Info

Maintain promotions

Cut back promotions

Higher profits for all

Market share goes to our firm

Maintain promotions

Market share goes to all other firms

Market share stays constant; profits stay low

Figure 16-8 The sales promotion trap

Exhibit 16-32 Dell's sweepstakes started a promotional battle in the personal computer industry

Exhibit 16-32 Dell's sweepstakes started a promotional battle in the personal computer industry

developed as a tactic for getting buyers to sample new products. But they have become a common, and costly, way of doing business.73 In many areas of the country, supermarkets have gotten into the trap of doubling or even tripling manufacturers' coupons, which cuts into their already small profit margins. Fast-food chains have also fallen into the trap with promotions featuring popular menu items, such as Burger King's Whopper for 99 cents. The sales promotion war spread to yet another industry recently when Dell Computer began using sales promotion offers to help sell its personal computers. Dell's Trip-a-Day Giveaway offered consumers a chance to win a vacation worth up to $50,000 (Exhibit 16-32). Competitors quickly matched Dell's promotion: Compaq and Hewlett Packard developed their own sweepstakes and also began using rebates. Gateway gave away free printers and scanners with certain PCs, and Apple offered no-payment financing. Industry analysts have expressed concern over the impact the promotional war will have on these companies as profit margins in the PC industry are already very low.74

Marketers must consider both the short-term impact of a promotion and its long-term effect on the brand. The ease with which competitors can develop a retaliatory promotion and the likelihood of their doing so should also be considered. Marketers must be careful not to damage the brand franchise with sales promotions or to get the firm involved in a promotional war that erodes the brand's profit margins and threatens its long-term existence. Marketers are often tempted to resort to sales promotions to deal with declining sales and other problems when they should examine such other aspects of the marketing program as channel relations, price, packaging, product quality, or advertising.

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