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ADVERTISING: Sales Promotion Sales Promotion • A special incentive to: – Distributors – Salespeople, or – Customers • to encourage an immediate sale Growth of Sales Promotion 100% 90% Consumer Promotions 80% 70% 60% Media Advertising 50% 40% 30% 20% Trade Promotions 10% 0% '89 ‘90 ‘91 ‘92 '93 '94 '95 '96 '97 '98 '99 ‘00 Percent of Total Promotional Dollars, 3-year Moving Average. Consumer Promotions Use Types of Promotions • Franchise Building – LONG TERM preferences – Communicate distinctive brand identity – Example: • “Frequency” programs with brand or store image • Non-Franchise Building – IMMEDIATE sales – Examples: Price-off deals Bonus packs Rebates or refunds Objectives of Sales Promotions • Obtaining trials • Increasing repurchase • Increasing overall consumption • Rewarding current customers • Reaching out to a new market • Enhancing advertising efforts Sales Promotion Vehicles Consumer-Oriented “Pull” Trade-Oriented “Push” Samples Contests, dealer incentives Trade allowances Point-of-purchase displays Dealer premiums Trade shows Cooperative advertising Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus packs Price-offs Event sponsorship Sampling Sampling Works Best When The Products Are of Relatively Low Unit Value, So Samples Don’t Cost Much The Products Are Divisible and Can Be Broken Into Small Sizes That Can Reflect the Products Features and Benefits The Purchase Cycle Is Relatively Short So the Consumer Can Purchase in a Relatively Short Time Period Samples -- Media • Door-to-door • Direct mail • In-store sample pack • Cross-product sampling • Co-op package distribution • With newspaper / magazine • Any of above with coupon Display Cards Coupons Advantage • Works – will increase sales Disadvantages • May be redeemed by loyal users who would buy anyway • Sometimes difficult to estimate redemption levels in advance • Expensive Percent of Sales with Coupons 43% Disposable Diapers 35% Ready-to-Eat Cereal 29% Liquid Detergents 25% Deodorants 24% Sanitary Protection 20% Coffee 12% Pet Food 11% Adult Cold Remedies 8% Carbonated Beverages 7% Candy Gum 2% Sweepstakes and Contests ADVANTAGES: • Gets consumer involved with the product • Generates interest and attracts attention to advertising DISADVANTAGES • May overshadow the product • May detract from brand image Spending on Event Sponsorship How much is spent (billions) Where it is spent $6 $5 $4 $3 $2 $1 4.705.00 4.20 3.70 3.30 2.80 2.50 2.10 1.75 $0 88 89 90 91 92 93 94 95 96 10% 9% 67% Sports Festivals Arts 8% 6% Music Cause Mktg. Benefits of Event Marketing 1. Greater Awareness 2. Associate Product with Event 3. New Potential Clients (Sales) 4. Media Coverage The Sales Promotion Trap Our Firm Reduce Promotions Continue Promotions Competition Reduce Promotions Continue Promotions Lose market share low profits Maintain share low profits Higher profits for everyone! Gain market share But low profits Quote of the day If you’re selling an inexpensive product that is purchased regularly, and it’s really great, just give away free samples. Mike Basil Professor of Marketing