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Sales promotion and publicity



Category: Marketing

Sales Promotion

Kotler indicates that sales promotion has «distinctive qualities».

Insistent presence. An attention-getting quality that can break through buyer inertia.

Product demeaning. Careless or too frequent use can cause people to question the value of the product.

Factors accounting for the increasing use of sales promotion:

The proliferation of new brands. Sellers have to work hard to get people to try their brand

Low quality retail staff and growth in self service. Sales promotion is often associated with the point of sale (eg an on-pack promotional gift) where the purchasing decision is made

Many sales promotion activities can be introduced quickly. e.g.: «10p-off» coupons and can produce sales quicker than advertising

It can contribute to the effectiveness of other elements in the promotional mix (synergistic effect)

Some problems associated with the use of sales promotion:

Product demeaning

It can be expensive e.g.: unexpected high demand for free gift

Problem of subsidising already loyal users. e.g.: 20% extra free packs

Targets of Promotion:

1. The trade. Examples include prizes for high sales levels and discounts to encourage dealers to stock

2. The consumer. Examples include free samples to encourage trial of a new product or a competition to encourage consumption of a product in the off season.

3. The sales force. Examples include holidays as a reward for meeting sales targets, and sales conferences as a means of improving sales force motivation and morale.

Publicity

Kotler indicates that publicity has the following qualities:

High credibility. News stories and features seem more credible than adverts.

Off guard. Publicity reaches people who might avoid salesmen and adverts

Dramatisation. Like adverts it can dramatise a company or product.

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A Guide to the Use of Sales Promotion Techiques

Offers. There’s so many different types, — competitions, buyback offers, free draws, money-off coupons, sweepstakes, phone—ins, free samples, share-outs, charity promotions, free mailings, self-liquidating premiums and so on. The list seems endless. Promotions are now an integral part of the modem business scene. No longer are they purely in the supermarket domain. More and more industries are learning how to use sales promotion as part of their marketing effort.

It’s important to bear in mind, however, that promotions are just one part of the marketing mix and consequently you need to consider whether or not investment in other areas eg. on improving the product or on advertising might meet your objectives in a more cost-effective manner. Once the decision has been made that a promotion is required — how does one select the most relevant technique from the wide variety available? In the first stage it is a question of defining the promotional objectives. Techniques can vary considerably in their effectiveness at solving particular problems. Sales promotions can assist in solving quite diverse problems such as: stimulating stock movement, encouraging repeat purchase, securing marginal buyers, increasing penetration of new or existing products, increasing sales volume, bringing forward buying peaks e.g.: seasonal sales, attracting customers to premises, correcting poor distribution levels, increasing awareness and loyalty, securing display in store, or broadening the brand’s appeal.

Promotions cannot change long term trends in the life of a brand or take the place of advertising and personal selling, nor are they any substitute for healthy consumer demand. For example, promotions may slow down the rate of decline of a brand but cannot reverse it without a significant and lasting change in the value (product and advertising based) that the brand offers the customer.

Promotions are generally regarded as short term marketing tools which are used to achieve specific objectives during a defined time period. Whilst they are acknowledged to be a means of offering temporary added value to the customer they should, nonetheless, form an integral part of the brand’s long term strategy. Unlike advertising, promotions act at the point of sale. As such they can be extremely versatile. They can be used against specific target groups e.g.: particular groups of customers, stores on a geographic or time basis, sales can be substantially increased during the promotional period and their effect and cost can usually be assessed in advance by prior testing. On the downside, most often fail to provide a lasting sales increase, there can be considerable extra costs involved; special displays, extra packaging, time and effort by the salesmen which is frequently ignored in evaluation. Price promotions if run for too long could establish a lower price level or price war with competitors and a profusion of price promotions cannot only seriously undermine brand loyalty but can increase the likelihood of switching between brands.

Sales promotion activity will impact on a company’s sales operation and in particular the sales force, so it is essential to plan ahead and co-ordinate promotional activity across all the company’s brands. Promotional activity should be tied in to key marketing activity such as new product introductions, relaunches, merchandising activity or price increases. Not only will this result in more cost-effective promotions but will also help to avoid difficulties such as conflict of sales force priorities, repetitious use of identical promotional techniques, over-promoting a brand, the incorrect timing or use of promotions. Forward planning can help identify when it might be appropriate to mount multi-brand schemes, merchandising activity, tailor-made promotions and so on. Identifying the promotional objectives is an essential pre-cursor to effective and efficient promotional activity. Aspects to consider in drawing up the objectives include: the nature of the problem the promotion is to solve; penetration, repeat purchase, distribution, or display, the budget available, the nature of the product or service involved and target group the promotion is seeking to influence.

Finally, it is important that all promotional activity is evaluated against pre-set action standards, as this can help in the design and budgeting of future promotional activities. Wherever possible, promotional objectives should be quantified in order to provide a yardstick against which the promotion can be measured. Money off coupons are used extensively to secure brand trial. In this respect couponing, after free samples, is the most effective device to introduce a new or improved product. It is also effective at building onto existing users, winning back lapsed users and encouraging repeat buying.

They can also be used to counter competition with a price incentive that does not alter the on-shelf price. No wonder that nearly 8 billion, are distributed every year, and of these around 350 million are actually redeemed (a 4.3% redemption rate). Redemption rates for specific coupons depend upon a wide variety of factors, and consequently vary considerably.

It is difficult to estimate redemption rates. Nielson Clearing House have a wealth of data on coupon redemption levels and are willing to provide information as to the likely redemption rate that a particular promotion might obtain. As a guide for established brands the average redemption levels are of the following order; for coupons directed at the consumer: on-pack 30%, door-to-door leaflets 7-8%, national press and magazines 2-2-1/2%, coupons carried on other brands 10-16%, and those handed out by in-store girls 20-30%. Trade coupons on the other hand give rise to the following redemption levels: magazines 2%, trade mailshots 30%, and in-case coupons 50-60%.

Coupons are distributed through four main media: newspapers, magazines, door-to-door and in/on-pack. Newspapers still account for the vast majority (73%) of coupons distributed whilst the majority of redemptions (62%) are accounted for by in/on-pack coupons. The face value of coupons has steadily increased and is now nearly 10p. Most of us enjoy competitions — the challenge of trying to beat others to win a glittering prize. Indeed, competitions are one of the most widely used sales promotion techniques. It is important to be aware of the definition of competition. It is the allocation of prizes based upon the judgement of merit and not by chance or gratuitous distribution. If success in a competition does not depend to a substantial degree upon the exercise of skill then it is illegal.

Well planned competitions can be particularly effective in securing repeat purchase, penetration and in-store display, as well as helping to build a brand’s distribution when they’re directed at the trade. Compared to other techniques, competitions can be mounted quickly, have a fixed cost, are relatively easy to manage and can be used across trade and consumer sectors. However, they do not provide an immediate benefit to the consumer, the redemption rate is normally low (typically less than 0.5-1% of promotional packs/leaflets distributed). Checking answers can also involve high administrative costs, and the cost of prizes that are offered tends to escalate as manufacturers compete to offer bigger and better prizes.

Effective and successful competitions should be simple to understand, easy to enter (but still skilful), have rules that are easy to read and comprehend, have a low proof of purchase requirement, are difficult to win and offer a range of attractive and exciting prizes. Opinion tends to be divided between a prize structure that involves a major prize (e.g. a house) with a few minor prizes and that which has a large number of smaller prizes with an «everybody wins» element.

Price reductions — featured price reductions of a product or service — are the most widely used promotion technique. Such price cuts may be on a single unit of the product or may be on several units banded together into one pack.

The price cut varies according to the product field but is typically between 10-20% of the normal retail price. This type of offer can be printed on-pack by the manufacturer or marked on the pack in store by the retailer/wholesaler.

Consumers and the trade love price promotions as the benefit is immediate. With on-pack price offers the consumer receives all the price benefit. The technique can be used tactically on different packages, and is effective for both big and small brands as there are no economies of scale.

Unlike most promotions there is also little actual administrative effort involved. However, the Government has added a little spice to the scene with two pieces of legislation: The Trade Descriptions Act 1968 and the Price Marking (Bargain Offers) Act 1979. These both contain complex regulations for statements, claims and comparisons about price and value claims — get them wrong and you should be guilty of a criminal offence.

The method of distribution used will depend upon the sample size, its packaging, budget available, target group and any security considerations (e.g. removal in transit or on shelf)

The strongest possible promotion for new or improved brands has to be sampling. Mind you it is the most expensive type of promotion, requiring considerable administration particularly when delivered door-to-door or sampled in-store. So the brand should deliver superior performance to competitors and have mass market appeal. Unless some sort of filtering mechanism is employed it can subsidise existing users and may require the production of expensive sample packs. Distribution costs can be high as well as the level of wastage unless controlled. Even so, the conversion of consumers to the sampled product can still be as low as 5%. However, there’s much to recommend this technique. It can create interest, rapid and widespread trial, can secure the display of a brand when conducted in-store and can help to force trade distribution of the product. For most consumers sampling, above all, demonstrates confidence in the product.

Getting the sample into the consumer’s grubby little hands can be achieved in a variety of ways: by cross sampling with another product, given away on a media magazine, handed out by an in-store demonstrator, retailer or dealer on home delivery, sent out on application of the consumer, sold as a trial size or given out at a specific location e.g.: exhibitions.

How much of the product to give away also has to be carefully considered. The consumer must be given enough to appreciate the qualities of the product but not to the extent that they feel Christmas has arrived early. Factors such as the nature and value of the product, consumer usage, method of distribution (magazines for instance can only handle certain sizes), the cost of any sample packaging and the budget have to be carefully considered.

The sampling of food and drink has to be undertaken with care. Such sampling must conform to hygiene, local licensing and other relevant laws. The Food and Drugs Act makes it illegal to supply food which is not fit for human consumption. Samples obviously should not be dangerous if picked up by children or animals and if there’s any risk, no matter how slight, the sample should be personally handed over. Giving something away free is not as easy as it seems!

Whilst the law ultimately regulates promotional activity there are several cedes of practice which are recognised as important guides. The most comprehensive of these is the British Code of Sales Promotion Practice. This covers most forms of promotional practices as well as sales and trade incentives. It has been drawn up by the Code of Advertising Practice (CAP) Committee. It is always advisable before embarking on a promotion to check that it satisfies any relevant code of practice.

Administratively, promotions can be a bit of a nightmare. There’s a great deal to consider: closing dates (which must be on the outside of the packaging), application forms, proof of purchase requirements, despatch date (which should NOT be more than 28 days), rules, tie breakers, criteria for judging and evaluation of entries, use of independent judges and observers presentation and availability of promotional offers, coupon codes, and legal wording, to name but a few. Many promoters have omitted to include some minor element with the result that a seemingly straightforward promotion has been turned into a disaster.

Typical problems and possible promotional solutions The Problem / The Solution

1. To increase consumer awareness Free draws
Phone-ins
Sweepstakes
2. To increase penetration of new or Free offers (with, in or on- pack)
existing products Money off coupons or offers
Samplings
Refund offers
Multibrand schemes
Banded packs
Reduced price offers
3. To improve repeat purchase Competitions
Free offers
On-pack money off coupons
Reduced price offers
Refund/buyback offers
Shareouts / give-aways
Reusable container premiums
4. To increase consumer loyalty Premium offers
Money-off offers
Personality promotions
Coupons
Buy one, get one free/
twin pack offers
Refund offers
Reusable container premiums
5. To increase purchase frequency or Competitions
amount bought Shareouts/give-aways
Free offers
Personality promotions
Tailor-made promotions
Multibrand schemes
In-store promotions
Banded packs
Reduced price offers
6. To move high stocks out of stores In store raffle/competition
Free offers
Tailormade promotions
In-store merchandising
7. To attract consumers to premises Free gifts/trial
Tailor-made promotions
Money-off coupons
8. Trading up to larger sizes Consumer choice coupons
Refund offers
Multibrand offers
9. To increase distribution Tailormade promotions
Multibrand schemes
Trade competitions
Salesman’s incentives
Sample distribution
10. To encourage display On-pack premiums
Banded packs
Premium offers
Heavy price cut

Major target groups and appropriate promotions

Consumer Reusable container premiums
Free mail-ins
Free draws
Sweepstakes/give-aways
Phone-ins
Premiums
Money off coupons or offers
Refund/buyback offers
Self liquidating premiums
Sampling schemes
Direct mail
Free gifts
Trading stamps
Sponsorship promotions
Charity promotions
Consumer/Trade Multibrand schemes
Money off coupons or offers
Reduced price packs
Competitions
Personality promotions
Tailor-made promotions
In-store promotions
In-,on- and with-pack offers
Banded packs
Exhibitions
Trade Conferences
Business gifts
Dealer loaders
Dealer incentives
Trade bonuses
Advertising contributions
In-store merchandising
Incentives
Salesmen Incentive schemes
Conferences
Incentive travel

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