Major Decisions in Sales Promotion

In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results.

^ 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. The main consumer-promotion tools are summarized in Table 5.3. We can distinguish between manufacturer promotions and retailer promotions. The former is illustrated by the auto industry's 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 consumer's 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, as shown in Table 5.4, to (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, and (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.37

^ Selecting business- and sales force promotion tools. Companies spend billions of dollars on business- and sales force promotion tools, shown in Table 5.5, 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

Table 5.3 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 product's 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 buy—bingo numbers, missing letters—that 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 customer's 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.

to select groups); (3) the duration (if the period is too short, many prospects will not be able to take advantage of it—but if it runs too long, it loses some of its "act now" force); (4) the distribution vehich (each distribution method involves a different level of reach, cost, and impact); (5) the timing (annually, one-time, or some other dates—which must be communicated and coordinated with other departments); and (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.38

^ 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.

Table 5.4 Major Trade-Promotion Tools

Price-Off (off-invoice or off-list): A straight discount off the list price on each case purchased during a stated time period.The offer encourages dealers to buy a quantity or carry a new item that they might not ordinarily buy.The dealers can use the buying allowance for immediate profit, advertising, or price reductions.

Allowance: An amount offered in return for the retailer's agreeing to feature the manufacturer's products in some way.An advertising allowance compensates retailers for advertising the manufacturer's product.A display allowance compensates them for carrying a special product display.

Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size. Manufacturers might offer push money or free specialty advertising items to retailers that carry the company's name.

Source. For more information, see Betty Spethman, "Trade Promotion Redefined," Brandweek, March 13, 1995, pp. 25-32.

Table 5.5 Major Business and Sales Force 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 company's 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 company's ability to achieve its objectives. Public relations (PR) involves a variety of programs that are designed to promote or protect a company's image or its individual products.

The wise company takes concrete steps to manage successful relations with its key publics. PR departments typically perform five functions: (1) press relations (presenting news 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 communica-

tions); (4) lobbying (dealing with legislators and government officials to promote or defeat legislation and regulation); and (5) counseling (advising management about public issues and company positions and image—and advising in the event of a mishap).39

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