Marketing Communications - Chapter 15 pps

© 2010 South-Western, a part of Cengage Learning All rights reserved. PowerPoint Presentation by Charlie Cook The University of West Alabama Eighth Edition Sales Promotion and the Role of Trade Promotions CHAPTER 15 1. Understand the nature and purpose of sales promotions. 2. Know the factors that account for the increased investment in promotions, especially those that are trade oriented. 3. Recognize the tasks that promotions can and cannot accomplish. 4. Appreciate the objectives of trade-oriented promotions and the factors critical to building a successful trade promotion program. Chapter Objecves After reading this chapter you should be able to: © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–2 5. Comprehend the various forms of trade allowances and the reasons for their use. 6. Be aware of forward buying and diverting and how these practices emerge from manufacturers’ use of off-invoice allowances. 7. Appreciate the role of everyday low pricing (EDLP) and pay-for-performance programs as means of reducing forward buying and diverting. 8. Understand nine empirical generalizations about promotions Chapter Objecves (cont’d) After reading this chapter you should be able to: © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–3 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–4 The Nature of Sales Promotion The Nature of Sales Promotion • Sales Promotion Sales Promotion  Is any incentive that is additional to the basic Is any incentive that is additional to the basic benefits provided by the brand and benefits provided by the brand and temporarily temporarily changes its perceived price or value changes its perceived price or value  Is Is short-term oriented short-term oriented and capable of influencing and capable of influencing behavior because it offers buyers superior value behavior because it offers buyers superior value and can make them feel better and can make them feel better about the buying experience about the buying experience © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–5 The Nature of Sales Promotion (cont’d) The Nature of Sales Promotion (cont’d) • Purposes of Sales Promotion Purposes of Sales Promotion  To induce the trade (wholesalers and To induce the trade (wholesalers and retailers) or consumers to buy a brand retailers) or consumers to buy a brand  To encourage the manufacturer’s sales To encourage the manufacturer’s sales force to sell a brand aggressively force to sell a brand aggressively  To encourage immediate, desired To encourage immediate, desired shopping and purchasing behaviors shopping and purchasing behaviors from their consumers from their consumers  To encourage people to increase their To encourage people to increase their donations to nonprofits now rather than donations to nonprofits now rather than later later © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–6 Brand-Level Promotion Targets Figure 15.1 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–7 Increased Budgetary Allocations Increased Budgetary Allocations to Promotions to Promotions • Advertising Spending Advertising Spending  Advertising expenditures have declined in recent Advertising expenditures have declined in recent years while promotion spending has increased years while promotion spending has increased • Push Strategy Push Strategy  Using promotional efforts to push product through the Using promotional efforts to push product through the selling chain selling chain • Pull Strategy Pull Strategy  Using consumer advertising to pull product through Using consumer advertising to pull product through the channel of distribution the channel of distribution © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–8 Push and Pull Strategies Table 15.1 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–9 Developments Underlying the Growth in Promotions Table 15.2 • Shift in manufacturer versus retailer balance of power • Increased brand parity and price sensitivity • Reduced brand loyalty • Splintered mass market and reduced media effectiveness • Emphasis on short-term results in corporate reward structures • Increase in responsiveness of consumers to promotion © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15–10 A Consequence of the Increase: A Consequence of the Increase: New Accounting Rules New Accounting Rules • Financial Accounting Standards Board (FASB) Financial Accounting Standards Board (FASB) Emerging Issues Task Force Emerging Issues Task Force  Regulations EITF 00-14 and 00-25 require that price Regulations EITF 00-14 and 00-25 require that price discount sales promotion discount sales promotion — — including those directed to including those directed to retailers and consumers retailers and consumers — — must be treated as must be treated as reductions in sales revenue. reductions in sales revenue.  Adherence to the new rules will cut reported net sales Adherence to the new rules will cut reported net sales for CPG companies by 8.5% on average. for CPG companies by 8.5% on average. [...]... 2010 South-Western, a part of 15 23 Trade Promotion Activities (cont’d) Account-Specific Marketing (Co -Marketing) • Creates promotional and advertising activities that a manufacturer customizes to specific retail accounts—local radio tie-in advertising, loyalty programs • Relatively recent innovation • Requires much effort and can be costly • The future of this practice is uncertain © 2010 South-Western,... day out Pay-for-Performance Programs • Reward retailers for selling the brands supported with trade allowances rather than merely buying these brands • Produce win-win-win situations • Provide incentives to the retailer only for the items that are sold to consumers during the agreed-upon time period • Benefit all parties: consumers, retailers, and manufacturers © 2010 South-Western, a part of 15 22 Scanning... suffers due to delays and serious problem could result from product tampering © 2010 South-Western, a part of 15 20 Efforts to Rectify Trade Promotion Problems Reducing the Negative Effects of Trade Allowances Everyday Low Pricing (EDLP) Pay-forPerformance © 2010 South-Western, a part of Account-Specific Marketing 15 21 Trade Promotion Activities Everyday Low Pricing (EDLP) or Value Pricing • When a retailer...Table 15. 3 Illustration of “Old” and “New” Accounting Procedure © 2010 South-Western, a part of 15 11 Table 15. 4 Tasks That Promotions Can and Cannot Accomplish Sales Promotions Can • Stimulate sales force enthusiasm for a new, improved, or mature product • Invigorate sales of a mature brand • Facilitate the introduction of new products to the trade • Increase on- and off-shelf merchandising... competitive activity 9 Selling as much as possible to final consumers © 2010 South-Western, a part of 15 14 Ingredients for a Successful Trade Promotion Program Financial Incentive Minimize Retailer’s Effort and Cost Correct Timing Quick Results © 2010 South-Western, a part of Improved Retailer Performance 15 15 Table 15. 5 Illustration of Forward Buying and Diverting 1 In preparation for a huge promotional... Trade Allowances Off-Invoice Allowances Bill-Back Allowances © 2010 South-Western, a part of Slotting and Deslotting Allowances 15 18 Major Forms of Trade Allowances Off-Invoice Allowances • Most frequently used form • Deals offered to trade that permit wholesalers and retailers to deduct a fixed amount from the invoice • Retailers may not pass along discounts to consumers Bill-Back Allowances • Retailers... of personal-care products—extends an off-invoice offer to grocery chains in the Los Angeles area This promotion is a 15 percent off-invoice allowance on all orders placed for SynActive shampoo (a hypothetical brand) during the week beginning April 3, 2009, and extending through the week beginning April 24, 2009 2 Assume that FB&D Supermarkets of Los Angeles (a hypothetical chain) orders 15, 000 cases... typically would sell in its own stores during any four-week period Beauty Products Inc has offered the 15 percent offinvoice allowance to FB&D Supermarkets with the expectation that FB&D will reduce SynActive’s retail price to consumers by as much as 15 percent during the week of Cinco de Mayo festivities 3 FB&D sells at the discounted price only 3,000 of the 15, 000 cases purchased (The remaining cases include... buys.) © 2010 South-Western, a part of 15 16 Trade Allowances • Trade Allowances  Are used because manufacturers hope to increase purchases of the manufacturer’s brand by wholesalers and/or retailers  Augment consumers’ purchases of the manufacturers’ brand from retailers  Foster the expectation that retailers will pass along their savings to consumers © 2010 South-Western, a part of 15 17 Trade Allowances... • Preempt competition by loading consumers • Reinforce advertising © 2010 South-Western, a part of 15 12 Table 15. 4 Tasks That Promotions Can and Cannot Accomplish (cont’d) Sales Promotions Cannot • Compensate for a poorly trained sales force or for a lack of advertising • Give the trade or consumers any compelling long-term reason to continue purchasing a brand • Permanently stop an established brand’s . South-Western, a part of Cengage Learning. All rights reserved. 15 6 Brand-Level Promotion Targets Figure 15. 1 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15 7 Increased. about promotions Chapter Objecves (cont’d) After reading this chapter you should be able to: © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15 3 © 2010 South-Western, a part. 2010 South-Western, a part of Cengage Learning. All rights reserved. 15 8 Push and Pull Strategies Table 15. 1 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 15 9 Developments