NAA JP PNS, December 2016

Planning a retail promotion strategy

- DPR6023 Retail Promotion -
 Lesson Learning Outcome

Establish promotional budget Produce promotional mix

Identify promotional budget: Select the promotional mix
Marginal analysis method Implement the promotional mix
Objective-and-task method Review and revise the promotional plan
Rule-of-thumb method
Determine retail promotional objectives
Recap
Distinguish retail promotional objectives:
Long term objectives
Short term objectives
Retail Promotion
Strategy
Promotional To provide direction for people implementing the program, and a basis for
Objectives evaluating its effectiveness.

Promotional
Objectives

Long-term Short-term

Attempts to gain long-term Attempts to achieve short-term

benefits by selling the store objectives
itself rather than the products in
it

Institutional advertising Promotional advertising

promotional message intended to uses merchandise
promote the institution but does availability and price as
not attempt to sell anything selling point
directly

Communication objectives are specific goals related to the retail communication mixs
effect on the customers decision-making process.
 Determining
Promotional
Objectives

Increase sales Get leads for sales Popularize new Maintain customer
personnel stores and Web sites loyalty

Stimulate impulse and Present and reinforce Capitalize on Have consumers pass
reminder buying the retailer image manufacturer support along positive
information to
friends and others
Raise customer traffic Inform customers Enhance customer
about goods and relations
services
Long Term
Objectives

To differentiate itself from its competition.

#1 Create a positive store Affects the customers perception of the store and its
image stores identity
Establishing a favorable impression helps to
develop ongoing relationship with customers
#2
Create a perception of Sponsoring a public service cause
being a good citizen Promoting blood donation campaign, providing
scholarships for underprivileged students, publishing
consumer newsletters packed with health tips,
providing supplies for disaster relief areas
Short term
objectives

Boosting sales Generating store Encouraging repeat Attracting new

traffic purchases customers
To move products
faster or as part of Especially during off- Enroll customers in Steady stream of
the planned growth peak hours. the frequent buyer customers allows
of the business. Important for brick- card or loyalty retailer to grow its
For limited period of and-mortar retailers. programs business and its
time. More opportunities Reward customers vision
Create sense of for sales and based on purchase To announce arrival
urgency. customer frequency or $ spent or existence of
engagement. retailer to the
community
Source of Communication
Budget
Co-op (cooperative) program
A promotional program undertaken by a vendor and a retailer working together.
The vendor pays part of the retailers promotion but dictates some conditions.
Able to lowering costs, to associate retailers name with well-known national brands and use attractive
artwork created by national brands.
Vertical co-op advertising
Agreement made between a retailer and its supply chain partner (usually a manufacturer) whereby they will share
the advertising costs.
Horizontal co-op advertising
Two or more retailers agree to share advertising costs, usually in the form of joint promotion in an event or sale
that would benefit both parties.
Promotional Budget
Methods

Marginal
Analysis
Affordable
Objective-and- Competitive Percentage-
Task Parity of-sales

Rule-of-thumb Method
Advertising Budget
The means for retailers to determine and control advertising costs and dividing them wisely among
merchandise lines.
Helps establish guidelines on how the retailer should spend it.
Marginal Analysis Method

Based on the economic principle that firms should increase communication expenditures
as long as each additional dollar spent generates more than a dollar of additional
contribution.
Refer to Exhibit 15-5: Marginal Analysis for Setting Diane Wests Communication Budget
(Textbook page 439)
Very hard to use because managers dont know the relationship between communication
expenses and sales.
 BASIC Principle of Marginal Analysis

Increase Spending If the increased cost is less than the incremental (marginal)
return

Hold If the increased cost is equal to the incremental (marginal)

Spending return.

If the increased cost is more than the incremental

Decrease Spending (marginal) return

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Objective-and-task
Method

Determines the budget required to undertake specific tasks to accomplish communication

objectives.
A retailer clearly defines its promotional goals and then prepares a budget to satisfy these
goals.
Example:
Rule-of-thumb
Method

Affordable Method Percentage-of-sales method Competitive-parity method

What management The budget as a Setting the budget to
thinks the company percentage of match competition
can afford? forecasted sales spending
 Affordable Budgeting
Method

Sets communication budget by determining what money is available after operating costs
and profits are budgeted.
Base their budgets on what they can afford.
Drawback: The affordable method assumes that the communication expenses dont
stimulate sales and profits.
 Percentage-of-sales
Method

Communication budget is set as a fixed percentage of forecast sales.

A retailer ties its promotion budget to sales revenue.
Takes a percentage of either past or anticipated sales and allocates that percentage of the
overall budget to advertising.
Drawback: This method assumes the same percentage used in the past, or by competitors
is appropriate for the future.
E.g.: A firm could set promotion costs at 10% of sales. If this years sales are expected to
be RM100,000, there is a RM10,000 promotion budget. If next years sales are projected
at RM140,000, a RM14,000 budget is planned.
 Competitive parity
Method

This communication budget is set so that the retailers share of communication expenses
equals its share of the market.
A retailers budget is raised or lowered based on the actions of competitors.
To compare its advertising spending with that of its competitors.
A business is aware of how much its competitors are spending to inform, persuade, and
remind the consumer of their products and services, then that business can, in order to
remain competitive, either spend more, the same, or less on its own advertising.
Drawback: This method (like the others) does not allow the retailer to exploit the unique
opportunities or problems they confront in a market.
Objective-and-task
Method

Establish Objectives
(create awareness of new product among 20 percent
of target market)

Determine Specific Tasks

(advertise on market area television and radio and
local newspapers)

Estimate Costs Associated with Tasks

(determine costs of advertising, promotions, etc)
Selecting the Promotion Mix

Type of product
Resource availability and the cost of each promotional tool /
available fund
Market size and concentration / products target market type of
consumer, no. of consumer, geographical location.
Customer information needs
Implementing the Promotional Mix

Choosing:
Specific media to use variety of elements, overall costs, efficiency,
lead time, editorial content.
The timing of promotion reach, frequency, massed promotion
effort, distributed promotion effort.
The content of messages written or spoken, personally or
impersonally delivered.
The makeup of the sales force qualification
Specific sales promotion tools
The responsibility for coordination
Reviewing and Revising the Promotional Plan