Sales Promotion

Objectives
1. What are the differences between consumer promotions and trade promotions?
2. How can the various forms of consumer promotions help to pull consumers into
the stores and products onto the store shelves?
3. How do different types of customers respond to consumer promotions?
4. What types of trade promotions can help push products on to retailer shelves and
eventually on to end users?
5. What concerns exist for manufacturers considering trade promotions programs?
6. What issues complicate international sales promotions programs?

 Learning Objective # 1: What are the differences between consumer promotions
and trade promotions?

 Sales promotions consist of all the incentives offered to customers and
channel members to encourage product purchases.
 Consumer promotions are the incentives that are directly offered to a
firm's customers or potential customers.
 Trade promotions consist of the expenditures or incentives used by
manufacturers and other members of the marketing channel to purchase
goods for eventual resale.

 Learning Objective # 2: How can the various forms of consumer promotions help
to pull consumers into the stores and products onto the store shelves?

Consumer Promotions
 Coupons
 Premiums
 Contests and sweepstakes
 Refunds and rebates
 Sampling
 Bonus packs
 Price-offs

Coupons
 A coupon is a price reduction offer to a consumer. It may be a
percentage off the retail price such as 25% or 40%, or an absolute amount
(50 cents or $1.00).
 Nearly manufacturers distribute 80% of all coupons. A total of 88% of all
coupons are sent out through print media with 80% being distributed
through free standing inserts (FSI), which are sheets of coupons
distributed in newspapers, primarily on Sunday.
 Digital coupons are rapidly growing in terms of popularity and use.

Types of Coupons
1. An instant redemption coupon is distributed in retail stores placed on or in
packages.
2. A bounce-back coupon is placed inside packages so that customers cannot
redeem them quite as quickly, which encourages repeat purchases.
3. Scanner-delivered coupons are issued at a cash register. They are triggered by an
item being scanned.
4. Cross-ruffing is the placement of a coupon for one product on another product.
5. Response offer coupons are issued following requests by consumers. Requests
may be from a 1-800 number or internet inquiries.

Disadvantages of Coupons
1. Reduced revenues result from a lower ultimate price being charged.
2. Mass cutting, which occurs when coupons are “redeemed” through a fraudulent
retail outlet that does not exist, except at a mail box set up by an illegal “coupon
ring.”
3. Counterfeiting, when coupons are copied and then sent back to the manufacturer
for reimbursement.
4. Misredemptions, when coupons are redeemed for an incorrect size for which the
discount applies, or when clerks honor coupons for merchandise that was not
purchased, which can be an error or they can be intentional.

Premiums
 Premiums are prizes, gifts, or other special offers consumers receive when purchasing
products. When a premium is offered, the consumer pays full price for the goods or
service.
 Types of Premiums
 Free-in-the-mail premiums, which are gifts individuals receive for purchasing products.
To receive the gift, the customer must mail in a proof-of-purchase to the manufacturer
who then mails the gift back to the consumer.
 In- or on-package premiums are usually small gifts, such as toys in cereal boxes (or
Cracker Jacks).
 Store or manufacturer premiums are gifts given by either the retail store or
manufacturer when the customer purchases a product.
 Self-liquidating premiums are used when the consumer must pay an amount of money
for the item, which is usually the amount needed to cover the cost of the premium.

Keys to Successful Premium Programs
 Match the premium to the target market.
 The best premiums are those that reinforce the firm’s image. They should not be
cheap trinkets.
 Premiums are more likely to succeed when they are tied into the firm’s products
and related in some manner.
 It is important to integrate premiums with the other components of the IMC
program.

Contests and Sweepstakes
 Contests and sweepstakes are used in consumer markets as well as business markets.
A primary factor in the success of this type of appeal is the prize list.
 Contests
 Contests normally require the participant to perform some type of activity in order to
enter.
 Sweepstakes
 No purchase can be required to enter a sweepstakes, and consumers may enter as
many times as they wish.

Perceived Value
 The perceived value of a prize has two components:
1. Extrinsic value, or the actual attractiveness of the item.
2. Intrinsic value, or those associated with playing or participating.
Goals of Contests and Sweepstakes
 To create successful contests and sweepstakes, it is important to coordinate the contest promotion
with the advertising, POP displays, and other marketing tools.
 The primary goals of contests and sweepstakes are often to increase customer traffic and boost
sales.
 Brand awareness also increases with multiple exposures to an advertisement or contest

Refunds and Rebates
 Refunds and rebates are cash returns offered to consumers or businesses following the purchase
of a product.
 A refund is a cash return on what are called “soft goods,” such as food or clothing.
 Rebates are cash returns on “hard goods,” which are major ticket items such as automobiles and
major appliances.
 Problems with these programs include:
1. Costs (lost revenue)
2. The paperwork involved (to file for the money and process the claim)
3. Diminished effectiveness, because people expect them
4. Successful refund or rebate program, must offer a perceived newness or originality. They should
generate an impact, or enough to cause an action.

Sampling
 Sampling is the actual delivery of a product to consumers for their use or
consumption. Normally, samples are provided free-of-charge. In business-to-business
markets, companies often provide samples of products to potential clients. Sampling
can also be used in the service sector.
 Benefits of Sampling
 The benefits of sampling include the ability to introduce new products, generate
interest in products, and collect information about consumers.
 Successful Sampling Programs
 Sampling must be a central part of the IMC plan. The primary purpose of sampling is to
encourage a trial use by a consumer or by a business. Sampling is most effective when
it is used to introduce a new product or a new version of a product to a market.

Bonus Packs
 When an additional or extra number of items of a product is placed in a special
package, it is called a bonus pack.
Objectives of bonus packs include:
1. Increase usage of the product
2. Match or pre-empt competitive actions
3. Stockpile the product
4. Develop customer loyalty
5. Attract new users
6. Encourage brand switching

Keys to Successful Bonus Packs
 Bonus packs reward customer loyalty and allow them to stockpile.
 They may lead to brand switching if the brand has been used previously.
 They can build relationships between manufacturers, retailers, and consumers.
 Bonus packs do not tend to attract new customers because they increase purchase
risk. Some consumers are skeptical of bonus pack offers.
 Bonus packs are costly in the sense that additional amounts of product are being
sold for the same or a similar price. In addition, new packaging and shipping costs
may be incurred.

Price-Offs
 A price-off is a temporary reduction in the price of a product to the consumer.
Price-offs are normally used to stimulate sales of an existing product. Price-offs are
easy to implement and can have a sudden impact on sales.
 Benefits of Price-Offs
 Price-offs can stimulate sales. They can encourage brand switching. They provide
and immediate reward to customers.

Problems with Price-Off Promotions
 It normally takes at least a 20% increase in sales to offset each 5% price reduction.
Consequently, although a price-off offer may have a large impact on sales, it can
be devastating for profit margins.
 Price-off programs can encourage consumers to become more price sensitive.
 Too many price-off offers can create a detrimental impact on the firm’s image.

 Learning Objective # 3: How do different types of customers respond to
consumer promotions?

Planning for Consumer Promotions
 It is vital for consumer promotions to support the brand image and the brand
positioning strategy of a product.
 Types of consumers in relation to promotions.
 Promotion prone consumers, or individuals who regularly respond to coupons, price-
off plans, or premiums.
 Brand loyal consumers, or consumers who purchase only one particular brand and do
not substitute regardless of any deal being offered.
 Price sensitive consumers, for whom price is the primary if not the only criterion used
in making a purchase decision.
 The type of sales promotions that is used will be impacted by the consumer group
being targeted.

 Learning Objective # 4: What types of trade promotions can help push products
on to retailer shelves and eventually on to end users?

Trade Promotions
 Trade promotions are the expenditures or incentives used by manufacturers and
other members of the marketing channel to help push products through to
retailers.
 The best way to understand trade promotions is to note that they are incentives
used by members of the trade channel to entice another member to purchase
goods for eventual resale.
 The difference between trade promotions and consumer or sales promotions is
that the latter involves a sale to an end-user or customer.

Trade Allowances
 Trade allowances provide financial incentives to other channel members to
motivate them to make purchases
1. Off-Invoice Allowances - When financial discounts given for each item, case, or
pallet ordered it is an off-invoice allowance. They are used often during holiday
seasons to encourage retailers to purchase large quantities of various items.
2. Slotting Fees - Slotting fees are funds paid to retailers to stock new products.
 Exit Fees - Exit fees are monies paid to remove an item from a retailer’s inventory.

Trade Contests
 Manufacturers sometimes use trade contests. Rewards are given as contest prizes to
brokers, retail salespeople, retail stores, wholesalers, or agents.
 These funds are known as spiff money.
 Contests can be held at various levels, such as:
1. Agents versus agents
2. Wholesalers versus wholesalers
3. Retail stores within a chain versus each other
4. Retailer store chains versus other retail chains
5. Individual salespersons within retail stores versus each other

Trade Shows
 Trade shows often present a situation in which the manufacturer’s sales team can meet
directly with decision makers and buyers from business-to-business clients.
 From the retailer’s perspective, a trade show allows buyers to compare merchandise
and to make contact with several perspective vendors in a short period of time and
possibly negotiate special deals.
 Specialty shows are better in three situations, most notably when the goal is:
1. To establish a client base quickly.
2. To establish a new brand.
3. To promote a new product.

 Learning Objective # 5: What concerns exist for manufacturers considering trade
promotions programs?

Concerns with Trade Promotions
 As company leaders consider ways to include trade promotions into an overall IMC plan, they
should be aware of the potential problems associated with trade promotions programs. These
include:
1. Costs: management must try to keep these costs at a reasonable level and make sure that the
money is being spent wisely.
2. The impact on small manufacturers: when the cost to get an item initially stocked is high large
manufacturers have the advantage.
3. Over reliance on trade promotions to move merchandise: overuse of trade promotions has led to
a situation in which merchandise does not move until a trade promotion incentive is offered.
4. The potential erosion of brand image: as more money is pumped into trade promotions, less
money is spent on advertising, thus hurting the brand’s image.

 Learning Objective # 6: What issues complicate international sales promotions
programs?

International Implications
 Sales promotions must be both legal and culturally acceptable.
 Some citizens take a dim view of promotions such as coupons. Be aware of these
viewpoints.
 Remember that differences exist in trade show attendance in international shows.
Many times the actual buyers attend international shows, seeking to make deals.
This is different than in many domestic U.S. shows.