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James Steidl Sales promotion is an important component of a company's marketing communication strategy along with advertising, public relations, and personal selling. At its core, sales promotion is a marketing activity that adds to the basic value proposition behind a product i. As this definition indicates, sales promotion may be directed either at end consumers or at selling intermediaries such as retailers or sales crews. Sales promotion stems from the premise that any brand or service has an established perceived price or value, the "regular" price or some other reference value. Familiar examples of consumer sales promotion tools include contests and sweepstakes, branded give-away merchandise, bonus-size packaging, limited-time discounts, rebates, coupons, free trials, demonstrations, and point-accumulation systems. Three issues clarify sales promotion. First, sales promotion ranks in importance with advertising and requires similar care in planning and strategy development. Second, three audiences can be targeted by sales promotion: And third, sales promotion as a competitive weapon provides an extra incentive for the target audience to purchase or support one brand over another. This last factor distinguishes sales promotion from other promotional mix tactics. For example, unplanned purchases may be directly related to one or more sales promotion offers. In order to understand the basic role and function of sales promotion, one must differentiate between sales promotion and other components of the marketing mix. Sales promotion usually operates on a short timeline, uses a more rational appeal, returns a tangible or real value, fosters an immediate sale, and contributes highly to profitability. The idea of contribution to profitability may be confusing. It is simply the ratio between what is spent on a promotional mix compared to the direct profitability generated by that expenditure. A few exceptions to the above characteristics do exist. For example, a sweepstakes might use a very emotional appeal, while a business-to-business ad may be very rational. In any case, there is wide consensus that sales promotion enjoyed fairly rapid growth from the s through at least the mids, rising by more than 10 percent a year for much of the period. There is some evidence that growth slowed after the mid s; promotional spending in the business-to-business arena was being outstripped by advertising spending as of , a reversal from the trend just two years earlier. Still, the steep growth of media costs for traditional advertising has offered an ongoing incentive for marketers to use sales promotions. Several factors contribute to the strength of sales promotion in the United States. First, consumers have accepted sales promotion as part of buying-decision criteria. Primarily, sales promotion offers consumers the opportunity to get more than they thought possible. Product sampling, for example, allows consumers to try the product without buying it. Furthermore, many people are reluctant decision makers who need some incentive to make choices. Sales promotion gives them the extra nudge they need in order to become active customers. Finally, sales promotion offers have become an integral part of the buying process, and consumers have learned to expect them. The progression of sales promotion has been spurred by business, especially big business. Top managers and product managers have played direct roles in encouraging the recent growth of sales promotion. The product manager's goals and desires have provided the initial impetus. Product managers are challenged to differentiate their product in a meaningful way from competitors' products because buyers have many choices among brands and products offering similar satisfactions. Sales promotion techniques provide solutions to this dilemma. Heads of companies today focus increasingly on short-term results. They want sales tomorrow, not next quarter or next year. Sales promotions can provide immediate hikes in sales. New technology, especially the computer, has also created greater acceptance of sales promotion by managers wanting to measure results. For example, scanning equipment in retail stores enables manufacturers to get rapid feedback on the results of promotions. Redemption rates for coupons or figures on sales volume can be obtained within days. The growth in power of retailers has also boosted the use of sales promotion. Historically, the manufacturer had the power in the channel of distribution. Mass marketers utilized national advertising to get directly to consumers, creating a demand for the heavily advertised brands which stores couldn't ignore. With consolidation, retailers have gained access to sophisticated information. For example, use of computers and bar codes on packages is shifting the balance of power in their favor. Custom designed programs will help retailers to complete and increase sales in their market area. Sales promotion is an effective and satisfying response to the demand for account-specific marketing programs. Increased sales volume provided through sales promotion enhances small profit margins. Retailers also benefit from the immediate feedback of sales promotion that readily reveals unsuccessful programs. After a consumer uses a coupon for the initial purchase of a product, the product must then take over. Sales promotion activities may bring several negative consequences, primarily clutter from increased competitive promotions. New approaches are promptly cloned by competitors, with efforts to be more creative, more attention grabbing, or more effective in attracting the attention of consumers and the trade. Another increasingly perceived drawback occurs with distributed manufacturers' coupons, such as those inserted in Sunday newspapers. While ideally these are offered as an incentive for new or occasional customers to try the product in hopes of making them regular buyers, research has suggested that most coupons are redeemed by individuals who would normally buy the products anyway. In effect, the manufacturers are subsidizing their existing sales, as only a relatively narrow segment of the consumer market actively uses clipped coupons from the newspapers. To address this problem, manufacturers have found that in-store coupon devices or displays reach a wider cross-section of buyers and are more likely to entice targeted customers in addition to the regular customers who will likely also use the coupons. Also, consumers and resellers have learned how to milk the sales promotion game. Notably, consumers may wait to buy certain items knowing that eventually prices will be reduced. Resellers, having learned this strategy long ago, are experts at negotiating deals and manipulating competitors against one another, so that, for example, one company's product may be on sale one week and its competitor's the following week. Value-minded consumers then can regularly find an equivalent product on sale, which may increase their loyalty to the store at the cost of the manufacturers. Some of the same general techniques may be used to promote business-to business sales, although they tend to be implemented in different ways given the contrasts between the consumer and the corporate markets. In addition, trade sales promotions target resellers—wholesalers and retailers—who carry the marketer's product. Following are some of the key techniques in the storehouse of varied consumer-oriented sales promotions. The price deal hopes to encourage trial use of a new product or line extension, to recruit new buyers for a mature product, or to reinforce existing customers' continuing their purchasing, increasing their purchases, accelerating their use, or purchasing of multiple units of an existing brand. Price deals work most effectively when price is the consumer's foremost criterion or when brand loyalty is low. Four main types of consumer price deals are used: Buyers learn about price discounts and cents-off deals either at the point of sale or through advertising. At the point of sale, price reductions may be posted on the package or signs near the product or in storefront windows. Ads that notify consumers of upcoming discounts includes fliers, newspaper and television ads, and other media. Price discounts are especially common in the food industry, where local supermarkets run weekly specials. Price discounts may be initiated by the manufacturer, the retailer, or the distributor. For instance, a manufacturer may "pre-price" a product and then convince the retailer to participate in this short term discount through extra incentives. Effectiveness of national price reduction strategies requires the support of all distributors. When such support is lacking, consumers may find that the manufacturer's price is covered by the retailer's price, bearing witness to the power of retailers. Existing customers perceive discounts as rewards and often then buy in larger quantities. Price discounts alone, however, usually don't induce first time buyers. Other appeals must be available, such as mass media ad exposure or product sampling. A price pack deal may be either a bonus pack or a banded pack. When a bonus pack is offered, an extra amount of the product is free when the product is bought at the regular price. This technique is routinely used for cleaning products, food, and health and beauty aids to introduce a new or larger size. A bonus pack rewards present users but may have little appeal to users of competitive brands. It is also a way to "load" customers up with the product. When two or more units of a product are sold at a reduction of the regular single-unit price, a banded pack offer is being made. Sometimes the products are physically banded together, such as in toothbrush and toothpaste offers. More often, the products are simply offered in a two-for, three for, or ten-for format. In other cases, a smaller unit of the product may be attached to one of the regular size. A refund or rebate promotion is an offer by a marketer to return a certain amount of money when the product is purchased alone or in combination with other products. Refunds aim to increase the quantity or frequency of purchase, to encourage customers to load up. This dampens competition by temporarily taking consumers out of the market, stimulates purchase of postponable goods such as major appliances, and creates on-shelf excitement or encourages special displays. Consumers seem to view refunds and rebates as a reward for purchase. They appear to build brand loyalty rather than diminish it. Coupons are legal certificates offered by manufacturers and retailers. They grant specified savings on selected products when presented for redemption at the point of purchase. Manufacturers sustain the cost of advertising and distributing their coupons, redeeming their face values, and paying retailers a handling fee. Retailers who offer double or triple the amount of the coupon shoulder the extra cost. Retailers who offer their own coupons incur the total cost, including paying the face value. Retail coupons are equivalent to a cents-off deal. Manufacturers disseminate coupons in many ways. They may direct deliver by mailing, dropping door to door, or delivering to a central location such as a shopping mall. They may distribute them through the media—magazines, newspapers, Sunday supplements, or freestanding inserts FSI in newspapers. They may insert a coupon into a package, attach it to, or print it on a package.
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