Transcript aimed at channel members

Sales Promotions
Chapter 12
Chapter Overview
• Consumer promotions
 Directed to individuals/
businesses that use product
• Trade promotions
 Directed to channel members
• Can differentiate a brand
• Use varies – product life cycle
Push/Pull Promotions
Manufacturer
Wholesaler/
distributors
Retailers
Pull:
aimed at
consumers –
consumer
promotions
Consumers
Push:
aimed at
channel
members –
trade
promotions
Consumer Promotions
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Coupons
Premiums
Contests and sweepstakes
Refunds and rebates
Sampling
Bonus packs
Price-offs
Coupons
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Over 188 billion distributed
Less than 1% redeemed
Average value ~ $1.50
Savings of $2.25 billion
Coupon Usage
• Coupon usage
 80% of households use
 67% willing to switch brands
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Always ~ 21%
Sometimes ~ 37%
Rarely ~ 17%
Never ~ 25%
Influencing Brand Purchases
On a scale of 1 to 10, the following are
the top five influences on the brand
purchased by a consumer.
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Sampling
Word-of-mouth
Coupons
Advertising
Contests
7.8
7.2
5.9
5.6
1.2
Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella &
Associates (Http://www.santella.com/marketing.htm).
Types of Coupons
• Instant redemption
 Lead to trial purchase
• Bounce back
 Encourage repeat purchase
• Scanner-delivered
 Encourage brand switching
 Cross-ruffing
Coupon Distribution
• 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
• Print media (90%)
 FSI (88%)
• Direct mail
• On- or in-package
• In-store
 Scanner-delivered
• Digital
• Employee/Sales staff
Percentage of Sales with a Coupon
Product category
Disposable diapers
Detergents
Meal starters
Dough products (refrigerated)
Cereal
Wrapping materials, bags
Oral hygiene products
Household cleaners
% of sales using
manufacturer’s coupon
~17%
~15%
~14%
~14%
~13%
~13%
~12%
~12%
Coupon Redemption Rates
Type of coupon
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Percent Redeemed
Instant redeemable
Bounce-back, In-Pack
Electronic shelf
Instant redeemable – cross ruff
On-pack
Direct mail
Handout
Free-standing inserts
Source: Santella & Associates
~39%
~23%
~18%
~17%
~5%
~4%
~3%
~1%
Problems with Coupons
• Reduced revenues
• Used by brand preference
consumers (80%)
• “Necessary evil”
Premiums
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Free-in-the-mail
In- or on-package
Store or manufacturer
Self-liquidating
• Don’t expect premiums to
increase short-term profits
Contests and Sweepstakes
• Contests
 Require activity, skill
 Can require purchase
• Sweepstakes
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Random chance
Must publish odds
Cannot require purchase
Enter as many times as desired
Refunds and Rebates
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Refunds – soft goods
Rebates – hard goods
Hassle to redeem
Now expected by consumers
Redemption rates
 30% overall
 65% for rebates over $50
Sampling
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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
Benefits of Sampling
Target specific markets/audience!
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Introduce new products
Encourage trial
Generate leads
Collect information
Boost sales
Bonus Packs
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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.
Price-Offs
Temporary price reduction
Benefits:
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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
Planning Consumer Promotions
(Pull)
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)
Retailers’ incentive to
participate:
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Increase store traffic
Increase store sales
Attract new customers
Increase basket size
Trade Promotions
(Push)
• Types of trade promotions
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Trade allowances
Trade contests
Trade incentives
Trade shows
For manufacturers, trade promotions
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Accounts for 70% of marketing budget
Often 2nd largest expense
Accounts for 17.4% of gross sales
Trade Allowances
Trade allowances: financial incentives to
channel members – may be passed on to
other members of channel
Types:
• Off-invoice allowance
 Price discount
 35% of all trade dollars
• Slotting fees
• Exit fees
Slotting & Exit Fees
• Retailer justification
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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
Trade Allowance
Complications
• 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 Contests
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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 Incentives
Trade
Incentives
• Cooperative
merchandising
agreement
• Premium or bonus pack
• Co-op advertising
programs
12-28
Cooperative Merchandising
Agreement
• Formal agreement
• Popular with manufacturers
 Retailer must perform marketing
functions
 Manufacturer maintains control
 Longer-term commitments
• Benefit retailers
 Schedule calendar promotions
Cooperative Advertising
• 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
Trade Shows
• 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 - Attendees
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Education seekers
Reinforcement seekers
Solution seekers
Buying teams
Power buyers
Competitive interests