Transcript Promotion through the marketing channel

Promotion through the
marketing channel
Week 11
Instructor: Jungwan Lee
Coupon
• 1900’s –Atlanta druggist Asa ChandlerHandwritten notes-a free glass of Coca-Coal
• Coupon face value-180billion/year
• Coupon-2 % redeemed by customers-3.6
billion/year
• Coupon issuing and distribution costs-6.5
billion/year
• P&G-coupon test: elimination??
What is promotional strategy?
• ..controlled, integrated program of
communications methods and materials
designed to present a company and its
products to prospective customers.
• ..to communicate need-satisfying attributes
of products toward the end of facilitating
sales and thus contributing to long-run profit
performance.
Major tools for manufacture’s
promotional strategy
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Advertising
Personal selling
Channel member support
Publicity
Sales promotion
Factors influencing trade promotional
support
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Item importance (16.3%)
Promotion elasticity (9.3%)
Manufacturer brand support (8.2%)
Manufacturer reputation (7.3%)
Promotion wearout (6.4%)
Sales velocity (5.4%)
Item profitability (4.5%)
Incentive amount (4.2%)
• -Source: Ronald C. Curhan and Robert J. Kopp, “Obtaining
retailer support for trade deals: Key success factors,” Journal of
Advertising Research, Dec.1987-jan.1988: p.54
Variables of Item importance
• Item is significant enough to warrant
promotion.
• Category responds well to promotion.
• Closest trade competitor is likely to
promote item.
• Item regular sales volume.
• Deal meshes with trade promotional
requirements.
Variables of manufacturer brand
support
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Manufacturer’s brand support in form of:
Coupons.
Radio and television advertising.
Newspaper advertising.
Point-of purchase promotion (e.g.,
display)
Variables of promotion elasticity
• Buyer’s estimate of sales increase on
the basis of:
• Price reduction and display.
• Display only.
• Price reduction only.
• Price reduction, display, and advertising
Pull versus Push
promotional strategies
• Pull strategy
• Push strategy
• ..by building strong
consumer demand for a
product, the
manufacturer will force
channel members to
automatically promote
the manufacturer’s
products.
• ..requires more direct
involvement by the
manufacturer with
channel members in the
use of promotional
strategies to secure
strong channel member
promotional support.
Pull promotions and channels
coordination
• Some manufacturers rely almost entirely on
promotion in the form of advertising to their target
markets, to “pull” their products through the channel.
• Hence, indirectly secure channel member
cooperation.
• The belief underlying this pull strategy is that by
building strong customer demand for a product, the
manufacturers will force channel members to
automatically promote the manufacturer’s products.
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-source: Eitan Gerstner and James D. Hess, “Pull promotions and
channels coordination,” Marketing Science, Winter 1995, pp.43-60
Basic push promotional strategies in
marketing channels
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Cooperative advertising
Promotional allowances
Displays and selling aids
In-store promotions
Contests and incentives
“kinder and gentler” push
promotion strategies
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Training programs
Quota specification
Missionary selling
Trade shows
Examples
• Cooperative advertising-50:50, 3% allowance
of purchases.
• Promotional allowance-cash back payment.
• Displays and selling aids-promotional kits,
special in-store displays, and mailing pieces
• In-store promotions-short-term events, Vidal
Sassoon haircare
• Contests and incentives
• Special promotional deals-catch-all category
promotional deals: discounts, (buy one get
one free, rebates, coupons)
Training program
• ..are more common for wholesale
channel members than for retail.
• But,…should not be narrowly confined
to being merely a “sales pitch” for the
particular manufacturer’s product.
• Rather, …worthy of the name should
help the channel members not only sell
more but to improve their overall
businesses as well.
Quotas
• …are often used by manufacturers as a
device to increase channel members’
sales efforts.
• The key to using such sales quotas
successfully is to present them in a
constructive and informative manner
rather than in a coercive way.
Missionary salespeople
• …often used by manufacturer to help focus
channel member’s attention on the
manufacturer’s product and to assist the
channel members in their selling efforts.
• The use of missionary salespeople can be
very effective if channel members want the
help that is offered.
• But, if the missionary salespeople do not take
up too much of the channel member’s time.
Trade show
• …have a chance to exhibit their
products and to show off the caliber of
their organizations provide an
opportunity to interact with channel
members.
• … foster a sense of pride in channel
members who carry the manufacturer’s
products.
Push marketing strategies
• Not “down the throats”
• Push strategy is one of mutual effort and
cooperation between the manufacturer and
channel members in the development and
implementation of promotional strategies.
• In this sense, the manufacturer does not push
channel members into promoting its product,
but instead seeks their participation and
cooperation to provide effective promotional
strategies that will be mutually beneficial to
the manufacturer and the channel members.
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-source: Donald R. Glover, “Distributor attitudes toward manufacturer-sponsored
promotions,” Industrial Marketing Management, 1991, pp.241-249
Shortcomings with push
promotions
• Frequent promotion deals erode consumer franchises for
existing manufacturer brands, add to the expense of
establishing new brands, and increase consumer price
sensitivity.
• Frequent discounts to channel members offered on products
used in trade deals result in deal-to-deal purchasing by
channel members and hence uneven factory shipments and
increased production costs.
• Trade buyers often take advantage of discounts but fail to
provide the merchandising support called for and do not pass
all price reductions through to consumers.
• Some channel members respond to deals by purchasing well
above their own requirements and reselling the excess deal
merchandise to other retailers at a profit.
Rule of thumb
• The effectiveness of the manufacturer’s
overall promotional strategy is
dependent upon how skillful the
manufacturer is in securing cooperation
from independent channel members in
the promotion of products.
Channel Member Relationship
Management: CMRM
• Any marketing mix strategies calling for
channel member cooperation should not be
haphazard one-shot, quick-fix approaches.
• Rather, strategies that involve channel
members stand a higher probability of being
favorably received by the channel members
when they are part of an overall program of
manufacturer support of channel member
needs.
• Distribution programming and the
partnerships/strategic alliances can be very
valuable in this regard.