Session 10-16 Slides

8/12/2019 Session 10-16 Slides

http://slidepdf.com/reader/full/session-10-16-slides 1/18

1

Three routes of promotion effectiveness

Cou ons

Types of Coupons

Instant redemption

Scanner-delivered

Cross-ruffing

Response offer U-pons

Types of Coupons

Cross-ruffing

The coupon is for another brand,manu acture e t er y t e same ordifferent firm. Coupon itself can be either

in or on package.

Response offer

Requested by customers. Coupons aree er ma e , axe or e-ma e o ecustomer.

U-pons – Online coupons



2

Coupon Redemption Rates

Instant redeemable 39.3%

-

Type of coupon Avg. Redemption Rate

- .

Instant redeemable – cross ruff 17.1%

Electronic shelf 10.2%

Electronic checkout 7.8%

In-pack 5.8%

On-pack 4.7%

Direct mail 3.5%

Handout 3.1%

Free standing inserts 1.3%

Source: Santella & Associates (http://www.santella.com/trends.htm.

Factors Affecting Coupon Effectiveness

Face value of coupon.

Distribution method.

Coupon for preferred brand or brand inevoked set.

Problems with Coupons

Reduced revenues

Mass cutting

Counterfeiting

Misredemption

Coupon Distribution Methods

Freestanding Inserts (FSIs)

Handouts in stores

Direct Mail

Magazines

Newspapers

In- and On-Package

Internet



3

1. Face value $1.00

Full Coupon Cost

. .

3. Handling charge 0.08

4. Consumer fraud (misredemption) cost 0.07

5. Internal preparation and processing cost 0.02

6. Redemption cost 0.02

.

Couponing (cont’d)

Is Couponing Profitable?

Most cou ons are redeemed b currentbrand users

Households most likely to redeem couponsare also the most likely to buy the brandin the first place

prevent losing consumers to other brandsthat do offer coupons

Point-of-Purchase Couponing

Point-of-PurchaseCoupons

nstant y e eema eCoupons

e - e vereCoupons

canner- e vereCoupons

Mail- and Media-Delivered Coupons

Mail-DeliveredCoupons

Have 95% household penetration rate

Have highest redemption rate of all mass-delivered coupons (3.5%)

Are relatively expensive

Are Inefficient and expensive for brands

enjoying a high market share

FSIs andOther Media-Delivered

88% of all coupons distributed newspaperfreestanding inserts

Provides broad exposure

Is relatively cheaper

Serves both reminder and advertisingfunctions

Redemption rate is very low

Don’t generate much trade interest

Susceptible to misredemption



In- and On-Pack Coupons

Are Included either in or on the product’spackage

Cannot e remove at t e point o purc ase;it’s for next purchase

May use a coupon to promote one brand byanother brand (crossruffing)

Have bounce-back value

Have no distribution costs

Have higher redemption rates

Offer delayed value to consumers

Don’t reach nonusers of the carrying brand

Online Couponing

Are distributed by many Internet sites

can be specific.

Allows consumers print their owncoupons, at no additional cost to theadvertiser

Has potential for fraud in that criminalscan alter their printed coupons

Minimal distribution costs

Disadvantages of couponing

Time of redemption cannot always becontrolled

w y r v urr u r rredeeming coupons

Coupon programs require costlyadministration

Fraud is a serious, chronic problem

Misredemption

Consequences of Misredemption

The 3 to 4 percent misredemption raterepresents millions of dollars in losses bymanufacturers

Participants in Misredemption

Consumers

Store management

Shady clearinghouses

Professional misredeemers



Consumer Promotions contd

Types of Consumer Promotions

Consumer Franchise Building Designed to increase awareness of and

oya ty to t e ran

Goal is to build a favourable image bypointing out unique features and sellingpoints

onsumer a es u ng Immediate sales rather than brand equity

or loyalty through discounts, prizes orother enticements

Types of Premiums

Free-in-the-mail

In- or on-package

Store or manufacturer

Self-liquidating

Pros & Cons of Premiums

Pro

Offer something more without reducingprice

Con

Takes focus away from main product



Match the premium to the target market.

Keys to Successful Premiums

Carefully select the premiums.(Avoid fads, try for exclusivity)

Pick a premium that reinforces the firm’sproduct and image.

Integrate the premium with other IMC

. spec a y a ver s ng an sp ays Don’t use premiums to increase profits.

Source: Based on Don Jagoda, “The Seven Habits of Highly Successful Promotions,”Incentive, (August 1999), Vol. 173, Issue 8, pp. 104-105.

Creating Successful Contests andSweepstakes

Know the legal restrictions. Must overcome clutter.

Find the right combination of prizes.

Must consider extrinsic and intrinsicvalue.

Look for tie-in opportunities with

. Must be coordinated with POP Displays

and other marketing tools.

Money back offer requiring the buyerto mail a request for money back from

Rebates

t e manu acturer

Often tied to multiple purchases Many consumers fail to bother sending

in the rebate request form

Frequency Programs

Also known as continuity programs

Offers customers discounts or freeproducts for repeat patronage

Common in airline, hotel, andrestaurant businesses



Successful Rebate/RefundPrograms

Visibility.

Encourages customers to act.

Not be too complicated.

Avoid becoming a permanent

component of the purchase decision(automobile rebates)

Profitable for retailers to handle.

Types of Sampling

In-store distribution Direct sampling

Response sampling

Cross-ruff sampling

Media sampling

Professional sampling

Selective sampling

Reasons for Using Bonus Packs

Increase usage of the product

Match or pre-empt competitive actions.

Stockpiling of product.

Develop customer loyalty. Attract new users.

Encourage brand switching.

Price-Offs

Temporary reduction in price.

Excellent for boosting short-term sales.

Excellent for generating customer

traffic. Can be implemented easily.

Must be careful not to increase.

Can have detrimental impact on brandand corporate image.



Promotion Combinations

Over-lay Combining two or more promotions into

one sing e campaign

e.g. Samples with coupons

Intra-company tie-in

Two products within the company

Inter-com an tie-in

Products of different companies

Economic Foundations

Price Perception

Weber’s Law Δ s

----- = k

A price decrease of Rs. 10 on a Rs. 100 item is the

minimum price decrease that will be noticed.

On a Rs. 200 item what is the price decrease required?

k = 0.1 and Rs. 20 decrease is required

Value of k needs to be determined empirically beforeem ar ng on promot ons

price cuts within a small range may be completelyineffective

a base or original price is important determiningeffectiveness of a price reduction

Adaptation Level Theory

Perceptions of new stimuli are formed relative toa standard or “adaptation level” .

is the “Reference Price”.

Reference price could be: Expected price (from experience – hear say) or

Fair Price (your perception of what it should be) or

Target Price (what you can afford)

’prices to be high

This would help accentuate effect of anydecrease in prices and regular prices do notseem unattractive.



Assimilation Contrast Theory

How do reference prices change? How customer is willing to deal with

discrepant new information

Changes in price of an item may eitherbe

Small – then customer treats it as anaberration – Latitude of acce tance

Large – Exception – Latitude of rejection

Moderate – may change the referenceprice – Latitude of non-commitment

Price Perception

Weber’s Law Δ s----- = k

price cuts within asmall range may becompletely ineffective

a base or original price

S

determiningeffectiveness of a pricereduction

Adaptationlevel theory

Concept ofreference price

Expected price

Target price

Fair price

- Less discre ant is

contrast theory

prices mightchange

easily assimilated

Prospect Theory and Mental Accounting

Segregate gainsprinciple

Better to have consumerscode several gains separately(segregate) than add them upas one ne ga n. n egra e

Silver lining principleSegregate a large loss and asmall gain (and integratewhen gains/losses are roughlyequal or gain is bigger thanloss)

Transaction eva uation acquisition uti ity +transaction utility

Trade Promotions



Trade promotion

Are promotions directed atwholesales distributors and retailers

Expenditures or incentives used bymanufacturers and channel membersto push goods through the channel.

Producer Wholesaler Retailer Consumer

Objectives of Trade Promotions

Obtain initial distribution Push vs Pull

Obtain prime retail location or shelfspace

Eye-level; superior location

Maintain support for established brands

Shelf space

Share of Shelf (SOS) = Share of Market(SOM)


Counter competitive activities

Increase order size

Key season Close sales target

Pre-empt

Push out the stock


Reduce excess inventories

Clear stock

Use trade for storage

Enhance channel relationships

Special supports, training

Enhance the IMC program

Enhance not only through image, but alsoother elements (in-store)




Obtain initial distribution Increase distribution of new packages or sizes.

a n pr me re a oca on or s e space

Maintain support for established brands

Counter competitive activities

Increase order size

Build retail inventories

Enhance channel relationships

Achieve product features in retailer’s ads.

Counter competitive activity.

Broad types of Trade Promotions

Contests and incentives

-

BuyingPOP displays

Sales trainin

Trade allowances

Promotions

SlottingTrade shows

Trade Allowances

Trade Allowances

Are used because manufacturers hope toincrease purchases of the manufacturer’sbrand by wholesalers and/or retailers

Augment consumers’ purchases of themanufacturers’ brand from retailers

pass along their savings to consumers

Types of Trade Allowances

Off-invoice allowance

a per-case rebate paid to retailers for an.

Drop-ship allowance

money paid to retailers who bypasswholesalers or brokers for pre-planned orders.

Slotting fees

product.

Exit fees

money paid to retailers to remove an itemfrom their SKU inventory.



Major Forms of Trade Allowances

Off-InvoiceAllowances

Most frequently used form

Deals offered to trade that permitwholesalers and retailers to deduct a fixedamount from the invoice

Retailers may not pass along discounts toconsumers

SlottingAllowances

Fees that manufacturers pay retailers foraccess to the slot, or location

ees pa y a manu ac urer o ge s newbrand accepted by retailers—a form ofbribery? or legitimate cost of doingbusiness?

Disadvantages of Trade Allowances

Low Passthrough Percentage of discount passed through to

customers

Forward buying

Diversion

Lack of control

Forward Buying

Retailers purchase enough products ondeal to carry them over until the

’manu ac urer s nex regu ar y sc e u edeal

Retailers’ savings from forward buyingoften are not passed on to consumers

Actions leads to increased distributioncos s

Manufacturers experience reduced marginsdue to price discounts

Diverting

Occurs when a manufacturer restricts adeal to a limited geographical area

Retailers buy large quantities at thedeal price and then resell the excessquantities in other geographical areas

Product quality potentially suffers dueto dela s and serious roblem couldresult from product tampering



13

Other Trade Promotions

1. Trade incentives and deals2. Contests

3. Point-of-purchase displays

4. Retailer (Dealer) kit

5. Trade shows and exhibits

6. Training programs

. en or suppor programs8. Specialty advertising

Trade Incentives and Deals

- xpec a on rom re a ers- Return for retailers

- Trade deal: buying allowances forincreasing purchase or advertising

a owances

Trade Incentives

Cooperative merchandising agreement(CMA)

Corporate sales program (CSP)

Producing plant allowance (PPA)

Back haul allowance (BHA)

Cross-dock or Pedal runs

Used to achieve sales targets

Trade Contest

Spiff Money

Rewards can be prizes or cash

Can be designed for various channel

members

Some organizations do not allow trade

contests because of possible conflict of

interests



14

Point-of-purchase displays

A manufacturer-designed display distributed toretailers who use it to call customers'

Reach

Cost

Impulse buy

Retailer's view on display materials

Effective POP Displays

Integrated Marketing Communication Integrate the brand’s image

Needs to target the shopper than just the consumer

Make the display dramatic to get attention

Make the display to be easily adapted byretailers

Make the dis la re-usable and eas to

assemble Make the display easy to stock

Customize the display to fit the retailer’s store

Retailer (Dealer) Kits

Material that support retailers'selling efforts that helprepresentative make sales calls onprospective retailing customers

Trade Shows and Exhibitions

Trade Shows: Companies within the same

- to present, sell, demonstrate products

- opportunity to discover potential customers

- strengthen relationship with current customers

- meet directly with decision makers and buyers

the products





16

Considerations in Executing a Trade Promotion

Size of the incentive

•Depth of discount

•Gross Margin•Incentive to cheat?

Con itions orparticipation?

Structure and distributionof the promotion program

• ua er•Pay for performance•Specific Activities – sales/others

•Coverage area•Products/SKUs•Price points/display

Length/frequency of theprogram

Measures of success

•Short period•Multiple promotions

•Revenue•Passthrough•New customers/New channels•Profitability

Ingredients for a SuccessfulTrade Promotion Program

Financial

CorrectTiming

Incentive

MinimizeRetailer’s Effort

and Cost

ImprovedRetailer

Performance

QuickResults

Concerns about Trade Promotions

High cost

Tend to be used outside of IMC Plan

Over-reliance on trade promotions to

push merchandise Often used for short-term sales goals

Potential erosion of brand ima e

Impact on small manufacturers

Efforts to RectifyTrade Promotion Problems

Reducing theNegative Effects of Trade Allowances

Everyday LowPricing (EDLP)

Pay-for-Performance

Accoun t-Spec ifi cMarketing



17

Trade Promotion Activities

Everyday Low

Pricing (EDLP) orValue Pricing

When a retailer charges the sameprice for a particular brand day inand day out

manufacturer charges retailers thesame price for a particular brand dayin and day out.

Pay-for-PerformancePrograms

Reward retailers for selling thebrands supported with tradeallowances rather than merely buyingthese brands.

Produce win-win-win situationsProvide incentives to the retailer only

for the items that are sold toconsumers during the agreed-upontime period

Benefit all parties: consumers,retailers, and manufacturers

Trade Promotion Activities (cont’d)

Account-SpecificMarketing(Co-Marketing)

Creates promotional and advertisingactivities that a manufacturercustomizes to specific retailaccounts—local radio tie-inadvertising, loyalty programs

Relatively recent innovation

Requires much effort and can becostly

The future of this practice isuncertain

Tactics for improving Trade Promotion Results

Count recount

paying retailer only on the number of unitsmove rom ware ouse to store

Surrogate for consumer sales

Pros Mfr pays only for units passed through and

not for units forward bought

High costs

Retailer’s dissatisfaction

Ok for strong brands


Bill Back

Retailer must bill back mfr for thepromot ona a owances ac eve ur ngthe promotion. (Price discount, display, ad

allowance) Pros

Mfr pays only for compliance

Retailer’s dissatisfaction



18


Allocations

Determining the normal volume a retailersells in a fixed time period

Limit amount that the retailer can buy

Why Not Reduce Trade Promotions?

If a manufacturer reduced trade promotions …

What would competitors do? Reduce, maintain or increase promotional levels

What would retailers do?

Punish or not punish the manufacturer

Documents

Session 10-16 Slides