Chapter 16 – Sales Promotion
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C. Media Support and Timing—using a promotion without prior or concurrent advertising can limit
VI. SALES PROMOTION ABUSE
The increasing use of sales promotion in the marketing program represents a change in the fundamental,
strategic decisions regarding how companies market their products and services. However, the value of
this increased emphasis on sales promotion has been questioned by many experts. Concerns include the
following:
• Marketers becoming too dependent on using sales promotion to produce short-term or immediate
increases in sales
In many situations there is the potential for companies to fall into a sales promotion trap or spiral
whereby all competitors are making extensive use of promotions. Figure 16-7 shows this dilemma which
is analogous to the “prisoner’s dilemma game” as the only way out of it is for both parties to cooperate by
cutting back on promotions.
Professor Notes
Teaching Suggestions
In this chapter we examine the very important area of sales promotion including the promotional activities
directed at consumers as well as the trade. This is a very long chapter as its covers both consumer and
trade-oriented sales promotion very thoroughly. We strongly suggest that this material be covered over a
two-class period. The first lecture can provide an overview of the sales promotion area, reasons for the
shift in marketing dollars to sales promotion and consumer-oriented sales promotion. The second lecture
Chapter 16 – Sales Promotion
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It is very important to point out to the students the increasing emphasis many companies are placing on
sales promotions targeted to both consumers and the trade and how it has come at the expense of media
advertising. The instructor should point out the fact that sales promotion accounts for anywhere from 60
It is important to clarify the differences between event marketing and event sponsorship as the two are
often confused. We discuss event marketing as a form of sales promotion while event sponsorships are
discussed in Chapter 17 as part of the public relations program. You might also want to review the chart
shown in Figure 16-4 which shows how sales promotion tools can be used to accomplish various
marketing objectives and whether the extra consumer reward or incentive is immediate or delayed. We
also feel it is important to devote some attention to the problem of sale promotional abuse and the number
of companies that are becoming over-reliant on sales promotion for a short–term “sales fix” rather than
investing in the long term image of the brand. You also may want to spend some time discussing the sales
promotional dilemma shown in Figure 16-7 of the text.
Chapter 16 – Sales Promotion
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Answers to Discussion Questions
1. Why do you think Subway’s $5 Footlong promotion has been so successful? What factors will
determine how long Subway can continue to run the promotion? (L01)
As discussed in the chapter opener Subway’s $5 Footlong promotion has been a tremendous success
as nearly $4 billion in sales have been generated specifically for this menu item. The success of the
promotion is due to several factors. First all the $5 Footlong is a very good deal for consumers as it is
2. IMC Perspective 16-1 discusses the problems Macy’s encountered when it tried to cut back on the use
of discount coupons. Analyze the company’s decision to abandon its strategy to wean its customers
off discount coupons. Do you think they should have given the new strategy more time to take effect
before abandoning it? (L01)
The problem Macy’s encountered when it tried to abandon the use of discount coupons was more than
likely a result of doing so too quickly rather than slowly weaning consumers off of them. Macy’s
had secured some exclusive product lines with fashion brands such as Oscar de La Renta and Calvin
Klein and was also increasing its consumer advertising to let consumers know about Macy’s
Chapter 16 – Sales Promotion
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It is difficult to estimate how long it might have taken the brand-building strategy to take hold and get
consumers to shop at Macy’s without the discount coupons. Some retailers such as Nordstrom’s only
run a few sales a year and thus consumers know that if they want to purchase an item sold there, they
are going to have to pay full price or wait up to six months for it to go on sale, and of course run the
3. What are some of the reasons brand managers are allocating more of their promotional budgets to
sales promotion rather than media advertising? Do you agree with the critics who argue that the
increased use of sale promotion is undermining brand equity for many once-powerful brands? (L01)
As discussed in IMC Perspective 16-1, many brand managers are allocating more of their promotional
budgets to sales promotion because they become enamored by the sales spike that often results from
some type of promotion such as a sale, discount coupon or some other form of promotion. The impact
of media advertising, on the other hand, is rarely immediate and plays out over a longer time period.
4. What is the difference between a consumer-franchise-building and non-franchise-building
promotions? Find an example of a promotional offer you believe contributes to the equity of a brand
and explain how it does so. (L02)
Consumer-franchise-building promotions are those that are designed to communicate distinctive
brand attributes and contribute to the development and reinforcement of brand identity and image.
They are designed to help build long-term brand loyalty or preference and help the marketer achieve
Chapter 16 – Sales Promotion
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Sales promotion has traditionally been thought of an IMC tool that could be used to generate short–
term sales increases, while brand building was viewed as the exclusive domain of media advertising.
Marketers have been changing the way they view sales promotion and realize that various forms of
consumer promotion in particular can be used as a part of their brand-building efforts. As more
marketers approach brand building from an IMC perspective, they are recognizing that sales
promotion techniques can be used to help create and maintain brand equity. Marketers are developing
contests and sweepstakes with themes that are consistent with the image of the brand. Premium offers
are now designed to tie into the theme of an advertising campaign and the positioning strategy for a
brand. For example, Marlboro cigarettes offers Western wear and gear through its Marlboro country
catalog which reinforces the brand’s positioning theme. Many marketers are now using frequency or
programs that encourage repeat purchase.
5. Evaluate the effectiveness of coupons as a sales promotion tool. How would you respond to critics
who argue that they are inefficient since less than 2 percent of coupons are redeemed? (L03)
Coupons are one of the most popular and most effective sales promotion tools used by marketers
However, their efficiency is often criticized as the redemption rates for coupons is very low and there
are significant costs associated with their use. There are a number of reasons why marketers have
been questioning the economic feasibility of coupons. Coupons have become very expensive to print,
distribute and process and a number of marketers have begun taking a very close look at their
Chapter 16 – Sales Promotion
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It is unlikely that marketers will totally eliminate their use of coupons, as they are still very important
in generating new-product trial and brand conversion. In fact, during the recent recession coupons
have become very popular with consumers as 3.3 billion were redeemed in 2009, which represented a
6. Discuss the type of company that would be likely to offer discounts to consumers using
Groupon.com. What are the pros and cons of a company using this type of promotional offer? (L03)
The basis of Groupon’s business model is that it uses collective buying power to offer deep discounts
and provide benefits for both consumers and businesses. Consumers save money by shopping in mass
and encouraging friends and associates to take advantage of the steep discounts, which can range
from 30 to 50 percent. The model is particularly popular among local businesses as it provides an
incentive to consumers who might not otherwise purchase from them. The model appeals to
7. Discuss the role the Internet is playing with regard to sales promotion. Why are many companies
moving promotions such as sweepstakes and contests online? (L03)
Many companies are integrating their sales promotion efforts with their online marketing efforts and
using the Internet to make various promotional offers available to consumers. Marketers promote
contests and sweepstakes on their web sites and consumers can enter them online. These companies
promote their contests and sweepstakes in their media advertising and encourage consumers to visit
their web sites to learn more about these promotions and to enter. Many companies also include
8. Discuss what marketers can do to avoid some of the promotional problems discussed in IMC
Perspective 16-2. Do you think the problems that KFC experienced with their promotion in China
could have been avoided? (L03)
Chapter 16 – Sales Promotion
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IMC Perspective 16-2 provides examples of major promotional blunders that have occurred both in
the U.S. and abroad in recent years and resulted in major embarrassment and financial losses for
companies such as, PepsiCo., Kraft Foods, and Harrah’s Entertainment Some of these botched
promotions are the result of poor planning by the companies as they did not accurately forecast the
demand that the promotions might generate or take some measures to limit the availability of the
promotional offer (such as enforcing eligibility periods or expiration dates). Marketing research
The problem McDonald’s experienced with its Monopoly game was the result of an elaborate
conspiracy by individuals working for the Simon Marketing promotion agency and was really not the
result of anything that the company did wrong. The scandal surrounding McDonald’s Monopoly
game generated a great deal of negative publicity and has probably undermined consumer trust and
confidence in this promotion as well as others that the company might run. However, McDonald’s
was able to use the Monopoly game promotion again. After a few years, the average consumer
The problem KFC encountered with its promotional offer for a 50 percent discount on three different
menu items is another example of the perils of promotions. KFC planned to offer the discount
coupons through its online store on Taobao.com, China’s largest e-commerce site. However, word
leaked out about the promotion and the discount coupons were circulated around the Internet and
published on other sites. KFC might have recognized that a 50 percent discount offer would attract a
9. A recent report by a rebate fulfillment service showed that the average redemption rate for a $50
rebate on a product that costs $200 is only 35 percent. Why do you think redemption rates are so
low? How might these low redemption rates affect a marketer’s decision regarding the use of rebates
as a promotional tool? (L03)
Chapter 16 – Sales Promotion
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As discussed in Ethical Perspective 16-1, redemption rates for rebates are low for a number of
reasons. The primary reason is that many consumers simply do not submit the rebate forms as they
view the process as a hassle. Most rebates require consumers to submit UPC codes printed on the
packaging along with receipts (sometimes originals) by a certain time period. Consumers may lose
their receipts, toss out the package with the UPC code or forget about the rebate. Some consumers
simply decide they do not want to through the process of filing for a rebate, even when the amount is
large. In some situations consumer rebate applications may be denied because the forms were not
filled out properly or there are problems with the receipt or UPC code. Rather continuing to pursue
the rebate, they give up and do apply for it again. Finally, many rebate checks are never cashed as
they may be lost or mistaken for junk mail and never opened.
10. Describe the various forms of cooperative advertising and the reasons they are used by marketers.
(L03)
There are three types of cooperative advertising. Horizontal cooperative advertising is advertising
sponsored by a common group of retailers or other organizations providing products or services to the
market. For example, automobile dealers who are all located in an auto park may allocate some of
their ad budget to a cooperative fund that will encourage consumers to come to the park to shop. This
form of cooperative advertising is used to achieve economies of scale in advertising as the retailers or
companies can share the costs of advertising and encourage consumers to come to their market area.
Chapter 16 – Sales Promotion
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The third form is vertical cooperative advertising whereby a manufacturer pays for a portion of the
advertising a retailer does to promote the manufacturer’s product at the retail level. This form of
11. What is meant by a sales promotion trap or spiral? Evaluate the promotional war that has developed
in the fast-food industry as various competitors promote their 99 cents or dollar menus. What are the
options for companies in deciding to participate in the promotional wars? (L05)
A sales promotion trap or spiral occurs when competitors in an industry are making extensive use of
sales promotions and an individual firm receives no differential advantage from doing so, but cannot
stop because its competitive position will be affected. When firms are caught in a sales promotional
trap, no one company gains from the use of promotions but the sales of an individual firm may
Additional Discussion Questions (not discussed in text)
12. Discuss how sales promotion can be used as an acceleration tool to speed up the selling and/or
purchasing process and maximize a company’s sales volume. (L01)
Chapter 16 – Sales Promotion
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There are several ways sales promotion can be used as an acceleration tool to speed up the sales
process and maximize sales volume. Consumer promotion tools such as premiums, bonus packs, and
price-off deals provide an extra incentive that may motivate consumers to take more immediate
13. Discuss the various factors that have led to companies shifting more of their marketing budgets to
sales promotion. Discuss the pros and cons of this reallocation of marketers advertising and
promotion budgets. (L01)
There are many reasons why sales promotion has become so important and is receiving a great deal of
marketers’ promotional budgets. These include the growing power of retailers; the decline in
consumers’ brand loyalty and their increasing sensitivity to sale promotion offers; brand proliferation
in the consumer market as many product categories have experienced a flurry of new brand
14. Discuss the role of sales promotion as part of the promotional mix and how it can be integrated with
other marketing communication tools. (L04)
Chapter 16 – Sales Promotion
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Sales promotion plays a very important role in the integrated marketing communications program of
most companies and consumer packaged goods firms in particular. Both consumer– and trade-oriented
16. Discuss how a contest can be used to increase involvement and contribute to brand equity. Find an
example of a contest that you believe contributes to the equity of a brand and explain how it does so.
(L03)
Building and/or maintaining brand equity has become an important goal for marketers as they
develop their sales promotion strategies and many companies are finding that contests are an
excellent way to accomplish these objectives. Contests are a very good way to get consumers to think
16. Discuss how samples and coupons can be used to generate trial of a new product or increase
consumption of an established brand. (L03)
Both samples and coupons are very effective for generating trial of a new brand of a product or
service. Samples are obviously effective as the majority of consumers who receive a sample either
use it immediately or save it to use sometime later. Samples of a new brand provide consumers a
Chapter 16 – Sales Promotion
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Samples can also be a way to increase consumption of an established brand. Marketers are often
17. What is a slotting allowance or fee? Evaluate the arguments for and against retailers charging slotting
fees to manufacturers. (L03)
A slotting allowance is a fee that must be paid to retailers to provide a “slot” or position to
accommodate a new product in their stores. Retailers argue slotting fees are justified because there
are costs associated with taking on a new product such as redesigning store shelves, entering the
IMC Exercise
The chapter discusses how sales promotion can be used to contribute to the development or
maintenance of brand equity by developing a promotional offer that is consistent with the image or
positioning of a product or service. Find an example of a contest, sweepstakes or premium offer that
a marketer is currently running and analyze the promotion with respect to how it contributes to brand
equity. You can find examples of contests, sweepstakes or premium offers in magazine ads, free
standing inserts (FSIs) in the Sunday newspaper, or on the Internet. Your analysis should include a
discussion of the image or positioning the marketer is using for the brand and how the promotional
offer supports the advertising campaign being used for the brand.
Chapter 16 – Sales Promotion
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AdForum Exercise: “Evaluating Advertising Used for Promotions”
(See Advertising and Promotion Playlist, Chapter 16)
Part 1
The chapter opener discusses the very successful “Five Dollar Footlong” promotion that Subway has been
running for several years. Watch the two Subway commercials provided on the playlist that were created
Part 2
IMC Perspective 16-1 discusses how Macy’s, which is one of the premier retailers in the United States,
has become very dependent upon price promotions and “One–day sales” to drive store traffic and revenue.
The playlist for Chapter 16 includes three commercials used as part of the national advertising done by
Macy’s. Watch these three commercials and answer the following questions:
2. How does the “Come Together” commercial differ from the other two spots (“Fourth of July” and
“Blues Break)? How might commercials such as the “Come Together” spot help Macy’s become less
dependent on the use of price-based promotions?