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Part Five Developing the Integrated Marketing Communications Program
Belch: Advertising and
Promotion, Sixth Edition
V. Developing the
Integrated Marketing
Communications Program
16. Sales Promotion © The McGraw−Hill
Companies, 2003
very little research and sales analysis; they relied on manufacturers for information
regarding the sales performance of individual brands.
In recent years, however, several developments have helped to transfer power from
the manufacturers to the retailers. With the advent of optical checkout scanners and
sophisticated in-store computer systems, retailers gained access to data concerning
how quickly products turn over, which sales promotions are working, and which products
make money. 10 Retailers use this information to analyze sales of manufacturers’
products and then demand discounts and other promotional support from manufacturers
of lagging brands. Companies that fail to comply with retailers’ demands for more
trade support often have their shelf space reduced or even their product dropped.
Another factor that has increased the power of retailers is the consolidation of the
grocery store industry, which has resulted in larger chains with greater buying power
and clout. These large chains have become accustomed to trade promotions and can
pressure manufacturers to provide deals, discounts, and allowances. Consolidation has
also given large retailers more money for advancing already strong private label initiatives,
and sales promotion is the next step in the marketing evolution of private label
brands. Private label brands in various packaged-good categories such as foods, drugs,
and health and beauty care products are giving national brands more competition for
retail shelf space and increasing their own marketing, including the use of traditional
sales promotion tools. Well-marketed private label products are forcing national brand
leaders, as well as second-tier brands, to develop more innovative promotional programs
and to be more price-competitive. 11
Declining Brand Loyalty Another major reason for the increase in sales promotion
is that consumers have become less brand loyal and are purchasing more on the
basis of price, value, and convenience. Some consumers are always willing to buy their
preferred brand at full price without any type of promotional offer. However, many
consumers are loyal coupon users and/or are conditioned to look for deals when they
shop. They may switch back and forth among a set of brands they view as essentially
equal. These brands are all perceived as being satisfactory and interchangeable, and
consumers purchase whatever brand is on special or for which they have a coupon.
Increased Promotional Sensitivity Marketers are making greater use of sales
promotion in their marketing programs because consumers respond favorably to the
incentives it provides. A major research project completed by Promotion Decisions, Inc.,
tracked the purchase behavior of over 33,000 consumers and their response to both consumer
and trade promotions. The results showed that 42 percent of the total unit volume
of the 12 packaged-good products analyzed was purchased with some type of incentive
while 58 percent was purchased at full price. Coupons were particularly popular among
consumers, as 24 percent of the sales volume involved the use of a coupon. 12
An obvious reason for consumers’ increased sensitivity to sales promotion offers is
that they save money. Another reason is that many purchase decisions are made at the
point of purchase by consumers who are increasingly time-sensitive and facing too many
choices. Some studies have found that up to 70 percent of purchase decisions are made in
the store, where people are very likely to respond to promotional deals. 13 Buying a brand
that is on special or being displayed can simplify the decision-making process and solve
the problem of overchoice. Professor Leigh McAlister has described this process:
As consumers go down the supermarket aisle they spend 3 to 10 seconds in each product category.
They often don’t know the regular price of the chosen product. However, they do have a
sense of whether or not that product is on promotion. As they go down the aisle, they are trying
to pensively fill their baskets with good products without tiresome calculations. They see a
“good deal” and it goes in the cart. 14
Brand Proliferation A major aspect of many firms’ marketing strategies over
the past decade has been the development of new products. Consumer-product companies
are launching nearly 30,000 new products each year, according to the research firm
Marketing Intelligence Service (compared with only 2,689 in 1980). 15 The market has
become saturated with new brands, which often lack any significant advantages that can
be used as the basis of an advertising campaign. Thus, companies increasingly depend