Transcript Sales Promotion - Southern Methodist University

Professor Chip Besio
Cox School of Business
Southern Methodist University
What Is Sales Promotion?
 Promotion tool that offers short-term
incentives to encourage customers to
purchase, resulting in immediate increases in
sales of a product or service.
 Reasons for rapid growth in sales promotion:
 Product managers are facing more pressure to
increase current sales,
 Companies face more competition in mature
markets,
 Advertising efficiency has declined,
 Consumers have become more deal oriented.
How Important Are Promotional
Sales?
 For a traditional high-low retailer, the
sales from items in the ad represent
approximately 25% of weekly grocery
sales
 100 - 200 items out of @ 40,000 are
therefore responsible for one-quarter of
a store’s volume
Source: Center for Retail Management,
Northwestern University
Types of Sales Promotions
 Consumer Promotions
 Manufacturer to consumer
 Trade Promotions
 Manufacturer to retailer/wholesaler
 Retailer Promotions
 Retailer to consumer
 Business Promotions
 Manufacturer to business buyer
How Significant Are Trade
Promotions?
Total Advertising and Promotion Budget
% by Spending type -2008
28%
52%
20%
Trade Promotion
Consumer Promotion
Media Advertising
Source: A.C. Nielsen
A comparison of push and pull promotional
strategies
Effects of Sales Promotion on
Consumer Behavior
 Expand category volume
 Cause brand switching
 Cannibalization
 Change purchase timing
 Cause stockpiling
Sales promotions can be used to achieve many objectives
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Coupons
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Deals
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Premiums
• Self-Liquidating: Free Toy
• in Happy Meal
• Deal-Prone & Value Seeking Consumers
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Contests
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Sweepstakes
• Value-Based Prizes
• Experience-Based Prizes
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Samples
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Loyalty Programs
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Point-of-Purchase Displays
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Rebates
SALES PROMOTION
CONSUMER-ORIENTED SALES PROMOTION

Product Placement
SALES PROMOTION
TRADE-ORIENTED SALES PROMOTION

Allowances and Discounts
• Merchandise Allowance
• Case Allowance
 Free Goods
• Finance Allowance
 Floor Stock Protection
 Freight Allowance
• Display Allowance
SALES PROMOTION
TRADE-ORIENTED SALES PROMOTION

Cooperative Advertising
Training of Distributors’ Sales Forces
 Buy-Back Guarantees
 Push Money – “Spiffs”


Contests
Retailer Promotions
 Short-Term Incentives by the Retailer that
Encourage Purchase of a Product or Service
Retailer-Promotion
Objectives
Retailer-Promotion
Tools
Generate Store Traffic
Price-Cuts
Free Goods
Improve the Retailer’s Price
Image
Displays
Generate Profits from
Consumers and
Manufacturers
Retailer
Coupons
Feature
Advertising
Reinforce the Store’s
Positioning and Image
Contests/
Premiums
Business Promotions
 Short-Term Incentives That are Directed to
Industrial Customers
Business-Promotion
Objectives
Business-Promotion
Tools
Generate Business Leads
Conventions
Stimulate Purchases
Trade Shows
Reward Customers
Sales Contests
Motivate Salespeople
Source: Prentice Hall
Key Issues in Executing a Sales
Promotion
Size of the incentive (depth of
discount)
What are the conditions for
participation?
Structure and distribution of the
promotion program
Length of the program (limited time)
How to evaluate success of the
program
Source: Adapted from Prentice Hall