Chapter 16 – Sales Promotion
16-1
CHAPTER 16
SALES PROMOTION
Chapter Overview
In this chapter we turn our attention to sales promotion and its role in a firm’s integrated marketing
communications program. We examine how marketers use both consumer– and trade-oriented promotions
to influence the purchase behavior of consumers as well as wholesalers and retailers. The chapter begins
with a discussion of the scope and role of sales promotion and a discussion of the reasons for its
increasing importance. Attention is also given to sales promotion objectives including a discussion of
Learning Objectives
2. To examine the various objectives of sales promotion programs.
4. To understand how sales promotion is coordinated with advertising.
5. To consider potential problems and abuse by companies in their use of sales promotion.
Chapter and Lecture Outline
I. THE SCOPE AND ROLE OF SALES PROMOTION
For many years advertising constituted the major part of the promotional budget of most consumer
product firms. Over the past decade, however, many marketers have come to the realization that
advertising alone often is not enough to stimulate demand for their products and are increasingly turning
Chapter 16 – Sales Promotion
Sales Promotion has been defined as “a direct inducement that offers an extra value or incentive for
the product to the sales force, distributors or the ultimate consumer with the primary objective of
creating an immediate sale.” There are several important aspects to sales promotion that should be
noted:
• Sales promotion involves some type of inducement that provides an extra incentive to purchase the
product or service
Sales promotion can be broken into two major categories:
• Consumer-oriented sales promotion which are promotions directed at the consumers who are final
purchasers of goods and services
Professor Notes
II. THE GROWTH OF SALES PROMOTION
The role and importance of sales promotion in companies’ integrated marketing communications
programs have increased dramatically over the past decade. In 2009 spending on various forms of
sales promotion reached nearly $350 billion while another $150 is spent each year on trade
promotions targeted at retailers and wholesalers.
A. Reasons for the Shift in Marketing Dollars to Sales Promotion—Since the mid ‘80s the
proportion of marketers’ promotional budgets allocated to both consumer and trade promotion
Chapter 16 – Sales Promotion
16-3
1. The growing power of retailers—in recent years several developments have helped to transfer
power from the manufacturers to the retailers. With the advent of optical checkout scanners
and sophisticated in-store computer systems, retailers gained access to data concerning how
2. Declining brand loyalty—consumers have become less brand loyal and are purchasing more
on the basis of price, value, and convenience. They are also looking for more deals and will
buy whatever brand is on sale or for which they can use a coupon.
3. Increased promotional sensitivity—the percentage of purchases made in conjunction with
some sort of promotional offer has increased sharply over the past decade. The text discusses
4. Brand proliferation—consumer product companies are launching nearly 20,000 new products
each year, according to a study by Marketing Intelligence Service, compared with only 2,689
5. Fragmentation of the consumer market—the consumer market is becoming more fragmented
and traditional mass media advertising is being replaced by promotional tools that can target
specific market segments. Sales promotion tools have become one of the primary vehicles for
tailoring promotional efforts to specific regional markets as well as specific demographic and
lifestyle segments.
6. Short-term focus—the increase in sales promotion in motivated by marketing plans and
reward systems geared to short-term performance and the immediate generation of sales
volume. Marketing and brand managers use sales promotions routinely, not only to introduce
7. Increased accountability—many companies are demanding to know what they are getting for
Chapter 16 – Sales Promotion
16-4
8. Gaining a competitive advantage—many marketers are turning to sales promotion to gain or
maintain a competitive advantage. A major development in recent years is the use of
9. Clutter—the increasing problem of advertising clutter has lead to the need to use consumer
promotions as a way of attracting attention and interest to advertising. Sales promotion offers
such as coupons, contests and sweepstakes are often used to attract attention to ads and
increase consumers’ involvement with a marketer’s IMC program.
B. Concerns about the Increased Role of Sales Promotion—it is very important to note that the
increased use of sales promotion is coming at the expense of media advertising. This has led to
concern that the increased use of sales promotion is having a negative effect on brand equity. As
C. Consumer Franchise-Building versus Nonfranchise-Building Promotions—It is important to
make the distinction between consumer-franchise building sales promotions and non-franchise
building efforts. Consumer-franchise-building promotions are designed to communicate
Professor Notes
III. CONSUMER-ORIENTED SALES PROMOTION
Marketers make extensive use of sales promotion, particularly those marketing to consumers and
have found a variety of ways to give consumers an extra incentive to purchase their products and
services.
Chapter 16 – Sales Promotion
16-5
A. Objectives for consumer-oriented sales promotion— as the use of sales promotion techniques
continues to increase, companies must give consideration to what they hope to accomplish
through their promotions and set clearly defined objectives and measurable goals for their sales
promotional programs. While the basic goal of most sales promotion activities is to induce
purchase of a brand, there are a number of different objectives the marketer might have for both
new and established brands. These include:
2. Increasing consumption of an established brand
3. Defending current customers
IV. CONSUMER-ORIENTED SALES PROMOTION TECHNIQUES
The various consumer-oriented sales promotion techniques used by marketers should be discussed along
with their advantages and limitations and the role they play in meeting various promotional objectives.
A. Sampling—sampling involves a variety of procedures whereby consumers are given some
quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing
a new brand to the market although it is also used for established products.
1. Benefits and limitations of sampling
• Samples are an excellent way of inducing trial
2. Sampling Methods—decisions must be made concerning the method by which the sample
will be distributed. The sampling method is important not only in terms of costs, but also in
terms of influencing the type of consumer who receives the sample. Some of the more widely
used sampling methods include:
• Door-to-door sampling
Chapter 16 – Sales Promotion
16-6
There are other sampling methods available such as inserts in magazines and newspapers,
requesting samples by phone, and the use of specialized sample distribution services. The
MyTownOffers.
B. Couponing —Couponing is the oldest, yet most widely used and effective sales promotions tool.
The number of coupons distributed to consumers in the United States has increased dramatically
from 16 billion in 1968 to 1994 when it peaked at 310 billion. Coupon distribution in the U.S.
1. Advantages and limitations of coupons
Pros:
• Coupons make it possible to offer a price reduction to those consumers who are price
sensitive without having to reduce the price for everyone.
2. Coupon Distribution—Coupons can be distributed in a variety of ways including:
• media delivery in newspapers and magazines and as free-standing inserts (FSIs)
Chapter 16 – Sales Promotion
16-7
3. Couponing Trends—in 2009 consumers used more coupons than ever before as more than 3.3
billion were redeemed. The increase in coupon use is primarily a result of the difficult
economic times consumers are having as a result of the great recession. Some companies
such as Procter & Gamble have tried to cut back on their use of coupons because of concerns
over costs and effectiveness. Marketers continue to search for new and more effective
couponing techniques to get around the problem of “coupon clutter.” In-store coupon
Professor Notes
C. Premiums—A premium is an offer of an extra item of merchandise or service either free or at a
low price that is used as an incentive for purchase. The two basic types of premiums are:
1. Free Premiums—usually inexpensive gifts or items that are included in the product package,
2. Self-liquidating premiums—those that require the consumer to pay some or all of the cost
of the premium plus handling and mailing costs. Self-liquidating premiums can be used to
create interest in a brand as well as generate goodwill that enhances the image of a brand.
Advantages and Limitations of Premiums
Pros:
• Premiums have high impulse value and can provide consumers with extra incentives to
purchase a product.
Chapter 16 – Sales Promotion
• Redemption rates of mail in premiums are low.
• Consumers may not perceive the premium offer as a value
D. Contests and Sweepstakes—A contest is a promotion whereby consumers compete for prizes or
money on the basis of skills or ability and winners are determined by judging entries against some
predetermined criteria. Contests often provide a purchase incentive by requiring a proof of
1. Some advantages of contests and sweepstakes:
• Contests and sweepstakes can be an effective way of getting the consumer to become
involved with the brand by making the promotion product relevant.
2. Problems with contests and sweepstakes
• A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to
contribute to the brand franchise or image.
E. Refunds and Rebates—Refunds or rebates are offers to return some portion of the product
purchase price after supplying some sort of proof or purchase. Consumers are generally
Chapter 16 – Sales Promotion
16-9
1. Evaluating refunds and rebates—The advantages and disadvantages of refunds and rebates
are:
Pros:
• Refunds and rebates can be effective sales promotional tools for creating new users and
for encouraging brand switching
• Refunds and rebates are often perceived as immediate savings or value even though the
money is not received until the offer is redeemed and many consumers never follow
through on the offer.
F. Bonus Packs—bonus packs offer the consumer an extra amount of a product at the regular price
by providing larger containers or extra units. Here are some of the advantages and limitations of
bonus packs:
Pros:
• They provide extra value to consumers without having to get involved with things such as
coupons or rebate offers.
G. Price-off Deals—price-off deals provide a reduction in the regular price of the brand, typically
right on the package through specially marked price packs. Here are some of the advantages and
limitations of price-off promotions:
Pros:
• They are controlled by the manufacturer, which enables them to ensure that the
promotional discount reaches the consumer rather than being kept by the trade.
Chapter 16 – Sales Promotion
16–10
Cons:
H. Loyalty programs—loyalty programs (also referred to as continuity or frequency programs) are
promotional programs that reward customers for continuing to purchase the same brand of a
product or service over time. Loyalty programs have become commonplace in a number of
product and service categories, particularly travel and hospitality, as well as among retailers.
Many consumer packaged goods companies are also developing frequency programs that offer
consumers to accumulate points for continuing to purchase their brands. The points can be
redeemed for gifts such as merchandise or for discounts.
Reasons for the popularity of loyalty programs include:
• Marketers view these programs as ways of encouraging consumers to use their products or
services on a continual basis and as a way of developing customer loyalty
Challenges associated with frequency programs include:
• Finding ways to make them true loyalty programs rather than just frequent-buyer programs
I. Event Marketing—Event marketing is a form of promotion where a company or brand is linked
to a specific event or a themed activity is developed for the purpose of creating experiences for
consumers and promoting a product or service. Marketers often do event marketing by
associating their product with a popular activity such as a sporting event, concert, fair, or festival.
Event marketing has become very popular in recent years for several reasons:
• Events can be used as to create experiences for consumers and associate a company’s brand
with certain lifestyles and activities
Chapter 16 – Sales Promotion
16–11
J. Summary of Consumer-Oriented Promotions—the discussion of the various consumer-oriented
promotion techniques shows that marketers use these tools to accomplish a variety of objectives.
These techniques provide consumers with an extra incentive or reward for engaging in a certain
Professor Notes
V. TRADE ORIENTED SALES PROMOTION
A. Objectives for Trade-Oriented Sales Promotion—as with consumer oriented promotions, sales
promotion programs targeted to the trade should be based on well-defined objectives and a
consideration of what the marketer wants to accomplish by using trade promotions. Objectives for
trade-oriented promotions include:
1. Obtain distribution for new products
2. Maintain trade support for established brands
B. Types of Trade Oriented Promotions—there are a variety of trade promotion tools that
manufacturers can use as inducements for wholesalers and retailers. These include:
1. Contests and incentives—manufacturers use contests and special incentive programs to
2. Trade allowances—probably the most commonly used trade promotion is some form of trade
Chapter 16 – Sales Promotion
16–12
• buying allowances—a deal or discount offered to resellers in the form of a price
reduction on product ordered during a fixed time period
Problems with trade allowances—many companies are concerned over the abuse of trade
allowances by wholesalers, retailers and distributors. Marketers give retailers trade
allowances with the expectation that the savings will be passed on to the consumer in the
3. Displays and point-of-purchase materials—marketers use a variety of point–of-purchase
materials including end–of-aisle displays, posters, banners, shelf cards, motion pieces, stand–
4. Sales training programs—another important form of manufactured sponsored promotional
assistance is sales training programs for reseller sales personnel. Manufacturers provide sales
training assistance to retail salespeople in a number of ways including having formal classes,
having their sale reps work with resellers and providing sales manuals, brochures, videos and
other selling aids.
5. Trade shows—a trade show is a type of exhibition or forum where manufacturers display
their products to current as well as prospective buyers. Trade shows provide a major
6. Cooperative advertising—cooperative advertising, whereby the cost of advertising is
Chapter 16 – Sales Promotion
• Horizontal cooperative advertising – refers to advertising sponsored in common by a
group of retailers, companies or other organizations providing products or services to a
market. Automobile dealerships that are concentrated in a specific location in many large
metropolitan areas often use this form of cooperative advertising.
• Vertical cooperative advertising—vertical cooperative advertising is the most common
type of co-op ad program used as part of a trade-oriented promotional program. Under a
vertical co-op program, the manufacturer pays for a portion of the advertising a retailer
runts to promote its product and its availability in the retailer’s place of business. The limit
or amount of co-op funds the manufacturer provides to the retailer is usually based on a
percentage of dollar purchases made from the manufacturer. This percentage is usually
around 3 to 5 percent.
Professor Notes
VI. COORDINATING SALES PROMOTION AND ADVERTISING
Sales promotion techniques usually work best when used in conjunction with advertising. Conversely, a
consumer sales promotion program can enhance the effectiveness of an ad campaign. When properly
planned and executed to work together, sales promotion can provide a synergistic effect that is much
greater than the response that would be generated from either promotional mix element used alone. Proper
integration of advertising and sales promotion requires the coordination of several decision areas
including:
A. Budget Allocation—this allocation depends on a number of factors:
B. Coordination of Advertising and Promotion Themes—to integrate the advertising and sales
promotion programs successfully, the theme of consumer promotions should be tied in with the
advertising and positioning themes wherever possible.