SALES-PROMOTION STRATEGIES

Sales promotion, a key ingredient in many marketing campaigns, consists of a diverse

collection of incentive tools, mostly short term, designed to stimulate trial, or quicker or
greater purchase, of particular products or services by consumers or the trade. Whereas
advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales
promotion includes tools for consumer promotion (samples, coupons, cash refund offers,
prices off, premiums, prizes, patronage rewards, free trials, warranties, tie-in promotions,
cross-promotions, point-of-purchase displays, and demonstrations)


Sales Promotion Strategies
promotion (prices off, advertising and display allowances, and free goods), and businesss and
sales force promotion (trade shows and conventions, contests for sales reps, and specialty
advertising). In years past, the advertising-to-sales-promotion ratio was about 60:40. Today,
in many consumer-packaged-goods companies, sales promotion accounts for 6575 percent
of the overall promotional budget. Several factors have contributed to this trend,
particularly in consumer markets.
Internal factors include the following:
Promotion is now more accepted by top management as an effective sales tool, more product
managers are qualified to use sales-promotion tools, and product managers are under
greater pressure to increase current sales. External factors include: The number of
brands has increased, competitors use promotions frequently, many brands are seen as
being similar, consumers are more price-oriented, the trade demands more deals from
manufacturers, and advertising efficiency has declined because of rising costs, media
clutter, and legal restraints.
In general, sales promotion seems most effective when used together with advertising.

Purpose of Sales Promotion
Sales-promotion tools can be used to achieve a variety of objectives. Sellers use
incentive-type promotions to attract new triers, to reward loyal customers, and to
increase the repurchase rates of occasional users. New triers are of three types
users of another brand in the same category, users in other categories, and frequent
brand switchers. Sales promotions often attract the brand switchers, because users of
other brands and categories do not always notice or act on a promotion. Brand
switchers are primarily looking for low price, good value, or premiums, so sales promotions
are unlikely to turn them into loyal users. Sales promotions used in markets
of high brand similarity produce a high sales response in the short run but little permanent
gain in market share. In markets of high brand dissimilarity, however, sales
promotions can alter market shares permanently.
Advertising typically acts to build long-term brand loyalty, but the question of whether or not
sales promotion weakens brand loyalty over time is subject to different interpretations. Sales
promotion, with its incessant prices off, coupons, deals, and premiums, may devalue the
product offering in the buyers minds. Therefore, companies need to distinguish between
price promotions (which focus only on price) and added-value promotions (intended to
enhance brand image).




Major Decisions in Sales Promotion

Establishing objectives. Sales-promotion objectives are derived from broader
promotion objectives, which are derived from more basic marketing objectives that
are developed for the product. The specific objectives for sales promotion vary with
the target market. For consumers, objectives include encouraging purchase of
larger-size units, building trial among nonusers, and attracting switchers away from
competitors brands. For retailers, objectives include persuading retailers to carry
new items and higher levels of inventory, encouraging off-season buying, offsetting
competitive promotions, building brand loyalty, and gaining entry into new retail
outlets. For the sales force, objectives include encouraging support of a new product
or model, encouraging more prospecting, and stimulating off-season sales.36

Selecting consumer-promotion tools. distinguish between manufacturer promotions
and retailer promotions. The former is illustrated by the auto industrys frequent
use of rebates and gifts to motivate test-drives and purchases; the latter includes
price cuts, retailer coupons, and retailer contests or premiums. We can also
distinguish between sales-promotion tools that are consumer-franchise building,
which reinforce the consumers brand understanding, and those that are not. The
former imparts a selling message along with the deal, as in the case of coupons that
include a selling message. Sales-promotion tools that are not consumer-franchise
building include price-off packs, premiums that are unrelated to a product, contests
and sweepstakes, consumer refund offers, and trade allowances.

Selecting trade-promotion tools. Manufacturers can use a number of trade-promotion
Tools
(1) persuade an intermediary to carry the product,
(2) persuade an intermediary to carry more units,
(3) induce retailers to promote the brand by featuring, display, and price reduction,
(4) stimulate retailers and their salespeople to push the product.
The growing power of large retailers has increased their ability to demand trade promotion at
the expense of consumer promotion and advertising, so manufacturers often spend more on
trade promotion than they would like.

Selecting business- and sales force promotion tools. Companies spend billions of dollars
onbusiness- and sales force promotion tools, to gather business leads, impress and reward
customers, and motivate the sales force to greater effort. Companies typically develop
budgets for each business-promotion tool that remain fairly constant from year to year.

Developing the program. In deciding to use a particular incentive, marketers have to
consider:
(1) the size of the incentive (a certain minimum is necessary if the promotion is to succeed; a
higher level will produce more sales response but at a diminishing rate)
(2) the conditions for participation (whether to offer the incentive to everyone or to select
groups)
(3) the duration (if the period is too short, many prospects will not be able to take advantage
of itbut if it runs too long, it loses some of its act now force)
(4) the distribution vehicle (each distribution method involves a different level of reach,
cost, and impact)
(5) the timing (annually, one-time, or some other dateswhich must be communicated and
coordinated with other departments)
(6) the total sales promotion budget (including administrative costs and incentive costs).

Pretesting the program. Although most sales-promotion programs are designed on the
basis of experience, savvy marketers use pretests to determine if the tools are appropriate, the
incentive size is optimal, and the presentation method is efficient. Strang maintains that
promotions usually can be tested quickly and inexpensively and that large companies should
test alternative strategies in selected market areas with each national promotion.

Implementing and evaluating the program. Implementation planning must cover lead
time (the time needed to prepare the program before the launch) and sell-in time (which
begins with the launch and ends when approximately 95 percent of the deal merchandise is in
the hands of consumers).
After implementation, manufacturers can measure sales-promotion effectiveness using sales
data, consumer surveys, and experiments.


Major Consumer-Promotion Tools

Samples: Offer of a free amount of a product or service.
Coupons: Certificates offering a stated saving on the purchase of a specific product.
Cash Refund Offers (rebates): Provide a price reduction after purchase: Consumer sends a
specified proof of purchase to the manufacturer who refunds part of the purchase price
by mail.
Price Packs (cents-off deals): Promoted on the package or label, these offer savings off the
products regular price.
Premiums (gifts): Merchandise offered at low or no cost as an incentive to buy a particular
product.
Prizes (contests, sweepstakes, games): Prizes offer consumers the chance to win cash, trips,
or merchandise as a result of purchasing something. A contest calls for consumers to submit
an entry to be examined by judges who will select the best entries. A sweepstakes asks
consumers to submit their names for a drawing. A game presents consumers with something
every time they buybingo numbers, missing lettersthat might help them win a prize.
Patronage Awards:Values in cash or points given to reward patronage of a certain seller.
Free Trials: Inviting prospects to try the product free in the hope that they will buy the
product.
Product Warranties: Explicit or implicit promises by sellers that the product will perform as
specified or that the seller will fix it or refund the customers money during a specified
period.
Tie-in Promotions:Two or more brands or companies team up on coupons, refunds, and
contests to increase pulling power.
Cross-Promotions: Using one brand to advertise another noncompeting brand.
Point-of-Purchase (POP) Displays and Demonstrations: Displays and demonstrations
that take place at the point of purchase or sale.

Major Trade-Promotion Tools
Trade Shows and Conventions: Industry associations organize annual trade shows and
conventions where firms selling products and services to this industry buy space and set up
booths and displays to demonstrate their products. Participating vendors expect several
benefits, including generating new sales leads, maintaining customer contacts, introducing
new products, meeting new customers, selling more to present customers, and educating
customers with publications, videos, and other audiovisual materials.
Sales Contests: A sales contest aims at inducing the sales force or dealers to increase sales
over a stated period, with prizes going to those who succeed. Incentives work best when
they are tied to measurable and achievable sales objectives (such as finding new accounts or
reviving old accounts) for which employees feel they have an equal chance.
Specialty Advertising: Specialty advertising consists of useful, low-cost items (such as
calendars) bearing the companys name and address, and sometimes an advertising message,
that salespeople give to prospects and customers.


PUBLIC RELATIONS STRATEGIES
Not only must the company relate constructively to customers, suppliers, and dealers,
but it must also relate to a large number of interested publics. A public is any group
that has an actual or potential interest in or impact on a companys ability to achieve
its objectives. Public relations (PR) involves a variety of programs that are designed to
promote or protect a companys image or its individual products.
PR departments typically perform five functions:
(1) press relations (presentingnews and information about the organization in the most
positive light)
(2) product publicity (publicizing specific products)
(3) corporate communication (promoting understanding of the organization through internal
and external communications)
(4) lobbying (dealing with legislators and government officials to promote or defeat
legislation and regulation)
(5) counseling (advising management about public issues and company positions and
imageand advising in the event of a mishap)

Marketing Public Relations

Many companies are turning to marketing public relations (MPR) to directly support
corporate or product promotion and image making. Thus MPR, like financial PR and
community PR, serves a special constituency, namely the marketing department.40
MPR plays an important role in:

Assisting in the launch of new products: The amazing success of toys such as the
Pokemon line owes a great deal to clever publicity.

Assisting in repositioning a mature product: New York City had extremely bad press in
the 1970s until the I Love New York campaign began.

Building interest in a product category: Companies and trade associations use MPR to
rebuild declining interest in commodities such as eggs and expand consumption of
products such as pork.

Influencing specific target groups: McDonalds sponsors special neighborhood events in
Latino and African American communities to build goodwill.
Defending products that have encountered public problems: Johnson & Johnsons
masterly use of MPR was a major factor in saving Tylenol from extinction following two
incidents in which poison-tainted Tylenol capsules were found.

Building the corporate image in a way that reflects favorably on its products: Richard
Bransons outrageous publicity stunts have created a bold, upstart image for his
U.K.-based Virgin Group.

Major Decisions in Marketing PR
In considering when and how to use MPR, management must follow the same process
as it does for advertising and sales promotion: Establish the marketing objectives,
choose the messages and vehicles, implement the plan carefully, and evaluate the
results.

Establishing the marketing objectives. These may include: Build awareness of a product,
service, person, organization, or an idea; add credibility by communicating a
message in an editorial context; boost sales force and dealer enthusiasm; and hold
down promotion costs while gaining share of mind. Management needs to set
specific objectives for each MPR campaign so the results can be evaluated. PR
expert Thomas L. Harris suggests PR and direct-response marketing work together
to build marketplace excitement before media advertising breaks, build a core
customer base, build a one-to-one relationship with consumers, turn satisfied
customers into advocates, and influence opinion leaders and influencers.

Choosing messages and vehicles. The MPR expert must identify or develop interesting
stories to tell about the product. If there are few stories, the expert should propose
newsworthy events to sponsor as a way of stimulating media coverage. For example,
when Anheuser-Busch sponsored a Black World Championship Rodeo in Brooklyn,
the event attracted more than 5,000 spectators.

Implementing and evaluating the plan. PR implementation must be handled with care.
A great story is easy to place, but other stories might not get past busy editors. One of
the chief assets of publicists is their personal relationship with media editors. MPRs
contribution to the bottom line is difficult to measure because it is used along with
other promotional tools. The easiest measure is the number of exposures obtained in
the media, including the audience size and the cost of that space and time if
purchased at advertising rates. Other measures include changes in product awareness,
comprehension, or attitude resulting from the MPR campaign (after allowing for the
effect of other promotional tools). The most satisfactory measure, however, is sales and-
profit impact, allowing the company to determine its return on MPR investment.