Sales Promotion

PERSONAL
SELLING ADVERTISING

PUBLICITY SALES
PROMOTION
 Sales Promotion Importance

Growth in United States

• Exceeds $250 billion dollars a year
• Increasing percentage of promotional
dollars
• Consumer goods companies spend
more on sales promotions than
advertising
 Sales Promotion
Definition: any activity or material used
as a direct inducement to purchase
Objective: Bolster/complement other
promotional mix elements during a specific
time period
Targeted toward:
• Sales force
• Wholesalers and retailers
• Consumers
 Sales Promotion
Methods for Consumers

Product sampling, demonstrations

Coupons, refunds

Rebates, cents-off-

Contests, games & sweepstakes

 Sales Promotion
Methods for Consumers
Premiums

Multiple purchase offers,

Frequent-user incentives

P-O-P material

Product placements/tie-ins
 Classifying Types of Sales Promotion
Promotional Non-price Sampling
pricing promotions
• Price reductions
• Free goods
• Tied offers • Most effective in
• Contests the early stages of a
• Money off next
• Free gifts new product launch
purchase
• Loss leader • Self-supporting offers (#1 use for coupons)
• • Important for food
pricing Multi-brand promos s
products
• Cheap credit • Guarantees and added
• Very expensive
services
Rebates: A Consumer Information Source
• Buyers fill out rebate forms with names,
addresses and household data about customers
- directly targets price cuts to customers
- 5-10% are redeemed (A Phantom discount)

Pepsi offers a $5 rebate on the Home Alone video

 Rebates are often effective at changing
purchase probabilities, even for big-ticket items
 Coupons, too, can be effective at getting
consumers to purchase specific products
 Number of Coupons Redeemed Per
(International) Household in 1992
Europeans lag in coupon redemption

90

80 •
70

60

50

40

30

20

10

0
U.S. Canada Belgium U.K Italy Spain France
Series1 80.9 32.7 18.5 15.9 4.3 1.5 1.4
 USA Coupon Redemption

1990 1992 1993 1994 1995

Distribution 279 310 300 310 292

Redeemed 7.1% 7.7 6.8 6.2 5.8%

Snapple ‘Yard Sale’ Refreshes Sales Drive
• “The idea is about brand loyalty, getting more
people to buy bottles, collect caps and buy stuff
at the Snappleton yard sale, an online town on
Snapple.com” Ms. Bernstein, Senior V.P.

• Involvement: Collecting bottle caps.

• Silver cap (16 oz.)- ice tea products
• Yellow caps (Lemonade products)
• White caps (20-32 oz. bottles.)

Source: Direct Mktg News, 2004

 Snappleton ‘Yard Sale’
• Unique merchandise like Quicksilver
apparel, Lite-Bright, Nintendo Game
Boy Advance and Piaggio Scooter.

• Objectives: Increase users aged -15 to 24.

• Use the internet to pique curiosity in a competitive
U.S. beverage market, (Coca-Cola Co. and Pepsi Co.)

• “Snapple operates off a really low budget ,

doing more with less.”
 Sales Promotion
Methods for the Trade
• Trade shows
• Contests, free merchandise
• Display equipment, P-O-P materials
• Cooperative advertising & promotions
– Vertical - channel members
– Horizontal - group of retailers
• Allowances (buying vol., buy-back, scan-back,
merchandise)
• Premium or push money, slotting allowances
 Trade Shows
Selling objectives Non-selling objectives
Maintain relationship Maintain image
Transmit messages Test products
Current
to key accounts Gather competitive
customers Remedy problems intelligence
Add-on sales Widen exposure

Contact prospects Contact prospects

Potential Determine needs Foster image building
customers Transmit messages Test products
Commit to call back Gather competitive
or sale intelligence
Proportion of Promotional Expenditures
60%

50%

40%

30%

20%

10%

0%
1985 1987 1989 1991 1993 1995

Trade sales promotion Consumer sales promotion

Advertising
 Sales Promotion, Pro and Con
•Advantages:
•Motivation method for
special efforts
•Short-term sales increase
•Defined target audience
•Defined role/objectives
•Indirect roles (e.g., wider
distribution)
•Disadvantages:
•Only short-term
•Hidden costs
•Confusion
•Price cutting -Brand image
•Postponement effect
•Significant government regulation
•Lack of effectiveness sometimes
(learning effect)
A Benefit Congruency Framework of
Sales Promotion Effectiveness

Are monetary savings the only explanation for

consumer response to sales promotions?
If not, how do the different consumer benefits
of sales promotion influence its effectiveness?
Six Benefits
Savings Quality
Convenience Value expression
Exploration Entertainment
JrlMktg,Oct.2000
Positioning Map
Sales Promotions Benefit Matrix

High *
Free
Gifts

Free Product Offers

*
Hedonic
* Sweepstakes * Coupons

* *Price Reductions
Rebates
Low
Low Utilitarian High
 Study #4:
Design and Procedure
2 P ro d u c ts

1 H e d o n ic 1 U tilita ria n

No M o n e ta ry N o n m o n e ta ry M o n e ta ry N o n m o n e ta ry
P ro m o tio n L /E B ra n d L /E B ra n d H /E B ra n d H /E B ra n d
 Study #4, Conclusions
1. Monetary saving is not the only consumer benefit
2. Consumers distinguish six benefits
3. Six benefits grouped between Utilitarian and
Hedonic
4. All six (except quality) are significant predictors of
overall evaluation
5. Monetary promos provide more Utilitarian benefits
than Hedonic benefits
Study #5: Benefit Congruency Effect
Design and Procedure

2 H ig h E n d P r o d u c t s
1 H e d o n ic a n d 1 U t ilit a r ia n

N o n m o n e ta ry M o n e ta ry
P r o m o t io n s P r o m o t io n s

2 F r e e G if t s 2 S w e e p s ta k e s 2 Coupons 2 R e b a te s
 Study #5, Conclusions
1.Sales promo’s provide benefits beyond monetary savings
2.Nonmonetary promos provide more Hedonic benefits
3.For High End brands, sales promos are more effective
4.Monetary promos can destroy market share when offered
with incongruent high equity hedonic brands
competing against low-priced brands

Discussion of Studies 4 and 5

 Proof of congruency between needs of products
and monetary promotions
 Negative effects of some promotion were due to
lack of relevance
 Role of The Promotion Mix
• Promotion is an organization’s unique set of
communications (stimuli) designed to influence
(inform, persuade & remind) selected target
audiences into desirable responses.
• Who says what to whom, in what setting , by
which channels, with what purposes.
• Promotion facilitates (efficient) exchange