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1. 19
Prof. ( Dr.) Kao Kveng Hong, Ph.D, D.Litt.
Chapter -19
Sales Promotions

2. Sales Promotions
Hook Fans
 Corpus Christi Hooks – Double A
 Affiliate of Houston Astros
 Attendance – 7,000 per game
 Thrives on consumer promotions
 30 promotional nights (72 home games)
 Discounts and giveaways
 Sponsorships and trade promotions
 Whataburger Field
 “Postgame catch” and “Kids Day”
 Fun, family entertainment
12

3. Sales Promotions
Chapter Overview
• Consumer promotions
• Individuals/businesses that use product
• Trade promotions
• Directed to channel members
• Possible erosion of brand equity
• Can differentiate a brand
• Use varies – product life cycle
12

4. Types of Consumer Promotions
• Coupons
• Premiums
• Contests and sweepstakes
• Refunds and rebates
• Sampling
• Bonus packs
• Price-offs
F I G U R E 1 2 . 1

5. Coupons
• 323 billion distributed
• 3 billion redeemed (0.93%)
• Average value was 89 cents
• Savings of $3.47 billion
• Coupon usage
• 78% of households use
• 64% willing to switch brands

6. F I G U R E 1 2 . 2
Percentage of Consumers and Coupon Usage
Always
20.7%
Rarely
17.0%
Sometimes
37.7%
Never
24.6%
Source: Karen Holt, “Coupon Crimes,” Promo, Vol. 17, No. 5 (April 2004), pp. 23-29.

7. A coupon accompanies this informational Gold Bond advertisement.

8. Influencing Brand Purchases
On a scale of 1 to 10, the following are the top five influences on
the brand purchased by a consumer.
Source: The SecondAnnual Survey of Consumer Preferences for Product Sampling, Santella &
Associates (Http://www.santella.com/marketing.htm).
• Sampling 7.78
• Word-of-mouth 7.18
• Coupons 5.91
• Advertising 5.61
• Contests 1.24

9. Percentage of Sales with a Coupon
Source:AC Nielson Scantrack, Santella &Associates
Product category % of sales using
manufacturer’s coupon
• Disposable diapers 17.1%
• Detergents 15.0%
• Meal starters 14.2%
• Dough products (refrigerated) 13.6%
• Cereal 13.4%
• Wrapping materials, bags 12.8%
• Oral hygiene products 11.7%
• Household cleaners 11.7%

10. Methods of Distributing Coupons
• Print media (90%)
• FSI (88%)
• Direct mail
• On- or in-package
• In-store
• Sampling
• Scanner-delivered
• Cross-ruffing
• Response offer
• Internet
• Fax
• Sales staff
F I G U R E 1 2 . 3

11. Print and FSI Coupons
Reasons for using:
• Consumers must make conscious effort to
clip coupon
• Creates brand awareness
• Must purchase brand on next trip to retailer
• More likely to recall brand name

12. Types of Coupons
• Instant redemption
• Bounce-back
• Scanner-delivered
• Cross-ruffing
• Response offer

13. Coupon Redemption Rates
Source: Santella & Associates
Type of coupon
• Instant redeemable
Percent Redeemed
39.3%
• Bounce-back 17.2%
• Instant redeemable – cross ruff 17.1%
• Electronic shelf 10.2%
• Electronic checkout 7.8%
• In-pack 5.8%
• On-pack 4.7%
• Direct mail 3.5%
• Handout 3.1%
• Free-standing inserts 1.3%

14. Problems with Coupons
• Reduced revenues
• Used by brand preference consumers (80%)
• “Necessary evil”
• $500 million illegally redeemed
• Mass cutting
• Counterfeiting
• Misredemption

15. Types of Premiums
• Free-in-the-mail
• In- or on-package
• Store or manufacturer
• Self-liquidating

16. Premium Offer
Click picture for video.
An ad by Haik
Humble Eye Center
offering a premium
with the purchase of
custom pair of eye
glasses.

17. Keys to Successful Premiums
• Match the premium to the target market
• Carefully select the premiums
• Avoid fads, try for exclusivity
• Pick premium that reinforces firm’s product and image
• Integrate the premium with other IMC tools
• especially advertising and POP displays
• Don’t expect premiums to increase short-term profits
Source: Based on Don Jagoda, “The Seven Habits of Highly Successful Premiums,” Incentive, (August
1999), Vol. 173, Issue 8, pp. 104-105.
F I G U R E 1 0 . 4

18. Fast-food chains are
well known for their
in-store premiums.

19. Contests and Sweepstakes
• Contests – require activity, skill
• Can require purchase to enter
• Some states illegal
• Sweepstakes – random chance
• Must publish odds of winning
• Cannot require purchase
• Rewards
• Extrinsic
• Intrinsic

20. Contests and Sweepstakes
• Rewards
• Extrinsic
• Choosing the right prizes
• Intrinsic
• Choosing the right contests and sweepstakes
• Alternative locations
• Internet
• Mobile phone

21. Contests and Sweepstakes
Goals
• Coordinate with other marketing
• Encourage customer traffic
• Boost sales - questionable
• Intrinsic rewards draws customers back
• Increase in brand awareness

22. Refunds and Rebates
• Refunds – soft goods
• Rebates – hard goods
• Hassle to redeem
• Now expected by consumers
• Redemption rates
• 30% overall
• 65% for rebates over $50

23. F I G U R E 1 2 . 6
Types of Sampling
• In-store distribution
• Direct sampling
• Response sampling
• Cross-ruff sampling
• Media sampling
• Professional sampling
• Selective sampling

24. Benefits of Sampling
• Introduce new products
• Generate interest
• Generate leads
• Collect information
• Internet sampling
• Boost sales

25. Experiment
Impact of In-Store Sampling
Product Previous 4 weeks Sampling Week Following 4 weeks
Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In-Store Sampling on the
Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.
• Meat product A 100% 430% 110%
• Meat product B 100% 590% 123%
• Meat product C 100% 185% 100%
• Bread product 100% 170% 90%
• Biscuit product A 100% 359% 64%
• Biscuit product B 100% 201% 49%

26. Experiment
Impact of In-Store Sampling on Competitors
Product Previous 4 week Sampling week Following 4 weeks
Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In-
Store Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.
• Bread product 100% 170% 90%
• Competitor A 100% 106% 105%
• Competitor B 100% 79% 93%
• Competitor C 100% 78% 86%

27. Sampling Programs
• Problems
• Cost
• Distribution
• Effective sampling
• Component of IMC plan
• Stimulate trial usage
• Target audience of sample

28. • Increase usage of a product
• Match or preempt competition
• Stockpile the product
• Develop customer loyalty
• Attract new users
• Encourage brand switching
F I G U R E 1 2 . 7
Reasons for Using Bonus Packs

29. Problems with Bonus Packs
• Rarely attract new customers
• Some consumers skeptical
• Small bonus – price not changed
• Large bonus – price increased first

30. Price-Offs
• Temporary price reduction
• Stimulating sales
• Reduces financial risk
• Brand switching
• Stockpiling

31. Price-Offs
• Proven to be successful
• Appeal of monetary savings
• Reward is immediate
• Problems
• Can have a negative impact on profit
• Encourages consumers to become more
price-sensitive
• Potential image on brand image

32. Impact of Price-off on
Consumer Purchase
Source: “Studies Indicate Coupons are an Effective Promotional Tool,” Santella &
Associates (http://www.santella.com/coupon.htm)
Consumer purchased because of sale price
9%
Consumer unaware item was on sale.
51%
Consumer would have purchased item anyway
40%

33. Promotion Combinations
• Overlay
• Intra-company tie-in
• Inter-company tie-in

34. Copyright © 2010 by Pearson Education, Inc. publishing as Prentice Hall 12-34
Planning Consumer Promotions
Promotion Prone
Brand Loyal
Price Sensitive

35. Retail Incentives
Consumer Promotions
• Increase store traffic
• Increase store sales
• Attract new customers
• Increase the basket size

36. Trade Promotions
• Account for 70% of marketing budget
• Often 2nd largest expense
• Account for 17.4% of gross sales
Trade Allowances
Trade
Promotions
Trade Incentives
Trade Contests
Trade Shows

37. • Off-invoice allowance
• Price discount
• 35% of all trade dollars
• Slotting fees
• Exit fees
F I G U R E 12 . 10
Trade Allowances

38. Slotting Fees
• Retailer justification
• 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

39. 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
• Retailers can schedule and promote on-deal brands
• Forward buying
• Pass savings on or pocket higher margin
• Additional carrying costs
• Diversion
• Pass savings on or pocket higher margin
• Additional shipping costs

40. Trade Contests
• Used to achieve sales targets
• Funds known as “spiff money”
• Rewards can be prizes or cash
• Can be designed for various channel members
• Some organizations do not allow trade contests
because of possible conflict of interests

41. F I G U R E 12 . 11
Trade Incentives
• Cooperative merchandising
agreement
• Premium or bonus pack
• Co-op advertising programs
Trade
Incentive

42. Cooperative Merchandising
Agreement
• Formal agreement
• Popular with manufacturers
• Retailer must perform marketing functions
• Manufacturer maintains control
• Longer-term commitments
• Benefit retailers
• Schedule calendar promotions

43. Cooperative Advertising
• Manufacturer pays part of retailer’s ad 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

44. Trade Shows
• Manufacturers (sellers)
• Display merchandise
• Seek prospects
• Retailers (buyers)
• Compare merchandise
• Seek vendors

45. • Education seekers
• Reinforcement seekers
• Solution seekers
• Buying teams
• Power buyers
Source: English, “On Displays,” Business First - Western New York, (Nov. 29, 1999), Vol. 16, No. 31, pp. 31-32.
F I G U R E 12 . 12
Categories of Buyers at Trade Shows

46. Trade Shows
• Few deals finalized at trade show
• International attendees want to make deals
• Increase in international trade shows
• National shows being replaced by regional
and niche shows
• Niche shows
• Provide better prospects
• Lower costs

47. Concerns Trade Promotions
• Corporate reward structure
• Used for short-term sales goals
• Tend to be used outside of IMC Plan
• Costs
• Over-reliance to push merchandise
• Difficult to reduce – competitive pressures
• Potential erosion of brand image