Consumer Promotions

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6.2 Types of Sales Promo�ons There are many types of promo�onal tac�cs that can be used by businesses. Each of these tac�cs is associated with either consumer promo�ons, which are directed to the final user, or trade promo�ons, which are directed at retailers or wholesalers instead of consumers. Table 6.2 shows a sampling of major consumer sales promo�ons tac�cs and Table 6.3 shows main trade promo�ons. Although many different types of promo�onal ac�vi�es are men�oned, only the main tac�cs will be discussed in detail within the chapter.

Table 6.2 Types of consumer promo�ons

Type Descrip�on Example

Coupons A document that can be exchanged for a discount off the price of a product or service

On many websites, there are printable coupons that can be redeemed online or in store.

Sampling A free sample of the product is provided; this may be done at point-of-sale, or it may be done through the Internet, mail, a�ached to a product, or through an adver�sement

A company representa�ve cooks sausage at a local market and gives out free samples to customers in the store.

Cash refunds or rebates

Return, reduc�on, or refund on the purchase price of a product or service

Customers buying three boxes of cereal will receive a $2 refund in the mail if they send a form and proof of purchase to the manufacturer.

Cents-off Tagging a product's package with a discount off the regular price of the product which can be peeled off; many �mes two products may be packaged together for the same effect

A person buying a razor may find an a�ached peel-off coupon that gives 50 cents off the product.

Premiums When consumers purchase a set amount of products, they receive a gi�.

Customers receive a free purse if they purchase branded perfume.

Sweepstakes, games or contests

Sweepstakes are drawings of chance and are free to enter (no purchase required); contests or games may not be free and require skill or are based on both chance and skill.

Companies o�en hold sweepstakes to increase brand recogni�on and sales.

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Point-of- purchase (POP) display or point-of- sale (POS) display

Specialized sales promo�ons located in a retail store; they o�en hold products and are found near the check-out loca�on.

A store may set up POP display that holds ba�eries for a specific brand.

Frequency or loyalty programs

Consumers are rewarded for frequently making purchases of a business's products.

The airlines o�en use frequency programs, commonly referred to as frequent flyer programs.

Free trials Provides an opportunity for a customer to try a product before buying.

A customer may receive a free subscrip�on to a magazine for a short period with the hope that the customer will become a paying customer.

Warran�es and guarantees

Warran�es are assurances about a product or service and guarantees are a promise that the product or service will perform.

Some Cra�sman hand tools (Sears) will be repaired or replaced free of charge for the life�me of the tool.

Tie-in promo�ons

A type of cross promo�on in which two or more brands (or companies) join to develop coupons, refunds, contests, rebates, etc.

A video game and movie join forces to increase sales of both.

Cross promo�ons

One brand is used to adver�se or promote another noncompe�ng product, brand, or service.

A fast food chain promotes a children's movie by providing toys from the movie in a kid's meal.

Table 6.3 Types of trade promo�ons

Type Descrip�on Example

Trade allowances

An allowance provides the business with cash or merchandise incen�ves for featuring a brand, product, or service in a special way. There are also allowances for the trade crea�ng and featuring displays of a manufacturer's products or services (called a display allowance).

A manufacturer may offer another company an adver�sing or IMC monetary allowance for adver�sing the manufacturer's products.

Trade contests

Contests offered by manufacturers to intermediaries as well as retail salespeople and retail stores to mo�vate them to increase their sales performance over a given period.

A manufacturer offers an expense paid trip to the top salesperson for a chain of retail stores the manufacturer sells to.

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Trade incen�ves

The retailer performs a func�on in order to receive certain funds.

A retailer must feature a company's products in its weekly circular to receive a 10% discount on its next order.

Trade shows (and conven�ons)

Trade shows are large events that bring together many sellers to showcase their products or services.

The Na�onal Show for Pet Retailers is a trade show held in Las Vegas, NV.

Sponsorships A company pays for all or a por�on of an event in exchange for recogni�on.

Adidas agrees to be one of the sponsors for the Olympic games. In exchange, the Adidas logo is placed on all Olympic marke�ng material.

Price-off During a specific period of �me, discounts are given on products offered.

A manufacturer gives a 25% discount to a retailer who buys swimsuits for three stores.

Free products

Free cases of products are offered to the trade if certain quan��es of a product or service are purchased. Many �mes manufacturers want the trade to offer a par�cular product style, flavor, size, etc. In these instances, free products are used as a promo�on tac�c.

A free case of soda is given to a retailer for every 10 cases purchased.

Specialty adver�sing

Low-cost items that carry the company name, brand name, or some other type of informa�on are given to trade customers (and o�en to consumers), such as pens at banks.

Flash drives, memo books, pens, laser pointers, tote bags, stress balls, and even t-shirts may be used as part of a specialty adver�sing program.

In addi�on to trade and consumer promo�ons, promo�ons are some�mes used by sales departments to induce their salespeople to perform some func�on or sell a par�cular product or service. These are called sales force promo�ons. The difference between trade contests and sales force promo�ons is that trade contests are aimed toward other businesses while sales force promo�ons are aimed toward a company's own sales force. An example of a sales force promo�on would be a sales contest, used to incen�vize the sales force to increase their overall sales for a given period. If the sales force reaches their stated objec�ves, they can win a trip, money, gi�s, or some other type of reward.

Let's look at each of the main promo�onal tac�cs in more detail. Whether the marke�ng manager is dealing with consumer promo�ons or trade promo�ons, decisions need to be made with respect to the budget, size of the incen�ve to be offered, and the condi�ons for par�cipa�on. Subsequently, decisions need to be made with regard to the actual promo�on and distribu�on of the incen�ve and the dura�on of the promo�on.

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Finally, measures need to be in place to determine the overall effec�veness of the promo�ons (Chandrasekar, 2012). In the next sec�ons, we will discuss consumer and trade promo�ons in more detail and discuss numerous tac�cs that can be implemented for both of these categories.

Consumer Promo�ons

Consumer promo�ons can account for between 65% and 75% of all marke�ng expenditures for many of the consumer packaged-goods companies (Kotler, 2003). There are numerous reasons why a large percentage of the marke�ng budget goes to sales promo�ons. Today's product managers are under tremendous pressure to increase sales, consumers expect deals, and the effec�veness of a firm's adver�sing efforts may be decreasing. In addi�on, the increased compe��on makes it difficult for consumers to differen�ate among compe�ng brands. Sales promo�ons may help gain the compe��ve advantage needed to stay relevant.

While adver�sing makes a consumer aware of the product, sales promo�ons serve as the incen�ve for the consumer to purchase the product or service. Marcom planners will o�en generate promo�ons in order to promote increased sales. For branding campaigns, sales promo�ons are used to achieve various sales- influencing objec�ves for the brand. Remember sales promo�ons = promo�ng sales (Shimp & Andrews, 2013). It is important for IMC planners to understand the market and customers prior to ini�a�ng the sales promo�ons plan. Addi�onally, it is important to take into account all areas of the IMC mix prior to the launch of any sales promo�on.

SALES PROMOTIONS = PROMOTING SALES!

Tac�cs

Consumer sales promo�ons consist of short-term incen�ves to encourage the purchase or sale of a product or service. The product life cycle (PLC) is o�en a considera�on when making sales promo�on decisions. For example, a new product may require a bigger por�on of the budget going to sales promo�ons to achieve a successful launch. Let's take a look at common sales promo�on tac�cs.

Coupons

One of the most popular consumer sales promo�on tac�cs is the use of coupons, which offer customers a savings when they purchase the specified product. A coupon can be expressed as a percentage off (e.g., 20%) or an actual amount, for example, 35 cents. According to a report on coupons (CPG Coupons, 2013), 80% of consumers redeem coupons regularly. In 2012, people in the United States redeemed 2.9 billion coupons, a 17% drop from 3.5 billion coupons redeemed in 2011. The drop was a�ributed to a shi� in the types of coupons available to consumers. There were fewer food coupons, which are redeemed more frequently, and more product coupons, which are redeemed less frequently. The top ci�es for coupon redemp�on were Atlanta, Tampa, St. Louis, and Cincinna� (Smith, 2012). As can be seen, coupons are an important tool and tac�c for IMC planners.

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Coupons have many advantages, but also have many disadvantages (Berman & Evans, 2013). Both are summarized in Table 6.4.

Table 6.4 Advantages and disadvantages of coupons

Advantages Disadvantages

With manufacturers' coupons, the manufacturer pays a retailer to adver�se, and also pays for the redemp�on of manufacturers' coupons; this is a key advantage for retailers. 80% of consumers regularly shop using coupons Consumers perceive they are ge�ng a good value Promo�onal and adver�sing effec�veness can be measured based upon coupon redemp�on rates

Coupons o�en create a nega�ve consumer percep�on of the brand or retailer's image Many consumers will only shop if coupons are available There is a lot of coupon clu�er There is a cost associated with issuing coupons, especially for the manufacturer There is coupon fraud at both the manufacturer and retail levels

An increasingly popular source for securing coupons can be found on Internet sites. Table 6.5 shows the most popular Internet sites to obtain coupons.

Table 6.5 Top coupon Internet sites

www.coolsavings.com (h�p://www.coolsavings.com) www.couponmountain.com (h�p://www.couponmountain.com) www.couponcabin.com (h�p://www.couponcabin.com) www.couponheaven.com (h�p://www.couponheaven.com) www.coupons.com (h�p://www.coupons.com) www.coupons2Redeem.com (h�p://www.coupons2Redeem.com) www.dealfind.com (h�p://www.dealfind.com) www.ebates.com (h�p://www.ebates.com) www.fatwallet.com (h�p://www.fatwallet.com) www.greatcoupons-online.com (h�p://www.greatcoupons-online.com) www.groupon.com (h�p://www.groupon.com) www.livingsocial.com (h�p://www.livingsocial.com) www.retailmenot.com (h�p://www.retailmenot.com) www.slickdeals.net (h�p://www.slickdeals.net) www.smartsource.com (h�p://www.smartsource.com)

Free-Standing Inserts

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Subway discon�nued its customer apprecia�on program because counterfeiters were using high- tech printers to make Sub Club stamps to earn free meals.

Tim Boyle/Ge�y Images

Coupons may be delivered through direct mail and print media. They can also be found on a package (called peelies), in a package (called bounce back coupons), or distributed in the store (scanner delivered upon prin�ng of receipt). Most of all print media coupons are found in free-standing inserts (FSIs), which are coupons and other promo�ons distributed in separate publica�ons such as newspapers and magazines. For newspapers, Sundays and Thursdays are days with high FSIs. Consumers have grown to expect these FSIs in their newspapers. Large consumer goods producers such as Proctor & Gamble o�en have their own FSI at least once a month. The objec�ve of FSIs is to encourage the consumers to use the coupons on their next trip to the store. Retailers support FSIs because they can increase store traffic and increase store sales.

According to Kantar Media, FSI coupon distribu�on has increased by 18% over the last 10 years. The greatest ac�vity for FSIs in 2012 was the pre-Super Bowl promo�on week. Coming in second was the pre- Thanksgiving promo�on week. The largest category using FSIs was the consumer packaged-goods industry.

Of retailers, Walmart, Walgreens, Target, and Family Dollar Stores® were the top users of FSIs (Kantar Media, 2013).

Coupon Fraud

Coupon fraud exists despite the many places available on the Internet and elsewhere to get coupons. Coupon fraud occurs when someone tries to use coupons illegally. It is es�mated that companies lose about $500 million a year due to counterfeit coupons alone (Chan, 2013). Coupon fraud may lead to an increase in the consumer price of goods. Internet coupons downloaded at home come under the greatest scru�ny from retailers. Some retailers have even refused to accept Internet coupons because of the poten�al for fraud. Consumers as well as manufacturers have become more proac�ve in their effort to detect coupon fraud. In order for a consumer, manufacturer, or retailer to ensure a coupon obtained from the Internet is legi�mate they can go to the Coupon Informa�on Corpora�on (h�p://www.couponinforma�oncenter.com/ (h�p://www.couponinforma�oncenter.com/) ), an organiza�on that is leading reform to improve security in the coupon industry. Consumers can find �ps for spo�ng counterfeits at h�p://couponing.about.com/od/groceryzone/a/webprintcoups.htm (h�p://couponing.about.com/od/groceryzone/a/webprintcoups.htm) . Some sugges�ons include checking for barcodes on the coupon, not redeeming too many Internet coupons at one �me, and never paying for coupons. Selling coupons is a crime.

Case in Point: Counterfeit Coupon Creator Finally Caught

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In 2012 Robin Ramirez, a 40-year-old woman from Phoenix, AZ, was arrested for running the largest counterfeit-coupon enterprise in U.S. history. Robin owned 26 vehicles, a boat, and three condominiums that she paid for with coupon fraud money. Ramirez sold fake coupons online. The fake coupons were from over 240 brands and totaled $40 million. In 2013, she was sentenced to two years in state prison and may have to pay up to $5 million in res�tu�on. She convinced her husband she was running a legi�mate business (Chan, 2013).

How did she pull off such a sophis�cated scam? She started out selling fake coupons on eBay. In 2007, she launched a website called savvyshoppersite.com. Companies that were targeted in the scam wanted to find out who was commi�ng fraud. These companies partnered with the Coupon Informa�on Corpora�on to hire private inves�gators who tracked the coupons to Phoenix, AZ. Despite the use of fake iden��es and addresses, search warrants for the website eventually proved that Ramirez was behind the scam.

To pull off the fraud, Ramirez collected product coupons and arranged with a foreign prin�ng company to produce the coupons in mass quan��es. She o�en added a counterfeit hologram that signaled the coupons were real. She then sold these coupons online for half the face value. Coupons ranged from $2 to $70. The coupons were of such high quality that retailers accepted them and it was not un�l the coupon reached the manufacturers that the fakes were detected (Gunter, 2013).

Reflec�on Ques�ons

1. Why do people a�empt these scams? 2. Do you think the sentence was too harsh? Not harsh enough? 3. How can manufacturers prevent coupon fraud?

Cost of Coupons to Company

It's great to use coupons as a sales promo�on tool, but what's the cost to the company? When assessing costs associated with the use of coupons, many variables need to be considered to calculate the cost per coupon. Sales promo�on professionals must be cognizant that there may be some hidden costs associated with this prac�ce, not just the redemp�on cost. First, sales promo�on professionals need to calculate the distribu�on cost of the coupon. What will it take to have the coupons distributed to the target market? How will they be delivered? Many �mes, coupon distribu�on costs can be mi�gated by piggybacking on other IMC tac�cs. For example, coupons may be delivered along with print adver�sing and the cost may be shared with media and adver�sing. Second, what is the redemp�on rate? Even at 1%, redemp�on costs will be the highest cost associated with the use of coupons. What is the cost of redemp�on based upon the redemp�on rates? Third, there will be costs associated with the handling of coupons, especially at the retail level. What are the handling and processing fees that will be associated with the coupon redemp�on? Fourth, what are the crea�ve expenses? The coupon must be designed, and there will be a cost associated with that func�on.

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By looking at these key points, sales promo�on personnel will be able to calculate a cost per coupon. To illustrate this point see the example below.

Example: Cost per coupon redeemed

This example is for illustra�ve purposes and the numbers are fabricated.

Distribu�on costs: 50,000 circula�on × $5.00 CPM $250

Redemp�on rate of 3% $1,500

Cost of redemp�on: 1,500 × $2.00 (coupon face value) $3,000

Handling costs and fees: 1,500 redemp�ons × $ 0.15 $225

Crea�ve costs associated with coupon $2,000

Total cost: $250 + $3,000 + $225 + $2,000 $5,475

Cost per coupon redeemed: $5,475 ÷ 1,500 $3.65

As can be seen from the example, some�mes the cost of a coupon is high from the company's perspec�ve. The return on investment is important to consider when using coupons.

Sampling

Sampling is an effec�ve sales promo�on tac�c in which a company offers the consumer a free sample of a product. O�en viewed as the best way to introduce a new product to the market and generate excitement, it is also the most expensive consumer promo�on. Sampling can occur in the store, through the mail, or by selec�ng a subset of people to receive a sample.

Samples can be useful in breaking down resistance to new and different products. A company representa�ve may provide samples to those who pass by a table in a retail store, for example. A coupon that provides an incen�ve to buy the product is usually handed out along with the sample.

Case in Point: Pepsi Uses Samples to Drive Facebook Likes

In an a�empt to drive customers to Facebook, Pepsi is crea�ng a new twist on the tac�c of sampling. Pepsi has created vending machines that provide free samples of Pepsi products—with a catch. In order to get the free sample, consumers have to go to Facebook and give Pepsi a Like on Pepsi's Facebook site. Pepsi also �ed in the use of m-commerce by allowing smartphone users the ability to simply stand by the screen and Like the Facebook page. They then choose their favorite flavor (or one they want to try) and the can comes immediately. Those without a smartphone can log into the Pepsi Facebook page via a large touchscreen on the machine. As soon as they Like the Facebook page, they too get their selected product. The objec�ve of the

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promo�on is to collect customer data. Users of Pepsi (and poten�al users) provide Pepsi with individual data via social media sites, in this instance, Facebook. Pepsi will look at the data generated and use it to develop a more effec�ve integrated marke�ng communica�on plan. The concept was first tested at a Beyoncé concert in Belgium where a significant percentage of the fans opted for the free beverage and Liked the Pepsi Facebook page. Based upon its success, Pepsi began to offer the vending machines in the United States (Kooser, 2013).

Take a look at Pepsi's promo�on video about the Like machine: h�p://www.youtube.com/watch?feature=player_embedded&v=O4YrQpup (h�p://www.youtube.com/watch?feature=player_embedded&v=O4YrQpupEO8)

Reflec�on Ques�ons

1. Do customers think about sharing their personal data with a company before ge�ng a free product?

2. Would you Like a product on Facebook in exchange for a free sample? 3. What will Pepsi do with the informa�on they collected?

Cash Refunds and Rebates

Cash refunds and rebates represent a return, reduc�on, or refund on what has been paid for a product or service. They are similar to coupons except that the price reduc�on occurs a�er the purchase rather than at the retail outlet. While the cash refund or rebate is en�cing and can o�en be the reason for the purchase, the Na�onal Consumers League, a consumer advocacy group, es�mates that only 2% to 3% of rebate forms are successfully submi�ed. This figure differs widely from figures provided by rebate centers such as Parago (www.parago.com (h�p://www.parago.com) ), who report that as many as 47% of consumers file rebates on a yearly basis (Heller, 2011). The trend toward paperless rebates may make rebates more popular. The challenge for the manufacturer is to differen�ate its rebate from others on the market, making it a unique opportunity for the consumer.

Cents-Off Deals

Cents-off deals (also called price-packs) offer consumers a temporary price reduc�on off the regular price of a product. This may take the form of a coupon affixed directly on the product that can be peeled off (called a peelie). Cents-off deals can also be �ed to special promo�ons. This can be a way to s�mulate sales of an exis�ng product, or perhaps a product that is declining in sales.

One interes�ng take on the use of price-packs is a campaign run by Pizza Hut. In the summer of 2013, Pizza Hut developed a promo�on that offered a large one-topping pizza for only $5.55. The move was undertaken to drive summer sales of Pizza Hut pizzas. Pizza Hut used the $5.55 promo�on as a �e-in to its 55th anniversary promo�onal hook. The promo�on ran for 10 days (June 5–15) and was only good on take-out pizzas. The take-out angle helped reduce costs associated with pizza delivery. Because pizza sales are slow in

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Contests and sweepstakes seek to promote product awareness and encourage customer traffic.

PRNewsFoto/The Hershey Company

the summer months, many pizza companies rely on heavy promo�ons during this period in order to drive immediate business into their retail outlets. The promo�ons look like they cost the companies money; however, when consumers buy pizza, they also purchase side items such as so� drinks to supplement their meal (Horowitz, 2013).

Premiums

Premiums are goods offered either free or at low cost as an incen�ve to buy a product. Premiums can enhance a product's image. One op�on available to the consumer is the free in the mail premium, which requires a mail-in proof-of-purchase to receive some type of merchandise. Another op�on is the self- liquida�ng premium, which requires the consumer to mail in a specified dollar amount to cover the handling and shipping and perhaps cost of the premium. The last op�on is the in or near pack premiums (merchandise is available in or is a�ached to the product's package). Consumer goods manufacturers need to exercise cau�on when selec�ng the premium to ensure that it fits with their IMC plan. Fads should be avoided. Premiums need to match the target market for the product and the firm should not expect the premium to increase short-term profits.

Sweepstakes, Games, and Contests

Sweepstakes are drawings of chance and are free to enter (no purchase required). Contests and games may not be free and require skill, or are based on both chance and skill. The chance of winning a sweepstake is based on a probability factor. The probability of winning must be clearly stated on all adver�sing materials. The primary goal of contests and sweepstakes is to create awareness and encourage customer traffic. While contests and sweepstakes may not boost sales in the short run, they can increase brand awareness and possibly affect brand image over a longer period of �me.

Contests and games provide the consumers with an opportunity to win something by taking some kind of ac�on. A contest may require consumers to submit an essay, which will be evaluated by judges selected by the sponsoring firm. Other contests may require contestants to answer ques�ons on a game show such as Jeopardy. Another type of contest requires the consumer to make a purchase in order to enter the contest. It is important that the prize offered is en�cing and exci�ng enough for the consumer to want to take advantage of the opportunity. Scratch-off games are popular because they provide instant results. Some�mes offering several levels of prizes is enough to en�ce the consumer.

McDonald's® Sponsors Dunk Contest

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A loyalty program is a sales promo�on that rewards frequent customers.

Emile Wamsteker/Bloomberg via Ge�y Images

This video features highlights of McDonald's All American dunk contest:

h�p://www.youtube.com/watch?v=nYESAzucqR0 (h�p://www.youtube.com/watch?v=nYESAzucqR0)

Heineken® has taken a unique approach in the development of a contest to engage its male consumers. Heineken launched a promo�on called "Dropped" which asks its male consumers (ages 21 and over) to submit an entry to Heineken that will allow them to be removed from the grind of daily life and dropped into the "great unknown." Men who wished to par�cipate submi�ed a video with their thoughts on an everyday journey. They uploaded it to an online site and tweeted the link using #dropped. The winners are dropped into a remote site where they are followed on their "legendary travel experience." Heineken developed a promo�onal campaign called "Legends," and has several execu�ons of the campaign, rewarding thrill seekers with adventures out of the seekers' comfort zones. Heineken developed a YouTube channel where viewers watch the winners' travels. Viewers of the videos on YouTube have to confirm their age prior to watching the videos to prevent underage viewers. Viewers may add their own comments and share their own travel experiences. Fans also follow the adventures on Heineken's Facebook page (Irwin, 2013).

Point-of-Purchase and Point-of-Sale

Point-of-Purchase (POP) or Point-of-Sale (POS) promo�ons are popular with retailers and packaged-goods manufacturers. These promo�ons occur in the store or close to the �me of receiving payment. The impact of point-of-sale adver�sing and promo�on has grown over the past 20 years, and the point-of-purchase industry has developed a metric that can be used to assess the effec�veness of point-of-sale promo�ons. One of the largest trade associa�ons focusing on point-of-sale promo�ons and other ac�vi�es is the Point-of- Purchase Adver�sing Interna�onal (POPAI) at www.popai.com (h�p://www.popai.com) . POPAI is the only not- for-profit trade associa�on for the marke�ng-at-retail industry. They offer many services to POPAI members including research studies, educa�on, and cer�fica�on programs. The associa�on examines ways that marketers can leverage consumer decision making at the point of purchase (Liljenwall, 2004).

Frequency or Loyalty Programs

With frequency or loyalty programs, consumers are rewarded for frequently making purchases of a business's products or services. This could take the form of a formalized program (most expensive) with rules and regula�ons, or the simple punch card given to record visits or purchases. It is important to ensure the program is user-friendly and easy to understand. If loyalty programs are too difficult to use or understand, the program could backfire and alienate customers. The Small Business Administra�on (www.sba.gov

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(h�p://www.sba.gov) ) offers seven �ps for star�ng a small business loyalty program (Beesley, 2013).

1. Start with a loyalty punch card. This is a low-tech op�on that is useful for businesses new to loyalty programs. With a punch card, a free gi� is offered a�er a certain number of purchases have been made.

2. Start an opt-in program. With this method, customers are asked to share their email addresses and are added to an opt-in email list. Customers can receive special offers only available via email.

3. Consider a premium loyalty program. Customer-rela�onship management so�ware is required for this method and is used to track high value purchases. Customers who meet thresholds are invited to join.

4. Offer branded loyalty membership cards. Use a commercially available loyalty card service and develop a store card. These cards allow a business to track customer spending.

5. Add a digital component. A business could use a company that provides apps to develop a mobile payment pla�orm and deliver coupons or other sales promo�ons.

6. Choose your incen�ves carefully. A company should be selec�ve with what is offered to customers as rewards. Too many free items can erode brand image.

7. Communicate regularly with your members. Businesses need to treat the customer with respect. Make sure all communica�ons are relevant to the target market.

Cross Promo�ons and Tie-ins

Cross promo�ons are when one brand is used to adver�se or promote another noncompe�ng product, brand, or service. These types of promo�ons are growing in popularity. A �e-in is a type of cross promo�on in which two or more brands (or companies) join to develop coupons, refunds, contests, rebates, etc. Cross ruffing is a type of cross promo�on that occurs when two promo�onal materials are packaged together. An example of this is when a coupon is placed on one product for another product. The products chosen need to fit together logically. For example, placing a Cheese Whiz (bo�led cheese spread) coupon on a package of frozen broccoli creates a synergis�c effect for both of the company's products while driving sales for both.

Consumer Behavior at the Point of Purchase

Examining consumer behavior at the point of purchase helps to explain how consumers make a decision to buy, and how the marketer can impact that decision (Liljenwall, 2004). As discussed in Chapter 2, the consumer decision process involves five steps that consumers follow when making a buying decision. These steps include problem awareness, search for informa�on, evalua�on of alterna�ves, purchase, and post- purchase evalua�on. In the first step, the consumer knows li�le or nothing about a product or service. In order to get the consumer's a�en�on, it is necessary to expose the shopper to the products and services offered. The customer may then become aware of an unsa�sfied need. In-store displays (among other promo�onal methods) for various product categories may be used to create that exposure. Once exposed to a product category, the search for informa�on step is shortened because the product is available for immediate purchase. The evalua�on of alterna�ves step also occurs in the store. Shoppers must be offered some type of mo�va�on in order to process the in-store s�muli, such as point-of-purchase displays. Once the exposure and mo�va�on have been created, the shopper will experience a need recogni�on for the product. The need recogni�on comes from an IMC synergy and the fact that promo�onal ac�vi�es are taking place at

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the point-of-sale. The IMC synergy may have been created by exposure, mo�va�on, and previous shopping experiences combined with adver�sing, personal selling, branding, and other areas of the IMC tac�cal execu�ons. Once the recogni�on occurs, the shopper will make a decision either to buy the product or to con�nue shopping.

Case in Point: Hoover's Sales Promo�on Fiasco

When planning a sales promo�on, a company has to provide a big enough incen�ve to catch a�en�on, but not so big that the company doesn't get a return on the investment. Hoover Company learned this lesson the hard way when a sales promo�on received so much a�en�on that the company had to halt the promo�on. The resul�ng publicity hurt the brand.

In 1992, the UK arm of Hoover planned a sales promo�on to reduce overstock of vacuum cleaners. The sales promo�on gave consumers two free return airplane �ckets to England from one of six European ci�es if they spent at least 119 pounds ($236 at the �me) on a Hoover vacuum cleaner or Maytag product. The exchange rate at the �me was U.S. $1.98 for every Bri�sh pound. The company es�mated that 50,000 people would partake in the promo�on. Execu�ves made the paperwork difficult for redemp�on, thinking that people would buy a product but never follow through with the applica�on. Instead of 50,000 applicants, there were 200,000 applicants. Company execu�ves were so happy with ini�al results that they expanded the promo�on to include return �ckets from the United States.

The �ckets were worth more than a customer spent on a Hoover or Maytag product (Rivkin, 2011). Stores ran out of Hoover products and could not meet demand. The company stepped up produc�on and had to get more company people involved in handling all the applicants. Because Hoover did not purchase �ckets up front, the company had to scramble to find airline �ckets, which cost the company millions more pounds than an�cipated. Customer complaints increased as people did not receive their �ckets (Blackhurst & Ho�en, 1993). The marke�ng execu�ves responsible for the promo�on were eventually fired.

The Hoover Holiday Pressure Group formed and sued the company. The group spent six years figh�ng the company to make sure everyone received their �ckets. In the end about 220,000 people did get to fly, but it cost the company over 50 million pounds (Chan, 2004).

Reflec�on Ques�ons

1. What could the execu�ves have done differently to ensure the success of the sales promo�on?

2. How can a company recover from such a mistake?

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A model developed by researchers J. Inman and R. Winer (1998) depicts the in-store consumer decision- making process and is helpful to retailers to understand where sales promo�ons can be used (Figure 6.1). The researchers suggest that why consumers take a trip to the store has an impact on their behavior. Is the trip for a convenience product or a major purchase? By understanding the type of trip the shopper is making, retailers can react by execu�ng sales promo�on tac�cs that please or excite the shopper. In addi�on to understanding the type of trip, retailers should try to understand which aisles in the store are being shopped and the types of displays needed to interest the consumer in purchasing.

Figure 6.1 A model of in-store consumer decision making

Source: Adapted from Inman & Winer. (1998).

Inman and Winer's model shows that a consumer's deal proneness will also have an impact on his or her shopping behavior. Deal proneness is a shopper's propensity to purchase products that are on sale or when the shopper is offered some type of deal. Closely related to deal proneness is feature proneness. Consumers are feature prone when they use coupons, FSIs, or some other type of circular, e-coupon, or other feature to encourage them to make a purchase. Understanding which consumers are feature prone and which are not

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will help the retailer create more effec�ve sales promo�on tac�cs, crea�ng more success for the retailer. As stressed in search and post-purchase evalua�on steps of the five-step decision-making process, the Inman and Winer model stresses that retailers need to be aware of the consumer's purchase involvement toward a par�cular product or service. Finally, retailers need to understand that a consumer's compulsiveness will also influence the buyer's behavior. Compulsiveness is the degree of openness shoppers have to impulse purchases. The more a consumer feels that impulse purchases are acceptable, the more compulsive he or she is toward purchasing. For example, when you go grocery shopping, do you come home with many unplanned items such as cookies, chips, soda, or granola bars? If so, you are high in compulsiveness.

Trade Promo�ons

Trade promo�ons are sales promo�ons aimed at the intermediaries in the marke�ng channel. The strategy behind trade promo�ons is to persuade resellers to carry new items and more inventory, buy ahead, promote the company's products, give products more shelf space, and push products to consumers. Manufacturers direct more sales promo�on dollars toward retailers and wholesalers than to final consumers. In this sec�on, we discuss the major types of trade promo�ons.

Trade Allowances

Manufacturers can offer a straight discount (also called price-off, off-invoice, or off-list) which is a dollar or percentage amount off the bill. The discount encourages intermediaries to carry the manufacturer's goods or to order a larger quan�ty of the goods. Manufacturers may offer a trade allowance, which is some type of monetary or other compensa�on in return for the retailer's agreement to feature the manufacturer's products in some way. Manufacturers may offer free goods like extra cases of merchandise, to resellers who buy a certain quan�ty or who feature a certain flavor or size of a product. They may offer push money which is cash or gi�s to dealers or their sales forces to "push" the manufacturer's goods down the channel of distribu�on. Table 6.6 summarizes the main types of allowances.

Table 6.6 Types of trade allowances

Type Descrip�on

adver�sing allowance

A manufacturer compensates retailers for adver�sing its products.

display allowance

A manufacturer compensates retailers for using special displays in their stores.

bill back allowance

Allowances are given to retailers for featuring a par�cular brand in their ads or for using special displays in the store. A�er receiving a bill from the retailer for services rendered, the manufacturer grants an allowance toward the retailer's next purchase.

slo�ng allowance

Allowance in which manufacturers pay retailers to carry the product or service.

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Slo�ng allowances are controversial because these fees o�en prohibit small businesses from ge�ng products onto shelves due to the bigger companies using their leverage to keep shelf space. The word "slo�ng," refers to gaining shelf space on the food retailer's shelf. For every new product that a food retailer wants to place on shelves, either another product will be removed, or the space allocated to that other product will be minimized. This is a risk to the food retailer since the retailer does not know if the new product will be well received by the consumer. The retailer could poten�ally lose money from lost sales of the product removed from the shelf.

Exit fees are fees retailers charge to remove a product from the shelf. The vendor, wholesaler, or manufacturer signs a contract with the retailer s�pula�ng an average volume of weekly traffic during a specified period. If this volume is not achieved, the retailer charges the vendor for the removal of the product (also called a handling charge). Only 4% of retailers use exit fees, compared to 82% who use slo�ng allowance fees. (Heller, 2002)

In order to increase their profit margins retailers o�en engage in forward buying and diver�ng. Forward buying induces retailers to purchase large quan��es of products and then stockpile them in order to take advantage of a temporary price reduc�on. When a manufacturer restricts a deal to a limited geographical area, the wholesalers and retailers buy abnormally large quan��es of the goods at the reduced price and o�en resell the goods to wholesalers and retailers at a higher price in other geographical areas. Diver�ng occurs when a retailer purchases a product at a reduced price in one geographical area and ships it to another geographical area where it is sold at a higher price. When considering diver�ng, the firm must consider the addi�onal transporta�on costs, and what profit level will be realized. O�en it is determined that it is not profitable to divert the product. As a result, forward buying is more o�en used than diver�ng.

Trade Contests

Trade contests are offered to intermediaries as well as retail salespeople and retail stores to mo�vate them to increase their sales performance over a given period. O�en these are referred to as spiff money and may include vaca�ons, big-screen televisions, or computers. A contest can be between a broker and agent who handles the manufacturer's goods or could simply be a sales volume contest among retail stores or retail salespeople. The ideal retail contest could be a contest among retail opera�ons in a certain region for the highest level of sales volume within a certain amount of �me.

Trade Incen�ves

Trade incen�ves are similar to trade allowances except trade incen�ves involve the retailer performing ac�ons in order to receive certain funds. The goal is s�ll the same as trade allowances, which is to encourage retailers to push the manufacturer's product or increase the purchase of the manufacturer's products. The three most popular trade incen�ves are:

1. Coopera�ve merchandising agreements (CMAs) are formal agreements between the manufacturer and retailer commi�ng the retailer to a specific marke�ng effort. A typical CMA might require the retailer to feature the manufacturer's brand in an adver�sement. Manufacturers like this type of agreement

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Trade shows allow companies to introduce new product and increase the customer base. Have you ever a�ended a trade show? Did you purchase anything?

George Doyle/Stockbyte/Thinkstock

because the retailer has to perform a func�on in order to receive the allowance or incen�ve. The promo�on is welcomed by retailers because it allows the retailer to rely on and develop calendar promo�ons.

2. Coopera�ve adver�sing occurs when the manufacturer agrees to reimburse the retailer a certain percentage of the adver�sing costs associated with promo�ng the manufacturer's products. Manufacturers generally have specific guidelines concerning the placement and content of the ad. Usually no compe�ng products may be adver�sed. Co-op adver�sing programs allow retailers to use the manufacturer's dollars to expand their adver�sing programs.

3. Premiums and bonus packs are another trade incen�ve where retailers receive free merchandise instead of discoun�ng the price of the product. For example, a retailer may receive a premium such as a free carton for every twelve cartons they order. A bonus pack may be offered if the order is placed within a certain period of �me.

Trade Shows

Trade shows are used throughout the B2B markets as vehicles for firms to sell to the industry and have become quite sophis�cated with recent technological advances. This forum allows firms to introduce new products, find new leads, meet new customers, educate the customers, and reach customers unavailable to them. At the trade shows, the manufacturers use reminder adver�sing by providing free specialty adver�sing items that carry the company's name such as jump drives, pens, pencils, calendars, paperweights, matchbooks, memo pads, and yards�cks.

Sponsorships are gaining in popularity. When an organiza�on pays part or all of a program's cost in exchange for recogni�on it is called a sponsorship. Sponsorship is an effec�ve way to generate communica�on and awareness for a company's brands, products, and services.

Since 2010, sponsorships have accounted for around $17 billion in expenditures for North America alone. Of those sponsorships, approximately 68% are aimed toward sports; approximately 10% for entertainment, tours and a�rac�ons; 5% on the arts; 3% on associa�on memberships and 9% on cause-related marke�ng efforts (Promo, 2009). The concept of sponsorship is to create a posi�ve associa�on between a company's brand and the target market. It's great to have customers say posi�ve things about a brand as it strengthens

the brand's value. Companies like State Farm® and MillerCoors have achieved success in sponsoring sports events.

There are numerous reasons for the development of events promo�ons, and in par�cular sponsorships for those events. Some of the reasons businesses undertake sponsorships are shown below (Kotler & Keller,

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Budweiser is designated the Official Beer Sponsor of Major League Baseball. Who is this sponsor's primary target audience?

PRNewsFoto/Major League Baseball

2012).

1. enhance the corporate or organiza�onal image 2. create experiences that will evoke posi�ve feelings from consumers and link those experiences to a

company or organiza�onal brand 3. allow for merchandising or other promo�onal reasons 4. entertainment 5. iden�fy with customers 6. create awareness 7. reinforce brand percep�ons 8. show commitment to the community

When a company chooses an event to sponsor that aligns with the values of its customers there is a higher likelihood of customers connec�ng with the brand. This can also reinforce consumer percep�ons about the brand, product, or service. This is par�cularly important for sports sponsorships. In order to reach a male- dominated target market or audience, sports and video games provide some of the best avenues to communicate with the market. A sports marketer will

have the ability to directly relate products and brands to a par�cular event, such as the World Series, which builds addi�onal credibility for the brand. By sponsoring spor�ng events, IMC professionals can reinforce the consumer percep�on that these products are effec�ve and are used by the top performers in each of the spor�ng categories (like Michael Jordan's Nike shoes). Sponsorships also allow a company to show an interest and a commitment to the communi�es in which businesses are involved. For example, AT&T provided seed money to start a nonprofit organiza�on called "Curing Kids Cancer" (www.curingkidscancer.org (h�p://www.curingkidscancer.org) ). This demonstrates to consumers that AT&T cares about children. The use of sponsorships and events is an effec�ve way to show the target market that a company embraces corporate social responsibility (CSR). This reason is extremely important if a company has made cause-marke�ng a cornerstone of its overall strategy (Kotler & Keller, 2012).

Although sponsorships offer a great marke�ng opportunity, they must be measured. Many �mes sponsorships will not help the IMC professional reach his or her objec�ves, but can be used to create goodwill. The overriding goal of business is to sell and drive profits. Because of that, promo�on planners need to measure the effec�veness of their sponsorship and event marke�ng programs and tac�cs. Are the events providing assistance in reaching the IMC objec�ves? Are they driving business? What is their overall impact on the IMC program? To answer these ques�ons, there must be accurate measurement of the en�re sponsorship program. Some guidelines for measuring a high performance sponsorship program are shown below (Measuring High Performance Sponsorship Programs, 2009):

1. Measure outcomes, not outputs. In other words, focus on what the sponsorship actually produced for the business, not on what the sponsor received.

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2. Define and benchmark objec�ves on the front end. Don't wait un�l a�er the sponsorship to determine what should be achieved. Make sure to develop objec�ves that are measureable.

3. Measure return for each objec�ve against prorated share of rights and ac�va�on fees. In other words, make sure that all costs and benefits are measured to determine if objec�ves have been achieved.

4. Measure behavior. Are there changes in the behavior of the target audience or target market as a result of the sponsorship?

5. Apply the assump�ons and ra�os used by other departments within the company. This is par�cularly important for the overall IMC plan. Quan�fy the objec�ves and use sta�s�cal analysis to show that the events or sponsorships are effec�ve when compared across the IMC plan and across the business plan.

6. Research the emo�onal iden��es of customers and measure the results of emo�onal connec�ons. 7. Slice the data. Each individual sponsorship will have a different impact upon the targeted market

groups. Create market segments germane to the sponsorship objec�ves for each of the segments. This should provide the event or sponsorship planner specific effects on the customers from all targeted segments.

8. Capture norma�ve data. U�lize a core set of criteria and ra�onale that will be applied across all the various sponsorship and event ac�vi�es.

While sponsorships are an effec�ve sales promo�on tac�c, it is impera�ve that the sponsorship and event ac�vity outcomes are measured.

›Learning Check Reflect on your learning by answering the following ques�ons:

1. What are the main consumer sales promo�ons used? 2. What are some of the benefits and drawbacks of using coupons? 3. What type of consumer promo�ons do you think are most successful? 4. What do you think makes a good point-of-purchase display?