PAPER THEORY

Sales Promotion
Sales promotion, a key ingredient in marketing campaigns, consists
of a collection of incentive tools, mostly short term, designed to stimulate
quicker or greater purchase of particular products or services by
consumers or the trade.
Whereas advertising offers a reason to buy, sales promotion offers
an incentive. Sales promotion includes tools for consumer promotion
(samples, coupons, cash refund offers, prices off, premiums, prizes,
patronage rewards, free trials, warranties, tie-in promotions, crosspromotions, point-ofpurchas displays, and demonstrations), trade
promotion (prices off, advertising and display allowances and free goods),
and business and sales force promotion(trade shows and conventions,
contests for sales reps, and specialty advertising).

Objectives
Sales promotion tools vary in their specific objectives. A free sample
stimulates consumer trial, whereas a free management-advisory
service aims at cementing a long-term relationship with a retailer.

Advertising versus Promotion

A decade ago, the advertising-to-sales-promotion ratio was about
60:40. Today, in many consumer-packaged-goods companies, sales
promotion accounts for 75% of the combined budget (roughly 50% is
trade promotion and 25% is consumer promotion). Sales promotion
expenditures increased as a percentage of budget expenditure
annually for almost two decades, although its growth has slowed down
in recent years.

Major Decisions
In using sales promotion, a company must establish its objectives,
select the tools, develop the program, pretest the program, implement
and control it, and evaluate the results.
Establishing Objectives
Sales
promotion
objectives
derive
from
broader
communication objectives, which derive from more basic
marketing objectives for the product. For consumers, objectives
include encouraging purchase of larger-sized units, building trial
among nonusers, and attracting switchers away from

competitors brands. Ideally, promotions with consumers would

have short-run sales impact as well as long-run brand equity
effects. For retailers, objectives include persuading retailers to
carry new items and higher levels of inventory. encouraging offseason buying, encouraging stocking of related items, offsetting
competitive promotions, building brand loyalty, and gaining entry
into new retail outlets. For the sales force, objectives include
encouraging support of a new product or model, encouraging
more prospecting, and stimulating off-season sales
Selecting Consumer Promotion Tools
The promotion planner should take into account the type of
market, sales promotion objectives, competitive conditions, and
each tools cost-effectiveness. The main consumer promotion
tools are summarized in Table 18.3. Manufacturer promotions are,
for instance in the auto industry, rebates, gifts to motivate testdrives and purchases, and high-value trade-in credit. Retailer
promotions include price cuts, feature advertising, retailer
coupons, and retailer contests or premiums.
a. Major Consumer Promotion Tools
Samples : Offer of afree amount of aproduct or service delivered
door-to-door, sent in the mail, picked up in a store, attached to
another product, or featured in an advertising offer
Coupons: Certificates entitling the bearer to astated saving on the
purcllase of aspecific product: mailed, enclosed in other products or
attached to them, or inserted in magazine and newspaper ads.
Cash Refund Offers (rebates): Provide aprice reduction after
purchase rather than at the retail shop: Consumer sends aspecified
"proof of purchase" to the manufacturer who "refunds" part of the
purchase price by mail.
Price Packs (cents-off deals): Offers to consumers of savings off
the regular price of aproduct, flagged on the label or package.
Areduced-price pack is asingle package sold at a reduced price (such
as two for the price of one). A banded pack is two related products
banded together (such as a toothbrush and toothpaste).
Premiums (gifts) : Merchandise offer edata relatively low costor
free as anincentive to purchase a particular product. A with-pack
premium accompanies the product inside or on the package. Afree
in-the-mail premium ismailed to consumers who send in a proof of
purchase,such as a box top or UP Ccode. Aself-liquidating premium
is sold below its normal retail price to consumers who request it.

Frequency Programs: Programs providing rewards related to the

consumer's frequency and intensity in purchasing the company's
products or services.
Prizes (contests, sweepstakes, games): Prizes are offers of the
chance to win cash, trips, or merchandise as a result of purchasing
something. Acontest calls for consumers to submit an entry to be
examined by a panel of judges who will select the best entries.
Asweepstakes asks consumers to submit their names in a drawing.
Agame presents consumers with something every time they buybingo numbers, missing letterswhich might help them win a prize.
Patronage Awards: Values in cash or in other forms that are
proportional to patronage of acertain vendor or group of vendors.
Free Trials: Inviting prospective purchasers to try the product
without cost in the hope that they will buy.
Product Warranties: Explicit or implicit promises by sellers that
the product will perform as specified or that the seller will fix it or
refund the customer's money during aspecified period.
Tie-in Promotions: Two or more brands or companies team up on
coupons, refunds, and contests to increase pulling power.
Cross-Promotions: Using one brand to advertise another
noncompeting brand.
Point-of-Purchase (P-O-P) Displays and Demonstrations: P-OP displays and demonstrations take place at the point of purchase or
sale.
Sales promotion seems most effective combined with advertising. In
one study, a price promotion alone produced only a 15% increase in sales
volume. When combined with feature advertising, sales volume increased
19%; when combined with feature advertising and a point-of-purchase
display, sales volume increased 24%.
SELECTING TRADE PROMOTION TOOLS
Manufacturersusea number of trade promotion tools (see
Table 18.6).76 Manufacturers award money to the trade (1) to
persuade the retailer or wholesaler to carry the brand; (2) to
persuade the retailer or wholesaler to carry more units than the
normal amount; (3) to induce retailers to promote the brand by
featuring, display, and price reductions; and (4) to stimulate
retailers and their sales clerks to push the product.
b. Major Trade Promotion Tools

Price-Off (off-invoice or off-list): Astraight discount off the list

price on each case purchased during astated time period.
Allowance: An amount offered in return for the retailer's agreeing
to feature the manufacturer's products in some way. An advertising
allowance compensates retailers for advertising the manufacturer's
product. A display allowance compensates them for carrying a
special product display.
Free Goods: Offers of extra cases of merchandise to intermediaries
who buy a certain quantity or who feature a certain flavor or size.

SELECTING BUSINESS AND SALESFORCE PROMOTION

TOOLS
Companies spend billions of dollars on business and salesforce promotion to gather business leads, impress and reward
customers, and motivate the sales force to greater effort. They
typically develop budgets for tools that remain fairly constant
from year to year. For many new businesses that want to make a
splash to a targeted audience, especially in the B2B world, trade
shows are an important tool, but the cost per contact is the
highest of all communication options. The following example
shows how one newcomer in the private jet industry makes trade
shows pay.
c. Major Business and Sales-Force Promotion Tools
Trade Shows and Conventions: Industry associations organize
annual trade shows and conventions, Business marketers may
spend as much as 35% of their annual promotion budget on trade
shows, Over 5,600 trade shows take place every year, drawing
approximately 80 million attendees. Trade show attendance can
range from afew thousand people to over 70,000 for large shows
held by the restaurant or hotel-motel industries, Participating
vendors expect several benefits, including generating new sales
leads, maintaining customer contacts, introducing new products,
meeting new customers, selling more to present customers, and
educating customers with publications, videos, and other
audiovisual materials.
Sales Contests: Asales contest aims at inducing the sales force or
dealers to increase their sales results over astated period, with
prizes (money, trips, gifts, or points) going to those who succeed.

Specialty Advertising: Specialty advertising consists of useful,

low-cost items bearing the company's name and address, and
sometimes an advertising message that salespeople give to
prospects and customers, Common items are ballpoint pens,
calendars, key chains, flashlights, tote bags, and memo pads.
PRETESTING, IMPLEMENTI G, CONTROlll G, AND
EVALUATING THE PROGRAM
Although most sales promotion programs are designed on the
basis of experience, pretests can determine whether the tools are
appropriate, the incentive size optimal, and the presentation
method efficient. Consumers can be asked to rate or rank
different possible deals, or trial tests can be run in limited
geographic areas.
Marketing managers must prepare implementation and control
plans that cover lead time and sell-in time for each individual
promotion. Lead time is the time necessary to prepare the
program prior to launching it.82 Sell-in time begins with the
promotional launch and ends when approximately 95% of the
deal merchandise is in the hands of consumers.

Events Objectives
Marketers report a number of reasons to sponsor events:
1. To identify with a particular target marketor lifestyle---Customers can be targeted geographically, demographically,
psychographically, or behaviorally according to events. Old Spice
sponsors college sports and motor sports-including driverTony
Stewart's entries in the Nextel Cup and Busch Series-to highlight
product relevancy and sample among its target audience of 16-to
24-year-old males.oo
2. To increase awareness ofcompany or product name---Sponsorship often offers sustained exposure to a brand, a
necessary condition to build brand recognition and enhance
brand recall. Frito-Lay used balloon festivals and street parades
to sample its Flat Earth baked fruit and vegetable crisps, build
awareness, and drive retail traffic.o9
3. To create or reinforce perceptions ofkey brand image
associations-Events themselves have associations that help to
create or reinforce brand associations.90 To toughen its image
and appeal to America's heartland, Toyota Tundra elected to
sponsor BAS.s. fishing tournaments and a Brooks & Dunn country
music tour.

4. To enhance corporate image----Sponsorship can improve

perceptions that the company is likable and prestigious. Although
Visa views its long-standing Olympic sponsorship as a means of
enhancing international brand awareness and increasing usage
and volume, it also engenders patriotic goodwill and taps into the
emotional Olympic spirit.91
5. To create experiences and evoke feelings-The feelings
engendered by an exciting or rewarding event may indirectly link
to the brand. Online activation accounts for a large portion ofLG
Electronics MobileComm USA's sponsorship leveraging efforts.
The company uses sites such as MySpace and YouTube to extend
its personality online and created its own proprietary Web site,
LifeWithLG.com, as a central place for information about events
and celebrity endorsers and related content for downloading.92
6. To express commitment to the community or on social issuesCause-related marketing sponsors nonprofit organizations and
charities. Firms such as Timberland, Stoneyfield Farms, Home
Depot, Starbucks, American Express, and Tom's of Maine have
made causerelated marketing an important cornerstone of their
marketing programs.
7. To entertain key clients or reward key employees-Many events
include lavish hospitality tents and other special services or
activities only for sponsors and their guests. These perks
engender goodwill and establish valuable business contacts.
From an employee perspective, events can also build
participation and morale or be used as an incentive. BB&T Corp.,
a major banking and financial services player in the South and
Southeast United States, uses its NASCAR Busch Series
sponsorship to entertain business customers and its minor league
baseball sponsorship to generate excitement among employees.
8. To permit merchandising or promotional opportunities-Many
marketers tie in contests or sweepstakes, in-store merchandising,
direct response, or other marketing activities with an event. Ford,
Coca-Cola, and CingularWireless all used their sponsorship of the
hit TV show American Idol in this way.

Major Sponsorship Decisions

Successful sponsorships require choosing the appropriate events;
designing the optimal sponsorship program; and measuring the effects
of sponsorship.
CHOOSING EVENTS Because of the number of opportunities
and their huge cost, many marketers are becoming more
selective about choosing sponsorship events

DESIGNING SPONSORSHIP PROGRAMS Many marketers

believe it's the marketing program accompanying an event
sponsorship that ultimately determines its success. At
leasttwo to three times the amount of the sponsorship
expenditure should be spent on related marketing activities.
Event creation is a particularly important skill in publicizing
fund-raising drives for nonprofit organizations. Fund-raisers
have developed a large repertoire of special events, including
anniversary celebrations, art exhibits, auctions, benefit
evenings, bingo games, book sales, cake sales, contests,
dances, dinners, fairs, fashion shows, parties in unusual
places, phonathons, rummage sales, tours, and walkathons.
No sooner is one type of event created, such as a walkathon,
than competitors spawn new versions, such as readathons,
bikeathons, and jogathons
MEASURING SPONSORSHlP ACTIVITIES As with public
relations, measurement of events is difficult. The supply-side
measurement method focuses on potential exposure to the
brand by assessing the extent of media coverage; and the
demand-side method focuses on reported exposure from
consumers.
Creating Experiences
A large part of local, grassroots marketing is experiential
marketing, which not only communicates features and
benefits but also connects a product or service with unique
and interesting experiences. "The idea is not to sell
something, but to demonstrate how a brand can enrich a
customer's
life."102
"Marketing
Insight:
Experiential
Marketing" describes the concept of Customer Experience
Management. Consultants and authors Pine and Gilmore,
pioneers on the topic, argue that we are on the threshold of
the "Experience Economy," a new economic era in which all
businesses must orchestrate memorable events for their
customers.103 They assert:
If you charge for stuff, then you are in the commodity
business.
If you charge for tangible things, then you are in the
goods business.
If you charge for the activities you perform, then you are in
the service business.
If you charge for the time customers spend with you, then
and only then are you in theexperience business.

Public Relations
Not only must the company relate constructively to customers, suppliers,
and dealers, it must also relate toa large number of interested publics. A
public is any group that has an actual or potential interest in or impact
on a company's ability to achieve its objectives. Public relations (PR)
includes a variety of programs to promote or protect a company's image
or individual products