepstakes Random chance Must publish odds Cannot require purchase Enter as many times as desired

16. Refunds – soft goods • Rebates – hard goods • Hassle to redeem • Now expected by consumers • Redemption rates • 30% overall • 65% for rebates over $50 Refunds and Rebates

17. Sampling In-store distribution Direct sampling Response sampling Cross-ruff sampling Professional sampling • 33% who tried a sample made a purchase during same shopping trip • 58% would buy product again • 25% bought product instead of intended brand

18. Target specific markets/audience! • Introduce new products • Encourage trial • Generate leads • Collect information • Boost sales Benefits of Sampling

19. Bonus Packs Increase usage of product Match or preempt competition May lead to stockpiling Develop customer loyalty Attract new users Encourage brand switching Typical bonus packs are special multi-packs or packages with extra 20- 100 % of product.

20. Temporary price reduction • Benefits: • Stimulate sales • Entice trial • Reduces customer financial risk • Encourages brand switching, stockpiling • Problems: • Negative impact on profit • Encourages price-sensitivity • Potential impact on brand image Price-Offs

21. Advertising vs. Sales Promotion • Advertising more profitable, high growth, and premium priced brands. • Sales Promotion significant in less popular, low growth, mid to lower priced brands. Planning Consumer Promotions(Pull)

22. Planning Consumer Promotions(Pull) Retailers’ incentive to participate: Increase store traffic Increase store sales Attract new customers Increase basket size

23. Trade Promotions(Push) Types of trade promotions Trade allowances Trade contests Trade incentives Trade shows For manufacturers, trade promotions Accounts for 70% of marketing budget Often 2nd largest expense Accounts for 17.4% of gross sales

24. Trade allowances: financial incentives to channel members – may be passed on to other members of channel Trade Allowances • Types: • Off-invoice allowance • Price discount • 35% of all trade dollars • Slotting fees • Exit fees

25. Slotting & Exit Fees Retailer justification Cost to add new products to inventory Requires shelf space Simplifies decision about new products Adds to bottom line Manufacturer objections Form of extortion Divert money from advertising and marketing Detrimental to small manufacturers 4% of retailers use exit fees, 82% use slotting fees

26. Failure to pass allowances on to retail customers • Only occurs 52% of the time • Retailers like only one brand on-deal at a time • Forward buying • Pass savings on or pocket higher margin • Additional carrying costs • Diversion • Segmentation strategy nullified • Additional shipping costs Trade AllowanceComplications

27. Used to achieve specific sales targets. • Funds known as “spiff money.” • Rewards can be prizes or cash. • Can be designed for various channel members. • Some channel members do not allow trade contests because of possible conflict of interests. Trade Contests

28. Trade Incentives • Cooperative merchandising agreement • Premium or bonus pack • Co-op advertising programs Trade Incentives 12-28

29. Formal agreement • Popular with manufacturers • Retailer must perform marketing functions • Manufacturer maintains control • Longer-term commitments • Benefit retailers • Schedule calendar promotions Cooperative Merchandising Agreement

30. Manufacturer pays part of retailer’s costs • Retailer must follow specific guidelines • No competing brands • Retailers accrue monies • Amount is based on sales • Allows retailers to expand advertising • Manufacturers gain exposure in local markets Cooperative Advertising

31. Business to Business venue • Consumer & BtB goods • Few deals finalized • Increase in international shows • National shows being replaced by regional and niche shows • Niche shows • better prospects, Lower costs Trade Shows

32. Trade Shows - Attendees Education seekers Reinforcement seekers Solution seekers Buying teams Power buyers Competitive interests