Bonus Packs. Bonus Packs

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1 Bonus Packs Extra quantities of a product that are offered for the same price Alternative to price-off deals Many bonus-packs will be purchased by regular customers who would have purchased the brand anyway 1

2 Bonus Packs Bonus Packs 2

3 Rebates/Refunds Rebates/Refunds Manufacturers give cash discounts or reimbursements to consumers who Submit (mail) proofs of purchase 3

4 Rebates/Refunds Rebate offer 4

5 Refunds and Rebates A refund offer 5

6 Contests and Sweepstakes Primarily to enhance a brand s image Sweepstakes are preferred because it s relatively inexpensive and simple to execute Sweepstakes purely on the basis of chance, no need for proofs of purchase Contest Solve the specific contest problem and may need proofs of purchase 6

7 Contests and Sweepstakes Sweepstakes Offer for Deer Park 7

8 Contests and Sweepstakes Dickies American Worker of the Year Contest 8

9 Contests and Sweepstakes Sweepstakes offer 9

10 Contests and Sweepstakes Primarily to enhance a brand s image Sweepstakes are preferred because it s relatively inexpensive and simple to execute Sweepstakes purely on the basis of chance, no need for proofs of purchase Contest Solve the specific contest problem and may need proofs of purchase 10

11 Contests Contests 11

12 Games Provide an instant reward Create excitement, stimulate brand interest, and reinforce brand loyalty 12

13 Games Games 13

14 Online Sweeps, Contests, and Games Growing in importance Forrester Research tracks Internet developments estimates online to be a $6 billion business by 2005 Create awareness, build consumer interaction, and enable expansion of a brand s opt-in database 14

15 Continuity Promotions Reward consumers repeat purchasing Loyalty programs, point programs Serve to cement a relation with the consumer 15

16 Continuity Promotions The Spam stuff points program 16

17 Internet Promotions The Internet is becoming a major medium for consumer-oriented promotions Online couponing is a cheaper and more targeted, but susceptible to fraud 17

18 Evaluating Sales Promotion Ideas Step 1: Identify the objectives Step 2: Achieve agreement Step 3: Evaluation system Good general idea? Appeal to target? Unique? Clear? Cost-Effective? 18

19 Evaluating Sales Promotion Ideas Evaluating after implementation five characteristics: Efficiency cost-per-unit moved Execution Ease total time and effort involved Expense sum of the direct outlays Equity Enhancement subjective assessment of enhanced brand image Effectiveness total units sold of the promoted product in that period 19

20 Types of Sales Promotions (b) Trade-Oriented Sales Promotion Trade Allowances Cooperative advertising and vendor support programs Trade contest and incentive Specialty advertising Trade Shows 20

21 Objectives of Trade Promotion Introduce new or revised products Increase distribution of new packages or sizes Build retail inventories Maintain/Increase manufacturer s shelf space Obtain displays outside shelf locations Reduce excess inventory Achieve product features in retailer s ads Counter competitive activity Sell as much as possible to final consumers 21

22 Trade Promotion Key Ingredients to Success Financial incentive Correct timing Minimize retailer s effort/cost Quick results Improve retailer performance 22

23 Types of Trade Promotions Trade allowances Cooperative advertising and vendor support programs Trade contests and incentives Trade shows 23

24 Trade Allowances Trade Allowances Used by manufacturers to reward wholesalers and retailers for performing activities in support of the manufacturer s brand 24

25 Major Forms of Trade Allowances Slotting allowances Bill-back allowances Off-invoice allowances The fees manufacturers pay retailers for access to the slot, or location, Typically when a manufacturer to get its new brand accepted by retailers A form of bribery? or Legitimate cost of doing business? 25

26 Major Forms of Trade Allowances Slotting allowances Bill-back allowances Off-invoice allowances Retailers receive allowances for featuring the manufacturer s brand in advertisements or for providing special displays 26

27 Major Forms of Trade Allowances Slotting allowances Bill-back allowances Off-invoice allowances Most frequently used form Deals offered periodically to trade that permit wholesalers and retailers to deduct a fixed amount from the invoice Retailers do not necessarily pass along to consumers the discounts 27

28 Forward Buying and Diverting Forward Buying Diverting Retailers purchase enough products on deal to carry them over until the manufacturer s next regularly scheduled deal Retailers savings from forward buying often are not passed on to consumers Leads to increased distribution costs Manufacturers experience reduced margins due to price discounts 28

29 Forward Buying and Diverting Forward Buying Diverting Occurs when a manufacturer restricts a deal to a limited geographical area Retailers buy large quantities at the deal price and then resell the excess quantities in other geographical areas Product quality potentially suffers due to delays and serious problem could result from product tampering 29

30 Efforts to Rectify Trade Promotion Problems Efficient Consumer Response (ECR) Category Management Everyday Low Pricing (EDLP) Pay-for-Performance Programs Account-Specific Marketing 30

31 Efficient Consumer Response Efficient Consumer Response (ECP) A broad-based concept of business management that is oriented toward enhancing efficiencies and reducing costs in the grocery industry 31

32 Efficient Consumer Response 1. Improved productreplenishment practices 2. Reduced trade promotions 3. Improved product introductions - move product more efficiently - Electronic Data Interchange (EDI) - minimize inventory costs and reduce forward buying and diverting - EDLP, Pay-for-Performance programs - respond to consumers needs for new product - avoid simply introducing metoo products 32

33 Efforts to Rectify Trade Promotion Problems Efficient Consumer Response (ECR) Category Management Everyday Low Pricing (EDLP) Pay-for-Performance Programs Account-Specific Marketing 33

34 Category Management Category Management Retailers and manufacturers must work together, share market intelligence, and develop strategies that are mutually beneficial 34

35 Category Management Reviewing the product category Targeting consumers Implementing strategy Planning merchandising Evaluating results 35

36 Efforts to Rectify Trade Promotion Problems Efficient Consumer Response (ECR) Category Management Everyday Low Pricing (EDLP) Pay-for-Performance Programs Account-Specific Marketing 36

37 Everyday Low Pricing (EDLP) EDLP A manufacturer charges the same price for a particular brand day in and day out 37

38 Why Some Retailers Resist Many retailers have established distribution infrastructures to avail themselves of high-low prices EDLP pricing benefits the manufacturers EDLP pricing takes some of the excitement out of retailing 38

39 Efforts to Rectify Trade Promotion Problems Efficient Consumer Response (ECR) Category Management Everyday Low Pricing (EDLP) Pay-for-Performance Programs Account-Specific Marketing 39

40 Pay-for-Performance Programs Pay-for- Performance Programs Designed to reward retailers for selling the brands supported with trade allowances rather than merely buying these brands 40

41 Pay-for-Performance Programs Provide incentive to the retailer only for the items that are sold to consumers during the agreed-upon time period Benefit all parties: consumers, retailers, and manufacturers A natural correlate for the efficient consumer response (ECR) 41

42 Efforts to Rectify Trade Promotion Problems Efficient Consumer Response (ECR) Category Management Everyday Low Pricing (EDLP) Pay-for-Performance Programs Account-Specific Marketing 42

43 Account Specific Marketing Account Specific Marketing Also called co-marketing, characterizes promotional and advertising activity that a manufacturer customizes to specific retail accounts 43

44 Account Specific Marketing Relatively recent innovation e.g., Local radio tie-in advertising, loyalty programs Requires a lot of effort and can be costly The future of this practice is uncertain yet 44

45 Cooperative Advertising Cooperative (co-op) advertising An arrangement between a manufacturer and reseller whereby the manufacturer pays for all or some of the advertising costs undertaken by the reseller 45

46 Cooperative Advertising Five Common Elements Specified time period Accrual Payment share Performance guidelines Billing for reimbursement 46

47 Why is Co-op Advertising Used? Manufacturers can achieve advertising support on a local-market basis Provide them with a way to associate their products in the consumer s mind with specific retail outlets Stimulates greater retailer buying and merchandising support Enables manufacturers to have access to local media with lower rates 47

48 Open-Ended Co-op Advertising Open-ended Co-op Advertising Involves paying for part of the retailer s advertising cost without relating the reimbursement to the amount of products purchased from the manufacturer 48

49 Why is Open-Ended Co-op Advertising Used? Wants to encourage the use of funds by smaller retailers Manufacturer sells through intermediaries and does not have access to retailers purchase figures It simplifies the record-keeping task 49

50 Vendor Support Programs Vendor support programs (VSPs) A retailers develops an advertising program in consultation with local advertising media and then invites its vendors to pay for a specific percentage of the media cost for the proposed campaign 50

51 Vendor Support Programs Retailer benefits Often a manufacturer pays a large sum but receives very little actual promotion The less powerful a manufacturer, the more susceptible to retailers demands The more the manufacturer invests in the retailer s advertising, the less funds available to it own brands 51

52 Trade Contests and Incentives Trade contest Trade incentives Push money generally based on managers meeting a sales goal given to retail managers and salespeople for performing certain tasks provide financial incentives to retail salespeople to aggressively sell to consumers a selected item 52

53 Specialty Advertising Refers to advertising and sales promotion medium that involves the use of decorative articles to convey organization s identification and promotional message i.e. companies promoting their brands to customer by offering free items that carry the brand s names such as calendar, office/desk accessories, t-shirts, etc 53

54 Trade Shows Trade show A temporary forum for sellers of a product category to exhibit and demonstrate their wares to present and prospective buyers 54

55 Functions of Trade Shows Servicing present customers Identifying prospects Introducing new or modified products Gathering information about competitors new products Taking product orders Enhancing the company s image 55

56 Capabilities of Sales Promotion Create sales force enthusiasm Increase sales of a mature product Assist the introduction of new products to the trade Increase extra shelf-space (for temporary period) Offset competitor s ad and sales promotion effort Encourage trial purchase Loading customers with larger quantities 56

57 Limitation of Sales Promotion Unable to make up for unfavorable brand If the brand is no longer favor/satisfy by consumers, sales promotion cannot do much help Unable to maintain long term performance Sales of a brand decline due to poor product performance or existence of superior competing brands Unable to make up for a poorly trained force or lack of advertising If a brand suffers from declining sales due to poor training of sales force or lack of brand awareness, proper sales management should be used instead of sales promotion 57

58 InClass Exercise a) Most practitioners agree that sampling is the premier sales promotion device for generating product trial or brand usage. What is the various ways samples are delivered b) If company wants to offer premiums to the customers, in what ways can the premiums be distributed? 58