978-0136074892 Solution Manual Chapter 11

Unlock access to all the studying documents.

View Full Document

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)

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.