This document provides an overview and history of sales promotions. It discusses how sales promotions have evolved from things like coupons in the early 1900s to more modern programs like frequent flyer miles. The document also notes that companies now spend 60-75% of their marketing budgets on sales promotions due to their focus on short-term results. However, heavy reliance on promotions can erode brand loyalty over time. The document concludes by discussing how companies can use promotions like contests and trade promotions to build their brand in a more sustainable way.

1. Sales Promotion
MKT 846
Professor West

2. Agenda
 Thinking
beyond creating awareness, interest, and
an image for your brand
 Providing incentives to purchase
 Battling for shoppers in the aisle

3. Sales Promotions
 Advertising has a long and colorful history
 Many of the images created by advertisers have become
cultural icons
 The Marlboro Man, Ronald McDonald, Pillsbury
Doughboy, Energizer Bunny, AFLAC duck...

4. Sales Promotions
 Sales promotion also has a very rich history
 Coupons have been around since 1895 when C.W. Post
began using penny-off coupons to sell Grape Nuts
 P&G began using coupons in 1920 good for discounts or
BOGOF.
 In 1912 Cracker Jack began offering a prize in every box
 Oscar Mayer introduced the first “Wienermobile” in 1936,
eight still cruise the highways playing versions of the jingle.
 Pepsi launched their “Pepsi Challenge” in 1975 as one of
the most successful promotions ever used to attract users
of a competing brand

5. Sales Promotions
 Sales promotion also has a very rich history
 Pillsbury launched its first “Bake-off” in 1949, it has since
become an institution and the nation’s most prestigious
cooking competition
 In 1981 American Airlines AAdvantage frequent flier
program was launched and created a new currency for
travelers

6. Sales Promotion
 Sales promotion is used to provide a direct
inducement that offers extra value to the sales force,
distributor, retailer, or end consumer with the
primary objective of boosting sales.
 While advertising appeals to the minds and hearts to
give consumers a reason to buy, promotions appeal
to the pocketbook and provide an incentive to buy.

7. Sales Promotion
 Consumer-Oriented  Trade-Oriented
 Coupons & Rebates  Dealer incentives
 Samples  Contests
 Bonus packs  Trade Allowances
 Price-offs  POP displays
 Contests &  Training programs
Sweepstakes  Trade shows
 Frequency programs  Co-op advertising
 Event marketing

8. Trends
 Consumer sales promotion increased from $56
billion in 1991 to nearly $100 billion in 2001. An
additional $150 billion is targeted to retailers and
wholesalers.
 Starting in the late ’80s a shift in marketing budgets
has boosted sales promotion sharply. Currently,
marketers spend between 60 and 75 percent of their
budget on sales promotion, with the remainder
allocated to media advertising. Seventeen percent
of advertising is devoted to promotional messages.

9. Reasons for Growth
 Mature industry and increased accountability…
manager’s pay depends on sales relative to cost
 Growing power of retailers (optical scanners,
consolidation)
 Market saturation (nearly 30,000 products are
launched each year compared to 2,700 on 1980)
 Advertising clutter & fragmentation (regional efforts
and targeted markets are better suited to
promotions)
 Short-term Focus …it generates immediate and
measurable results

10. Slippery slope…
 Increased promotional sensitivity
 Forty-two percent of package-good volume was
purchased on promotion. Twenty-four percent
involved the use of a coupon.
 More than seventy percent of purchase decisions
are made in the store, where people are likely to
respond to POP offers.
(1999 study by Promotion Decisions Inc. tracked 33,000 consumers)

11. Slippery slope…
 Declining brand loyalty
 Consumers tend to have more than one brand in
their “repertoire” and have been conditioned to
switch when deals are offered.
 What
is this doing to the brand equity
companies have paid so dearly to build?

12. Prisoner’s Dilemma
Our Firm
All Other Cut Back Maintain
Firms Promotions Promotions
Cut Back Higher Profits Market share goes
Promotions for all to out firm
Maintain Market share Market share stays
Promotions goes to other firms constant, profits
stay low

13. Non-franchise Building Promotions
 Price oriented “deals,” such as coupons, samples,
bonus packs, and discounts are useful mechanisms
for encouraging trial and acquiring new customers…
 However, you run the risk of eroding profits and
increasing consumer price sensitivity
 Price discounts don’t allow you to discriminate
between price sensitive and insensitive buyers
 Coupons allow you to price discriminate, but they
tend to be used by your loyal consumers
 Consumers tend to forward buy, or stockpile when
deals are offered

14. Franchise Building Promotions
 Ratherthan using a one-time offer, many companies
are developing frequency programs that encourage
repeat purchase and long-term patronage
 In order for this to be effective you have to make sure that
the rewards are meaningful and are actually generating
additional revenue

15. Franchise-Building Promotions
 Contests are used to energize the brand
 Trade promotions can be used to create win-win
opportunities

16. “Brawny Man” contest took the Reggie
 Despite over 90% awareness, Georgia-Pacific recognized
that the Brawny Man icon no longer seemed relevant to
consumers, and it needed to work out a new regimen to
increase sales
 They launched a summertime contest that asked women to
send in photos and 150-word descriptions explaining why
their guy is as rugged as the product.
 One dozen semi-finalists traveled to New York City for photo
sessions, and the grand-prize winner got a Dodge Durango
and a limited run as the packaging model. Dedicated TV
spots, print ads in USA Today and People magazine, and an
eight-market mobile tour supported.

17. Results
 During the promotion period (May-October), brand
volume grew more than 12.3%, five times more than
the entire category
 Brand share increased from 10.5% to 11.5% during
these months
 At the campaign's peak in June 2002, brand volume
was up 31% vs. the year before and Brawny had its
highest monthly dollar (13.2%) and unit (12.8%)
share for the year.
 Profits for Brawny increased $5 million as a direct
result of the promotion.

18. Nike at the Finish Line
 Choose to play campaign…
 Target Market: 19 year-old action addicted college
students who are role models for teenagers and adults
wistfully recalling their college days.
 Objectives:
 To support Nike brand as a leader in exciting, stylish,
innovative and high performance footwear and apparel
among 65 percent of Finish Line customers.
 Create a competitive advantage for Finish Line and the
destination for Nike products among 85 percent of
target consumers.

19. Nike at the Finish Line
 Choose to play campaign…
 Objectives:
 Increase retail store traffic and web traffic by 20
percent
 Increase sale of Nike brand products through Finish
Line by 15 percent in one year.

20. Other Elements
 Finish Line “Magalog” featured articles on athletes
such as MJ, Mia Hamm, and Derek Jeter
 Training of sales associates using Nike’s “Ekins”
 Direct mail and winner’s circle frequency program

21. Results
 Overall sales of Nike brand through Finish Line
increased by 20 percent
 Calls to Finish Line store locator increased by 200
percent following the first run of print advertising
 Retail traffic increased by 17 percent
 FL customer tracking study showed that the
percentage of customers viewing FL as the best
destination for Nike increased from 20 to 62 percent
after one year.

22. Battling for shoppers in the aisles
 Marketers make their products “shout” at
consumers from the store shelves
 The Portable Shopping System is being issued to
consumers upon entering the store
 Upload shopping lists via the internet
 Lets you know when your prescriptions, photos, and deli
orders are ready
 Floor
mat ads make audio announcements when
people step on them

23. Battling for shoppers in the aisles
 Storesare trying to reduce the clutter of marketing
messages (shopping spam) delivered in the stores.
 Supermarkets are being designed more around the
consumer’s mind-set rather than the traditional
warehouse.
 Trader Joes & Central Market

24. Battling for shoppers in the aisles
 Retailer’s
new mantra is to brand the shopping
experience so customers are aware of where
they’re shopping.

25. Next Week…
Dr. Osei Appiah will be here on Monday
to talk about advertising research and
copy testing methods
Ken Levy will be here to talk about
measuring advertising effectiveness and
return on investment