Sales promotion developing the sales promotion plan
Developing the sales promotion plan Presentation By Ben Mugerwa
introduction• An important aspect of developing sales promotion activities is the plan itself• There are several important factors to be considered and no plan can work effectively unless it results from comprehensive analysis of the situation in which the brand finds itself
Session objectives• To consider the dimensions of the sales promotion plan process• To examine methods of determining the sales promotion budget• To consider the use of sales promotion agencies• To identify the methods used for selecting a promotional agency
Developing the plan• Since the sales promotion plan is an integral part of the overall marketing plan, it is important that the marketing plan forms the basis of all sales promotion planning• In most instances the marketing plan will be developed independently of the sales promotion plan but the imperative is that all sales promotion activity seeks to fulfill the overall objectives contained in the marketing plan
• as with all forms of marketing communication, the development of a sales promotion plan is a sequential process and all aspects must be considered before it becomes possible to identify an appropriate promotion solution• There are several stages to the overall planning process:
Stages in planning process• Environmental analysis• Internal analysis• Consideration of the marketing strategy• Identification of the target audience[s]• Determination of promotional objectives• Budget determination• Identifying the promotional objective• Developing the programme• Implementing the programme• Contigency plan• Evaluation and feedback
Environmental analysis• It is important to understand the broad context in which promotional planning is to take place• It must be recognized that the market itself is somewhat fluid• Changes in factors such as consumer attitudes, competitive activity, retail changes etc may all impact on the brand position• We need to understand the position we occupy in the market, we also need to consider how we wish to be perceived by consumers• Sales promotion can contribute to strengthening or changing that position and can also be used to modify consumer perceptions
• There is a need to develop our understanding of the consumer dynamics: who are our customers, what characteristics do they possess and what are their specific needs from our product category?• How can sales promotions contribute to an improvement in our position?• A significant factor will be the nature of the purchasing profile: why do consumers buy the products they do, why do they purchase our products or those of our competitors?
• Understanding considerations such as the frequency of purchase will impact on our ability to run particular forms of promotional activity• a product that is purchased on regular basis is best suited to promotions that reward high frequency• Setting redemption requirements for a free mail in, for example will be affected by the regularity of purchase• If the product is purchased only infrequently, the amount of time taken to collect proofs of purchase may be so long as to be impractical from the consumer`s perspective
• Equally, given the ability of promotions to target marginal consumers[those who are less likely to be exposed, for example,to media advertising] it is important to recognise that sales promotion may be the perfect vehicle for attracting such consumers to the brand• These consumers are potentially very profitable to the brand• There is need to consider competitor dynamics. Not only do we need to understand who are the competitors, but also their promotional policies
• What sort of promotions do they offer to consumers?• How effective are they and how can we utilize sales promotion to achieve a greater level of impact on the target market?• What we don`t want to do ,in an ideal is to run a promotion that is very similar to those run by competitors• This will only serve to blur the differences between our product and theirs• We can identify a promotion that is different and this will help us to establish a distinctive edge in the market place
• We need to look at the distribution channels.• What channels do we need to consider and within those channels, who do we need to motivate?• Markets differ significantly between particular product categories• Understanding the nature of the channels of distribution and our relationships with them will be an important guiding factor in promotional development• Eg do we need or have to establish better relationships with the major chains?• What is the role of wholesalers and do we need to motivate their staff to give greater support to our brands?
Internal analysis• According to Ailawadi et al a company`s promotional policy influences its ability to attract and retain customers by inducing more of them to:• Switch to the firm`s brand• Repeat purchase it more often or• Consume larger quantities
• There will be a number of internal factors that affect our ability to implement promotional activity effectively• There is need to consider for example, where our product is in the product life cycle• Products at different stages of the product life cycle react differently to the various promotional executions• This will affect the objectives that we establish for promotional activity
• The stage of the product life cycle for brand captures consumer demand and competitive intensity in the market place• In the two early stages of a product`s life cycle [introduction and growth], advertising is used to inform consumers about features and benefits, to strategically position a brand and to build awareness• During mature phase of the product life cycle, intense competition can also lead managers to shift funds away from advertising and into promotions as they attempt to take market share from competition• As brands progress through the product life cycle, managers plan to allocate proportionately less of their marketing communication budget to advertising
• and more to consumer and trade promotions• In addition, lower relative price brands and family brands typically receive an allocation that emphasizes sales promotion relative to advertising• These product/market factors appear to be commonly used guidelines that managers rely on in making their allocation decisions
• There is a need to consider the various production issues involved in the implementation of a sales promotion eg are there specific production factors that need to be taken into account?• In many instances, the primary vehicle used to communicate promotional offers will be packaging• Does this impose limitation on what we can do?• Is the surface area of the product label capable of carrying sufficient detail to communicate effectively to the target audience?
• Can we for instance,brand several products together or do we require to order in special packaging in order to offer the consumer an increased volume of product for the same price?• What impact will this have on the ability to maintain current production levels?• Such promotions can only be mounted at significant cost to output• What time factors involved in designing new labelling or obtaining alternative packaging?
• Can we insert a free gift item inside the packaging?• Do we have machinery that can cope or will we need to make special arrangement?• Are there restrictions on what we can do,imposed by the regulatory bodies for our specific sector?• Some professional bodies preclude specific forms of promotional offer.
• According to Davidson and Connolly packing design is important in consumer motivation• Pack design offers the opportunity to set the brand apart from the normal design codes that have been adopted for the category• There is a need to consider the way in which the promotion will be sold in to the trade• What is the nature of our salesforce and what is their role?
• Consideration of marketing strategy:• Sales promotion activities must be consistent with overall marketing strategy• Not only do we need to understand what the marketing strategy is designed to achieve, we must consider the roles of sales promotion within the overall strategy• It is likely that there will advertising support running behind the brand• Can we develop promotions that reinforce the advertising message and that are consistent with over all brand platform?
• The target audience: turning to the target audience, there is a need to identify clearly which customers we intend to motivate• We may choose to target all consumers for the brand or alternatively, we can select a smaller segment of those consumers• These alternative targets will require different promotional executions and different methods of distributing the promotion to ensure that it reaches the right people• We need to identify the underlying reasons for the behavior of the chosen target audience in order to ensure that the promotional execution is appropriate• We need to define what we intend to achieve with the promotion• What is the desired outcome and how will the chosen execution deliver it?
• Objectives: as with other forms of marketing communications, it is important to set precise objectives for the activity• Is the promotion expected to increase trial and sampling or reward loyal users? Objectives should be specific and measurable• What level of trail is to be generated: 10,20 or 30% or higher?• If no value is given to the objective,it will be extremely difficult to determine whether the goal has been achieved on its completion
• Walters suggests that priority should be given to promoting products that have received little promotion for some time, as this increases the likelihood of both retailer support and consumer participation• Krishnaargues that the consumer`s perception of the frequency of deals is an important factor in determining the impact of those deals
Budget determination• It is important to identify the scale of the budget [appropriation] that will be allocated to the activity• Promotions broadly fall into three distinct categories:• Fixed budget promotions: where the total cost of the promotional activity is known in advance• Partially fixed cost promotions• Promotions with totally variable costs:some promotions such as those involving coupon distribution will be totally dependent upon the number of consumers redeeming the coupons. Estimates may be made.
Identifying the promotional strategy• The detailed planning should be developed with the aid of a database of past results for the brand and the company• Manufacturers use many different kinds of consumer promotions[coupons, direct mail, free-standing inserts,peel-off,in-pack premiums, rebates, contests and price packs] to attract customers to the brand• In planning promotion campaigns, brand managers in major consumer packaged goods firms face decisions about which promotional vehicle to use in a particular product category• There is a need to design the campaign elements,creativity and timing are important dimensions of the plan
• Research and pre-testing: to determine the likely take-up of the promotional offer• Control mechanism must be established at the outset to ensure the smooth implementation of the promotion• Briefing sales force and trade is important for the smooth implementation• Delivery of items to ensure adequate stock are available• Contigency plan:it is rare that a plan will be implemented without changes. Bear in mind that the plan itself is determined in isolation of the market conditions that obtain at the time of implementation
• Evaluation and feedback is necessary for the plan
Budgeting for sales promotion• Marginal analysis• Percentage of sales• Percentage of product gross margin• Residue of previous year`s surplus• Percentage of anticipated turn over• Competitive expenditure• Objective and task method• Experimentation• What we can afford
exercise• Outline the steps you should follow when selecting a sales promotion agencies