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Chapter 11: Sales Promotion
Chapter Objectives
After reading this chapter, students should understand:
·How sales promotion differs from advertising and other modes of
communication
·The different types of sales promotions available to the marketing manager
·Differences among customer, trade, and retailer-oriented promotions
·Issues in the development of promotional strategy and objective setting
·Allocating money between advertising and sales promotion
Chapter Overview
The purpose of this chapter is to introduce the various aspects of sales promotion
decision-making.
Chapter Outline and Key Terms
Key Terms:
·Sales promotion
·Couponing
·Product-oriented promotions
·Sampling
·Premiums
·Trade promotions
·Market development funding
·Retailer promotions
·Point-of-purchase (POP) advertising
·Consumer franchise building (CFB)
Copyright© 2011 Pearson Education, Inc., publishing as Prentice Hall 1
A. Definitions
1. Sales promotion: Is an action-focused marketing event whose purpose is to
have a direct impact on the behavior of the firm’s customers.
2. Couponing: Price-oriented promotion that offers a discount off the price of a
product and is accompanied by a physical or electronic document indicating
the amount of the discount.
3. Product-oriented promotions: Consumer promotions that give away the
product itself or a closely related product.
4. Sampling: A product-oriented promotion in which a free product is given
away.
5. Premiums: A product-oriented promotion in which free merchandise is
provided with a purchase or some free or reduced-price item is made
available.
6. Trade promotions: Sales promotions oriented toward the channels of
distribution in an effort to get the channels to carry and promote the product,
often including devices such as sales contests, quantity discounts, and
training programs.
7. Market development funding: Any money a company spends to help
channel members sell their products.
8. Retailer promotions: Short-term financial incentives to purchase provided
by retail channel members.
9. Point-of-purchase (POP) promotions: A form of retailer promotion that
includes information related displays and other company-paid advertising
inside the store.
10. Customer franchise building (CFB): Activities that build brand equity,
including advertising, sampling, couponing, and product demonstrations.
B. Sales Promotion
1. Key portions of sales promotion activities:
·Sales promotions are action focused
·Promotions are marketing events
·Sales promotions are intended to have a direct impact on behavior
·Sales promotions influence both consumers and customers
C. Types of Sales Promotion
1. Table 11.2 Page 312 Types of Promotions Provides an overview of consumer
promotions, trade promotions, and retail promotions
2. Table 11.3 Page 318 Typical Promotional Events Held in the Major Appliance
Industry. Overview of major appliance manufacturers and their programs and
products.
1. Consumer promotion
·Price-oriented promotions Dominate form is couponing. Table 11.5
Page 320 Coupon Distribution and Objectives. Demonstrates various
methods of coupon distributions and associated objectives.
·Illustration: Valassis (www.valassis.com) Page 321
4. Product-oriented promotions
·Sampling
·Giveaway product itself or closely related product
·Some products can be obtained free through the web:
·TheFreeSite.com (See Figure 11.3, Page 322)
·Free-samples.com
·Freecenter.com
·Illustration; Lcafe Tokyo Page 322
·Premiums
·Illustration McDonald’s (www.mcdonalds.com) Page 323
·Special events
·Contests and sweepstakes fall into this category
5. Trade promotions
·Market development funding: incentives to help develop market by
distribution channels
·Illustration Clorox (www.clorox.com) Page 325
6. Retailer promotions
·Includes point-of-purchase advertising (POP)
D. Promotion Strategy, Objectives, and Evaluation
1. Customer-oriented promotions
·Strategic issues: include impact sales but effects are temporary. Price
promotions should be approached with caution.
·Objectives: generally for short-term effect Table 11.6 Page 327
Customer Promotion Objectives shows some goals that are relevant
for promotion.
·Evaluating customer promotions: Look at incremental results of the
variable that as been set as the promotion’s goal such as:
·Accelerated regular purchases
·Accelerated captured purchases
·Unaccelerated regular purchases
·Unaccelerated captured purchases
2. Trade promotion
·Strategic issues: Approach trade promotions from a strategic
perspective, with some ideas of what may or may not be useful
·Objectives: Common goals for trade promotions are shown in Table
11.7 Page 330 Objectives of Trade Deals
·Evaluation: Tracking before/after results. Important criterion for
evaluating trade promotions is how often a retail promotion is run
when the channel members receive some kind of deal.
·Illustration: Procter & Gamble (www.pg.com) Page 331
3. Retail promotion
·Have same strategic aspects, objectives, measurement approaches as
other end-customer promotions
·Table 11.9 Page 333 Sales Effects of Deal Discount, Feature
Advertising, and Displays. An example of how retail promotions
can interact with each other.
E. Promotion Budgeting
1. Generally follows same approaches in setting advertising budgets (Chapter 10)
2. Advertising and promotion budget affected by seven conditions. Companies
spend more on advertising and promotion relative to sales under the following
conditions:
·The product is standardized (as opposed to being produced or
supplied to order)
·There are many end-users
·The typical purchase amount is small
·Sales are made through channel intermediaries rather than directly
to end-users
·The product is premium-priced
·The product line has a high contribution margin
·The product or service has a small market share
3. Allocating money between advertising and promotion
·Several factors affect this allocation decision:
·Total amount of resources available has major impact
·Customer factors affect allocation decisions (such as brand
loyalty, customer behavior)
·Sales promotion money is spent on product categories
in which decision-making is routine and involves
little processing of information about the product
·Whether advertising and promotion highlight the unique
aspect of the product (Customer franchise building)
·Illustration: Table 11.8 Sales Promotion Plan Page 332 This table
presents a basic framework and template for a sales promotion plan.
F. Sales promotion and information technology
1. Information technology has a significant impact on promotion decision-
making.
2. In-store information technology helps deliver promotions directly to the
shoppers in the store.
3. Illustration: Vault versus Mountain Dew (www.drinkvault.com and
www.mountaindew.com Pages 335 – 336
Teaching Tips and Strategies from Barbara S. Faries, MBA
The purpose of this chapter is to introduce the concepts involved with sales
promotion.
Key Terms and Concepts Introduced Include:
·Sales promotion
·Couponing
·Product-oriented promotions
·Sampling
·Premiums
·Trade promotions
·Market development funding
·Retailer promotions
·Point-of-purchase (POP) advertising
·Consumer franchise building (CFB)
Note: Two recurring themes in this Instructor’s Manual are the first two items:
·Link theory to practice.
·Engage students to link work experience to the concepts demonstrated in
the text.
·Instructors are encouraged to link theory to practice by finding current examples
in the business environment that demonstrate the key concepts above.
·If your class contains those already working in the field, have them describe how
the concepts in theory match those in the actual workplace.
From the view of both executive and academic, I routinely see the following issues:
Most of the above terms will be familiar to the students. Most students, however, may not
have considered the concepts in the light of strategy or strategy marketing. A great many
may confuse sales promotion with advertising and vice versa. Still others will see sales
promotion as marketing. It is essential that they understand how advertising and sales
promotion “fit inside” the broader marketing plans and strategy of a company. I would
encourage a class discussion at the beginning of this chapter that delineates the differences.
You will find that there are some students who do not understand the basic principles of
budgeting and allocation of funds and the resulting correlation between budgeting and
sales. Most have not created a sales promotion plan. I normally introduce several
spreadsheet models to assist them in developing a sales promotion plan and a budget. Table
11.8 Page 332 is a good template to share with them. It gives them a format from which to
start.
Finally, a good deal of the students will be aware of the rise of Internet vehicles that use
sales promotion to stimulate sales revenue. A discussion of Groupon.com and
LivingSocial.com and like websites can provide lively class discussion. It can be linked to
the text’s discussion of sales promotion and information technology. I query the students as
to the pros/cons to the retailer that uses such vehicles. We also discuss the market research
benefits that can result from the use of one of these including the ability to fine tune target
marketing.
Review Questions
1. How is advertising and sales promotion similar? Different? Which do you think is a
more effective communication tool and why?
2. Are particular kinds of customer-oriented sales promotions more likely to have long-
term effects on buying behavior than others?
3. Consider Figure 1.5 (“Strategies for Trade Dealing”). What other products or services
would fit into the four boxes?
4. Summarize the factors that affect the allocation of money between advertising and
promotion. Considering the consumer franchise-building approach, when would you
want the CFB ratio to be below the 50–55% recommended? When might you want it to
be much higher?
5. A number of new in-store coupon delivery systems other than the Catalina system are
being developed (e.g., free-standing kiosks). Compared to coupons delivered through
the mail or newspapers and magazines, what kind of impact do you expect these
coupons to have on consumer behavior other than simply inducing a one-time trial?
6. What are the pros and cons of trade deals from the perspectives of (a) the marketing
manager, (b) the distributor, and (c) the retailer?
Exercises, Activities, and Projects
Purpose: To help students link theory to real life.
To demonstrate the important implications of sales promotion
·Have the students develop a sales promotion plan and a budget using the basic
framework from Table 11.8 Page 332. The plan does not have to be elaborate or
complex, but be designed to give a general idea of how to construct one. Have
them discuss the results of the promotion plan as they relate to an overall
marketing plan.
·Have the students research and discuss the effects of the Internet on sales
promotion and the use of vehicles such as Groupon and LivingSocial. During the
discussion, ask them to talk about the pros/cons of these vehicles.
·Have the students design a manufacturer’s sales promotion including the
distributor portions and end-user’s perspective.
