Marketing Management, Millenium Edition - epiheirimatikotita.gr

Sales Promotion Strategies 289promotion (prices off, advertising and display allowances, and free goods), and businessandsales force promotion (trade shows and conventions, contests for sales reps, and specialtyadvertising).In years past, the advertising-to-sales-promotion ratio was about 60:40. Today, inmany consumer-packaged-goods companies, sales promotion accounts for 65–75 percentof the overall promotional budget. Several factors have contributed to this trend,particularly in consumer markets. 32 Internal factors include the following: Promotionis now more accepted by top management as an effective sales tool, more productmanagers are qualified to use sales-promotion tools, and product managers are undergreater pressure to increase current sales. External factors include: The number ofbrands has increased, competitors use promotions frequently, many brands are seen asbeing similar, consumers are more price-oriented, the trade demands more deals frommanufacturers, and advertising efficiency has declined because of rising costs, mediaclutter, and legal restraints.In general, sales promotion seems most effective when used together with advertising.In one study, a price promotion alone produced only a 15 percent increase insales volume. When combined with feature advertising, sales volume increased 19 percent;when combined with feature advertising and a point-of-purchase display, salesvolume increased 24 percent. 33Purpose of Sales PromotionSales-promotion tools can be used to achieve a variety of objectives. Sellers useincentive-type promotions to attract new triers, to reward loyal customers, and toincrease the repurchase rates of occasional users. New triers are of three types—users of another brand in the same category, users in other categories, and frequentbrand switchers. Sales promotions often attract the brand switchers, because users ofother brands and categories do not always notice or act on a promotion. Brandswitchers are primarily looking for low price, good value, or premiums, so sales promotionsare unlikely to turn them into loyal users. Sales promotions used in marketsof high brand similarity produce a high sales response in the short run but little permanentgain in market share. In markets of high brand dissimilarity, however, salespromotions can alter market shares permanently.One challenge is to balance short- and long-term objectives when combiningadvertising and sales promotion. Advertising typically acts to build long-term brandloyalty, but the question of whether or not sales promotion weakens brand loyalty overtime is subject to different interpretations. Sales promotion, with its incessant pricesoff, coupons, deals, and premiums, may devalue the product offering in the buyers’minds. Therefore, companies need to distinguish between price promotions (whichfocus only on price) and added-value promotions (intended to enhance brand image).Here’s how Toro, a major manufacturer of lawn mowers and snowblowers, usedan added-value promotion to sell its snowblowers in early September: Knowing thatmost people would wait to buy until the first snow, Toro offered to include Toro SnowInsurance, promising a rebate of $50 to each September buyer if it did not snow beforeJanuary. This sales promotion did not hurt, and may have helped, Toro’s brand image.When a brand is price promoted too often, the consumer begins to buy it mainlywhen it goes on sale. So there is risk in putting a well-known brand leader on promotionover 30 percent of the time. 34 Kellogg, Kraft, and other market leaders are tryingto return to “pull” marketing by increasing their advertising. They blame the heavy useof sales promotion for decreasing brand loyalty, increasing consumer price sensitivity,brand-quality-image dilution, and a focus on short-run marketing planning.