Sales promotion - Dr. Yang Lui PDF

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Dr. Yang Lui...

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Sales Promotion • Sales Promotion refers to the short-term incentives to encourages purchases or sales of a product or service. It is part of the promotion mix mentioned in week 8.! • Consumer promotions - sales promotions targeted at consumers to encourage more buying.! • Trade promotions - mainly for resellers/intermediaries eg. Shelf space! • Business promotion - mainly for business buyers eg. Factory space ! • Sales force promotions - motivating sales people ! One form of sales promotion is price discount. Eg. Black Friday in US/UK and “double-eleven” in China ! Reasons for conducting sales promotion:! - Product managers are under pressure to increase sales - Companies face more competition - Competing brands offer less differentiation - Advertising efficiency has declined due to rising costs, clutter and legal constraints! - Consumers have become more deal-oriented

Other common sales promotion tools for consumer promotions include…! Samples

Coupons

Cash Refunds

Price packs

Premiums

Advertising specialities

Patronage rewards

Point-of-purchase displays

Demonstrations

Contests

Sweepstakes

Games

1. Samples offer a trial amount of a product ! - Can be effective but expensive with lower risk as people know whether they like it! - However some people can take advantage by only using samples and never buying ! - Usually for fast moving consumer goods (FMCG) eg. shampoo, food as it can be in small portions and used up quickly ! 2. Coupons are certificates that give buyers a saving when they purchase specified goods ! - Distributed to certain target customers ! - Usually for some people but not all and reflects segmented pricing ! 3. Cash refunds/rebates are similar to coupons except that the price reduction occurs after purchase. ! - Usually done in collaboration with banks as it makes refunds more convenient ! 4. Price packs (cents off deals) offer consumers savings off the regular price of a product! - Can be single products or two products together ! - Very effective ! - Eg. “any 2 for £3” or a meal deal! 5. Premiums are goods offered either for free or at a low price, an incentive to buy another product. ! - Eg. Happy meal toys ! 6. Patronage rewards are rewards provided by companies to promote and encourage the purchasing of their products! - Eg. Tesco club card points, credit card points, gifts/reward points to be redeemed as gifts !

7. Advertising specialities/promotional products are useful articles imprinted with he advertiser’s name, logo or message that are given as gifts to consumers! 8. Point-of-purchase promotions include displays and demonstrations that take place the point of sales ! 9. Contests, sweepstakes and games give consumers the chance to win something such as cash, trips or goods by luck or through extra effort. ! - Contests require entry by a consumer where the best ones are selected for rewards! - Sweepstakes require consumers to submit their names for a drawing ! - Games present consumers with something that may or may not help them win a prize ! Sales Promotion in Practice! How do companies conduct promotion?! - You need to understand the relationship between products before doing sales promotion. There can be cannibalisation effect if you promote similar products together, which is less effective.! - When doing sales promotion you need to understand what is important to customers -itis about your company being loyal to your customer.! - Eg. Dunnhumby is a customer data science company and helped Tesco create the club card. ! Sales Promotion Research Findings ! Raghubir, P., Inman, J., & Grande, H., (2004). Sales promotion can influence customers not positively and negatively through 3 routes:! 1. The economic route - lower price, but stockpiling costs and more consumption/waste. Waste is costly. 2. The informational route - Increasing awareness but perceptions of high profit margin. May think that original price is too high and will only buy if they have a coupon eg, 3. The affective route - Feeling of being smart, but annoyance of dealing with coupons or restrictions. Eg. Minimum spending for coupon discounts ! Companies need to be aware of these effects and manage their sales promotion carefully. ! Laroche, et. al., (2003) find different customer behaviours for two sales promotion tools.! 1. Coupons - users engage in coupon search and sort. Involves planning a purchase in advance.! 2. 2 for 1 deals - decisions to buy are made in the store, low effort and commitment! Bawa, K., & Shoemaker, R., (2004) find 3 effects of sample promotion ! 1. Acceleration effect - the free sample can make some people try products earlier than without the free sample so the company can get new customers earlier. (positive) 2. Cannibalisation effect - without the free sample, some people would actually buy product to try it, but with the free sample they don’t buy for trial. It is a loss for a company. (negative) 3. Expansion effect - some people would never try a product if there is no free sample.They don’t want to buy the product for trial. With the free sample the market is expanded (positive)! The company needs to calculate it carefully and work out the if the net impact is positive or negative....