Transcript Document

Chapter Sixteen
Sales Promotion
Management, MarketingOriented Public Relations,
and Sponsorships
Chapter Sixteen Objectives
• Describe the nature and purposes
of sales promotion
• Explain the factors that account
for the increased investment in
promotions, especially those that
are trade oriented
• Explain the tasks that promotions
can and cannot accomplish
Chapter Sixteen Objectives
• Understand nine empirical
generalizations about promotions
• Discuss the circumstances that
determine when promotions are
profitable
Introduction to Sales Promotion
What Exactly is Sales Promotion?
Any incentive used by manufacturers to
induce the trade and/or consumers to
buy a brand and encourage sales force
to aggressively sell it
Introduction to Sales Promotion
What Exactly is Sales Promotion?
The incentive is additional to the basic
benefits provided by the brand and
temporarily changes its perceived price
or value
Introduction to Sales Promotion
Promotion Targets
All three groups – the sales force, retailers
and consumers – are targets of sales
promotional efforts
Sales Promotion
Sales Force
Retailers
Pull
Push
Encourage
Brand-Level Advertising
and Sales Promotion Mix
Consumers
Increased Budgetary Allocations to
Promotions
•Advertising spending as a percentage
of total marketing communications
expenditures has declined in recent
years
•Promotional spending, however, has
steadily increased
Increased Budgetary Allocations to
Promotions
70
60
50
40
30
20
10
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Media Advertising
Trade Promotions
Consumer Promotions
Push Vs. Pull
Push Strategy
Pull Strategy
Using promotional
efforts to push
product through
the selling chain
Using Consumer
advertising to pull
product through the
channel of
distribution
Push Vs. Pull
Advertising to
Sales PromotionConsumers Advertising to
Retailers
to Retailers
Sales Promotion
to Consumers
Personal Selling
to Retailers
Personal Selling Sales Promotion
to Consumers
Sales Promotion
to Retailers
to Retailers
Advertising to
Retailers
Advertising to
Consumers
Factors Accounting for the Shift
• Balance-of-power shift from manufacturers
to retailers
• Increased brand parity and price sensitivity
• Reduced brand loyalty
• Splintering of the mass market and reduced
media effectiveness
• Short-term orientation and corporate reward
structures
• Consumer responsiveness
Sales Promotions - Can
•
•
•
•
•
•
•
•
•
•
Stimulate sales force
Invigorate mature brand sales
Facilitate introduction of new products
Increase merchandising space
Neutralize competitive ads
Obtain trail purchases
Hold current users
Increase product usage
Preempt competition
Reinforce advertising
Sales Promotions - Can’t
• Compensate for lack of training and
advertising
• Give a long-term reason for repeat
purchases of the brand
• Permanently stop an established
brand’s declining sales or basic nonacceptance
Generalizations About Promotions
1. Temporary retail price
reductions increase
sales
2. The greater the
frequency of deals,
the lower the height
of the deal spike
3. The frequency of
deals changes the
consumer’s reference
price
4. Retailers passthrough less than
100% of trade deals
5. Higher market share brands
are less deal elastic
Generalizations About Promotions
6. Advertised promotions
can result in increased
store traffic
8. Promotions in one
product category
affect sales of
complementary and
competitive products
7. Feature advertising
and displays operate
synergistically to
influence sales of
discounted brands
9. The effects of
promoting higher-and
lower-quality brands
are asymmetric
A Segmentation Model of Consumer
Response to Sales Promotion Deals
All Consumers
On- and Off-Deal
Consumers
Loyalists
On-Deal Only
Consumers (S8)
Switchers
Non-Deal-Prone
Loyalists (S1)
Deal-Prone
Loyalists
Stockpiling
Loyalists (S2)
Exceptionist
Loyalists (S3)
S1- S8 = Segment1 - Segment 8
Non-Deal-Prone
Switchers (S5)
Deal-Prone
Switchers
Stockpiling-Exceptionist
Loyalists (S4)
Nonstockpiling
Switchers (S6)
Stockpiling
Switchers (S7)
Purchase Patterns
Promotion Insensitives
Shampoo
Sales
SynActive
Market Share
Off
Deal
On
Deal
• Insensitive to promotional deals
• Unprofitable to place SynActive on deal
Off Time
Deal
Stockpiling Loyalists
Shampoo
Sales
Sales Depression
Due to SynActive
Promotions
SynActive
Market Share
Off Deal
On Deal
Off Deal Time
• Loyal to SynActive and will stockpile on deal
• Unprofitable to place SynActive on deal
• Sales increase is borrowed from future sales
Nonstockpiling Promotion Sensitives
Shampoo
Sales
Sales Depression
Due to SynActive
Promotions
SynActive
Market Share
SD
SN
Off Deal
On Deal
Off Deal
• Loyalists and switchers but don’t stockpile
• Profitable only if R x MD > MN
(R= SD/SN, M: Margin)
Time
Stockpiling Promotion Sensitives
• Switch among brands and stockpile
• SynActive baseline sales are
depressed both by its own dealing
activity and by competitive dealing
• If SynActive dealing activity is
profitable when consumers do not
stockpile, then stockpiling behavior
will lead to even greater profitability
On-Deal-Only Consumers
• Only buy on deal
• Profitable to place SynActive on deal
• Profit would equal the number of
units(Q) sold times the profit
margin(MD) : Q x MD
In Conclusion
Unprofitable
Promotion-insensitive
Stockpiling loyalists
Profitable
On-Deal-Only consumers
‘May’ or
‘May not’
Nonstockpiling or
Stockpiling promotionsensitive consumers