Transcript Slide 1 - Fisher College of Business

Sales Promotion
MKT 846
Professor West
Agenda
 Thinking
beyond creating awareness, interest, and
an image for your brand
 Providing
 Battling
incentives to purchase
for shoppers in the aisle
Sales Promotions
 Advertising
has a long and colorful history
Many of the images created by advertisers have become
cultural icons
 The Marlboro Man, Ronald McDonald, Pillsbury Doughboy,
Energizer Bunny, AFLAC duck...

Sales Promotions
 Sales
promotion also has a very rich history
Coupons have been around since 1895 when C.W. Post
began using penny-off coupons to sell Grape Nuts
 P&G began using coupons in 1920 good for discounts or
BOGOF.
 In 1912 Cracker Jack began offering a prize in every box
 Oscar Mayer introduced the first “Wienermobile” in 1936,
eight still cruise the highways playing versions of the
jingle.
 Pepsi launched their “Pepsi Challenge” in 1975 as one of
the most successful promotions ever used to attract users
of a competing brand

Sales Promotions
 Sales
promotion also has a very rich history
Pillsbury launched its first “Bake-off” in 1949, it has since
become an institution and the nation’s most prestigious
cooking competition
 In 1981 American Airlines AAdvantage frequent flier
program was launched and created a new currency for
travelers

Sales Promotion
 Sales
promotion is used to provide a direct
inducement that offers extra value to the sales force,
distributor, retailer, or end consumer with the
primary objective of boosting sales.
 While
advertising appeals to the minds and hearts to
give consumers a reason to buy, promotions appeal
to the pocketbook and provide an incentive to buy.
Sales Promotion
 Consumer-Oriented
 Coupons
& Rebates
 Samples
 Bonus
packs
 Price-offs
 Contests &
Sweepstakes
 Frequency programs
 Event marketing
 Trade-Oriented
 Dealer
incentives
 Contests
 Trade Allowances
 POP displays
 Training programs
 Trade shows
 Co-op advertising
Trends
 Consumer
sales promotion increased from $56
billion in 1991 to nearly $100 billion in 2001. An
additional $150 billion is targeted to retailers and
wholesalers.
 Starting in the late ’80s a shift in marketing budgets
has boosted sales promotion sharply. Currently,
marketers spend between 60 and 75 percent of their
budget on sales promotion, with the remainder
allocated to media advertising. Seventeen percent
of advertising is devoted to promotional messages.
Reasons for Growth
 Mature
industry and increased accountability…
manager’s pay depends on sales relative to cost
 Growing power of retailers (optical scanners,
consolidation)
 Market saturation (nearly 30,000 products are
launched each year compared to 2,700 on 1980)
 Advertising clutter & fragmentation (regional efforts
and targeted markets are better suited to
promotions)
 Short-term Focus …it generates immediate and
measurable results
Slippery slope…
 Increased
promotional sensitivity
 Forty-two
percent of package-good volume was
purchased on promotion. Twenty-four percent
involved the use of a coupon.
 More than seventy percent of purchase decisions
are made in the store, where people are likely to
respond to POP offers.
(1999 study by Promotion Decisions Inc. tracked 33,000 consumers)
Slippery slope…
 Declining
brand loyalty
 Consumers
tend to have more than one brand in
their “repertoire” and have been conditioned to
switch when deals are offered.
 What
is this doing to the brand equity
companies have paid so dearly to build?
Prisoner’s Dilemma
Our Firm
All Other
Firms
Cut Back
Promotions
Maintain
Promotions
Cut Back
Promotions
Higher Profits
for all
Market share goes
to out firm
Maintain
Promotions
Market share
goes to other firms
Market share stays
constant, profits
stay low
Non-franchise Building Promotions
 Price
oriented “deals,” such as coupons, samples,
bonus packs, and discounts are useful mechanisms
for encouraging trial and acquiring new customers…
 However, you run the risk of eroding profits and
increasing consumer price sensitivity
 Price discounts don’t allow you to discriminate
between price sensitive and insensitive buyers
 Coupons allow you to price discriminate, but they
tend to be used by your loyal consumers
 Consumers tend to forward buy, or stockpile when
deals are offered
Franchise Building Promotions
 Rather
than using a one-time offer, many companies
are developing frequency programs that encourage
repeat purchase and long-term patronage

In order for this to be effective you have to make sure that
the rewards are meaningful and are actually generating
additional revenue
Franchise-Building Promotions
 Contests
are used to energize the brand
 Trade promotions can be used to create win-win
opportunities
“Brawny Man” contest took the Reggie
Despite over 90% awareness, Georgia-Pacific recognized
that the Brawny Man icon no longer seemed relevant to
consumers, and it needed to work out a new regimen to
increase sales
 They launched a summertime contest that asked women to
send in photos and 150-word descriptions explaining why
their guy is as rugged as the product.
 One dozen semi-finalists traveled to New York City for photo
sessions, and the grand-prize winner got a Dodge Durango
and a limited run as the packaging model. Dedicated TV
spots, print ads in USA Today and People magazine, and an
eight-market mobile tour supported.

Results
 During
the promotion period (May-October), brand
volume grew more than 12.3%, five times more than
the entire category
 Brand share increased from 10.5% to 11.5% during
these months
 At the campaign's peak in June 2002, brand volume
was up 31% vs. the year before and Brawny had its
highest monthly dollar (13.2%) and unit (12.8%)
share for the year.
 Profits for Brawny increased $5 million as a direct
result of the promotion.
Nike at the Finish Line
 Choose
to play campaign…
Target Market: 19 year-old action addicted college
students who are role models for teenagers and adults
wistfully recalling their college days.
 Objectives:
 To support Nike brand as a leader in exciting, stylish,
innovative and high performance footwear and apparel
among 65 percent of Finish Line customers.
 Create a competitive advantage for Finish Line and the
destination for Nike products among 85 percent of
target consumers.

Nike at the Finish Line
 Choose

to play campaign…
Objectives:
 Increase retail store traffic and web traffic by 20
percent
 Increase sale of Nike brand products through Finish
Line by 15 percent in one year.
Other Elements
 Finish
Line “Magalog” featured articles on athletes
such as MJ, Mia Hamm, and Derek Jeter
 Training of sales associates using Nike’s “Ekins”
 Direct mail and winner’s circle frequency program
Results
 Overall
sales of Nike brand through Finish Line
increased by 20 percent
 Calls to Finish Line store locator increased by 200
percent following the first run of print advertising
 Retail traffic increased by 17 percent
 FL customer tracking study showed that the
percentage of customers viewing FL as the best
destination for Nike increased from 20 to 62 percent
after one year.
Battling for shoppers in the aisles
 Marketers
make their products “shout” at
consumers from the store shelves
 The Portable Shopping System is being issued to
consumers upon entering the store
Upload shopping lists via the internet
 Lets you know when your prescriptions, photos, and deli
orders are ready

 Floor
mat ads make audio announcements when
people step on them
Battling for shoppers in the aisles
 Stores
are trying to reduce the clutter of marketing
messages (shopping spam) delivered in the stores.
 Supermarkets are being designed more around the
consumer’s mind-set rather than the traditional
warehouse.

Trader Joes & Central Market
Battling for shoppers in the aisles
 Retailer’s
new mantra is to brand the shopping
experience so customers are aware of where
they’re shopping.
Next Week…
Dr.
Osei Appiah will be here on Monday
to talk about advertising research and
copy testing methods
Ken Levy will be here to talk about
measuring advertising effectiveness and
return on investment