4550: Promotion Strategy II

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4550 Promotion Strategy II

• Professor Campbell
• 2/24/05

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Plan for the Day

• Consumer promotions
• Online promotions
• Testing
• Trade promotions
• Putting promotions in perspective

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Online Promotions

• Advantages
• Real-time tracking
• Message execution
• Product movement
• Easily/fast modification
• Data capture
• Follow-up opportunities
• Costs
• Reach Frequency
• Redemption
• Friendly target?

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Online Promotions, continued...

• Disadvantages
• Response rate prediction
• Lack of real consumer interest
• Often does not build equity
• Usage

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Questions for Online Promotions

• Does this NEED to be online?
• (to meet objective)
• Is this something that will work better online
  than in traditional media?
• What does this say about the brand?

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Testing Promotions

• Is the promotion offer being processed by target
  consumers as intended to meet communication
  goals?
• How does the promotion affect brand equity?
• Consumers attributions for the promotion need to
  be understood

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Trade Promotions

• Promotions (ie, short-term incentive) targeted to
  some member of the channel of distribution
• Should be based on well-defined, specific
  objectives
• Should have measurable goals

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Trade Promotions Objectives
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Trade Promotions

• Point-of purchase displays
• Trade deals/ Buying allowances
• Price-offs/ Off-invoice
• Free goods
• Slotting allowances
• Dealer loaders
• Comarketing
• Co-op Ads
• Account Specific Promotions
• Market Development Funds
• Dealer contests incentives
• Push /Spiffs

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Price-offs

• Advantages
• Quick implementation
• Evoke strong response and fast response
• Disadvantages
• Cost
• Short-term impact
• Does not help brand equity and can hurt it
• Usage
• Short-term competitive response

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Tradeoffs among Promotions
Price Reductions Unsure Incomplete
Pass Low Short Retailer High Shelf
Talker Negative Immediate Low Impulse Yes Moder
ate
Bonus Packs Yes Residual Stock Moderate Long Manu
facturer Moderate Handling Depends Immediate Lo
w Impulse Yes Moderate
Coupons Yes Misredemption High Moderate Manufactu
rer Low Checkout Time Depends Delayed Moderate
Planned No High
Trial Sizes Yes Residual Stock Moderate Long Manu
facturer Moderate In-Store Handling Depends-Neutra
l Immediate Low Impulse Yes Low
Manufacturer Factors Pass Through Unplanned
Costs Ability to Forecast Costs Lead Time Source
of Offer Immediacy of Impact Added Cost to
Retailer Effect on Brand Equity Consumer
Factors Timing of Reward Consumer Effort Impulse
of Planned? of Units can Purchase Regular
Users
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Generalizations about Promotion Types
Consumer Promotion
Advertising
Trade Promotion
Franchise Building Brand Benefit Emphasis High
Marketer Control Pull Strategy Longer-Term
Impact Investment Financing Long Time
Horizon Image oriented
Non-franchise Building Price Emphasis Low
Marketer Control Push Strategy Short-Term
Impact Pay-as -You-Go Financing Shorter Time
Horizon Action oriented
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Promotions

• Usage of promotions grew dramatically during the
  80s and early 90s
• 60 of consumer goods firms were spending more on
  promotions than ads
• 80 of consumers made use of promotions
• Trend then began reversing
• 1991 - average of 47 of budget went to
  promotions
• 1995 - average of 44 of budget went to
  promotions
• Now appears to be increasing again
• Retailer power expectations

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Limitations
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Other Promotions

• Because of limitations, promotion expenditures
  are increasingly going to non-sales promotions,
  e.g., event sponsorship
• Global trend
• Consistent with micro-marketing, relationship
  marketing

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Setting the Marketing Communications Mix

• Decide on target market and marketing
  communications objectives
• What effect do you want to have on the consumer?
• Then decide which communications tools appear to
  be the best for achieving the desired effects

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What can we do to Generate Trial?
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What can we do to Generate Usage?
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Think about Brand Building

• Non-Brand-Building Promos
• Accelerate purchase process and generate an
  immediate increase in sales
• Brand-Building Promo
• Communicate brand attributes and contribute to
  the development and reinforcement of brand
  identity

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Base the marketing communications mix on
consideration of the communications objectives
and how best to achieve them
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In Conclusion...

• Some promotions are likely to be necessary
• Consumer may be the best route to objectives
• Trade may be best route to objective but also
  may not have much latitude
• Interest should be in incremental sales (versus
  short terms spikes in the sales curve)
• Promotions (like everything else!) should be
  considered in terms of likely effects on brand
  equity

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Conclusion, continued

• Advertising and promotion work together
• Prior attitude-building advertising creates
  higher perceived value from a brands promotion
• Prior attitude-building advertising creates
  resistance in the consumer to other brands
  promotional activities
• Synergies among marketing communications
  activities can make or break the overall plan.