Lecture 8 HO MIMC

Lecture 8
Sales promotion
Direct Marketing

Sales Promotion: Key facts

Sales promotion techniques:
Offer a direct inducement (value adding) to
encourage buyers to act now
Offer an incentive (value-increasing) to shorten the
transaction

In context:
usually used in the AIDA model as the final
marketing communication objective ACTION.
Or trial before first purchase!

Typology of sales promotion

Value-increasing (alters
price/quantity or price/quality
equation

Value-adding (offers something

extra while leaving core product &
price unaffected

Discount pricing
Money-off coupons
Payment terms (interest free credit)
Refunds
Guarantees
Multipack or multi-buys
Quantity increases
Group Buying
Buybacks

Samples
Special features (limited editions)
Valued packaging
Product trial
In-pack gifts
In-mail gifts
Piggy-back gifts
Gift coupons
Information (catalogue/brochure)
Clubs or loyalty schemes
Competitions/prize draws

Some research suggests valueincreasing is a short-term benefit,

decreases profits etc.

These instruments add value, enhance

the offering & provide opportunities to
drive longer-term benefits

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Who are the targets of sales promotions?

Three broad audiences:
Consumers
Members of the distribution or channel network
Sales forces of both manufacturers/resellers

Think campaign strategy: pull, push & profile!

Reasons for sales promotions: Consumers

Trialling: reaches new customers/defend shelf space
from competitors
Rewards those who purchase products/services
Attracts & retains first time purchasers by collecting
personal details for future offers
Sampling & providing extra value to purchases
encourages repeat purchase behaviour
Sense of urgency, increases excitement & interest at
POP for mundane, mature products induces action
Helps cash flows for smaller companies
Links together other tools of the communications mix by
integrating

Reasons for sales promotion:

Manufacturers; Distributors; trade
Dissuades distributors from buying elsewhere
Manufacturers improve efficiency by using idle capacity
and other manufacturing cost imbalances
Manufacturers can discriminate between high-list, highdeal pricing (more profits) and offer deals for price
sensitive segments.
Joint promotions (manufacturer & distributor;
distributor/retailer) provide credibility

Lecture 8 HO MIMC

Role of sales promotion

Short termism A managerial climate exists geared to
short-term performance & evaluation

Managerial Accountability increased pressure to be

accountable for communications expenditure think number
of coupons returned or bonus-packs purchased are easy to
do measures

Brand Performance New technology means that brand

managers can be held to account by supermarkets much
more quickly for below-par performance

Brand Expansion Increased product proliferation &

choice results in a slower, tense consumer shopping
experience. Promotions make purchase decisions quicker,
decreasing tension.

Sales promotion objectives

Over-riding objective: to accelerate or bring forward future
sales.
To change consumer purchasing habits
To stimulate increased purchases by current consumers
To persuade new customers to switch
To reward those who do purchase
To reward those who increase their purchases
To stimulate trial
To clear current stocks
To match a competitor
Offer trade a complete package/cement good relations
Build a database

Sales promotion: Methods

Audiences
Manufacturer to resellers

Manufacturers to consumers

Method
Advertising Allowance
Buying Allowance - Buy X at a discount
Count and Recount incentivize resellers
to clear old stock before new products are
launched
Buy-back allowance provided for
resellers who purchase new products
rather than switch
Dealer contests Dealer conventions/meetings good
relations
Training & support
Sampling freebies, tasting,
demonstrations
Coupons Price offs
Bonus packs
Refunds & rebates premiums
Contests & Sweepstakes chance win

Lecture 8 HO MIMC

Matching promotion
types/objectives - sales force
Psychic income: incentives and motivation
schemes.
Aimed at the higher levels of need self esteem!
Valued, recognized, rewarded.
Financial income: bonuses, commission.
Cash is still king, but a financial award gets sucked
up in bills.
Easily forgotten.

Sales promotion: problems

Short term tactics (Manufacturers/trade):

pressure to boost quarterly sales

shortening product life cycles
increased competition/NPD
speedy solution to business crisis
full service agencies selling ad hoc

But: research findings suggest:

not profitable;
force prices down;
incur significant hidden costs of storage,
stock transfer costs,
forward buying costs
= costs outweigh benefits!

Sales promotion: problems

Short term tactics: consumers
Come to expect them
BOGOFS cause dreadful waste (15m tonnes of
food is wasted in the UK each year: BBC 2014)

Discounting
Computation fluency: Was 10, now 8 - easier than
7.99 or 8.99
Charm prices: associate 9s with discounted prices/deals

Lecture 8 HO MIMC

Sales Promotion Retention programmes

Long term strategies: (loyalty schemes)

Use of swipe cards points accrual
Motivate more points accrual lock in!
Avoids switching
Plus, smartcards
record consumer info
Track consumers

Launching a scheme lifts sales by 2 to 3% (Fill 13)

BUT; some suggest that loyalty schemes:
Are misguided as they do not develop loyalty
Have cost industry huge amounts of money

Strategy
Why develop a strategic approach?
it enables one offer to build on another
it is possible to communicate image and functional
values
it can produce savings in time and money
It enables offers to be fully integrated with the rest of the
communications mix
Facilitates a best practice approach to Joint promotions

Strategy planning
how to develop a strategic approach?
Identify long-term strategic marketing and
communication objectives
create guidelines indicating appropriate types of
promotions for long-term health
agree budget criteria and availability
ensure senior management is on board
develop measurement/monitoring

develop a promotions file

Lecture 8 HO MIMC

Weight Watchers ATL paid for

*Awareness (Cinema)
*Interest/desire (TV)
*Encourage trial (press)
*Incentive (internet ad)
Call to action
Owned and Earned
Website
Endorsers
App
Merchandise
FB likes
WoM/eWoM

International sales promotions

Factors which restrain the international
development of sales promotions
Economic development
Market maturity
Consumer perceptions
Regulations
Trade structure
A need to deal with country-specific issues!

Direct marketing
What is direct marketing?
All media activities that generate a series of
communications and responses with an existing or
potential customer (Fill 2013).

Lecture 8 HO MIMC

Role of direct marketing

A tool which is used to create and sustain a personal and
intermediary-free communication with customers, potential
customers and other significant stakeholders
Very useful for collecting and utilising pertinent and
measurable data.
Measurable responses using 3 associations:
An individual, a particular media activity & an outcome like a sale or
an enquiry for more information

The customer gets help with purchasing convenience and a

building of trust/commitment.
The direct marketer gets precision target marketing benefits
e.g. minimised waste; increased profits & less effort used to
find new customers.

Direct marketing
The choice of media for direct marketing is wide:
Direct response media:
direct mail
telemarketing
door-to-door selling
direct response advertising
home shopping via TV or the Internet
Internet-based direct work includes email,
mobile & affiliate marketing

Direct Mail
Personally Addressed
Advertising via Post
Junk Mail?
Lasered letters
Response rates
Costs
Strengths & Weaknesses

Lecture 8 HO MIMC

Telemarketing

Outbound telemarketing
Canned calls
Framed calls
Customised calls
Inbound telemarketing
Care lines
Response Rates
Strengths & Weaknesses

used in a variety of ways, such as selling, lead generation, customer care

fast feedback is invaluable so that the flexibility of the channel is utilized
telemarketing campaigns are either inbound or outbound

Door to Door Selling

Field marketing
Response rates
Strengths & Weaknesses

Direct Response Advertising

Main direct response media
TV, inserts, print (catalogues and magazines and
news papers

Direct marketing
Advantages
Targeting
cost effective
control and
accountability
immediate and flexible
opportunity to test
market
Opportunity to build a
database
Tailor made messages
Long term customers
International
Multifunctional

Disadvantages
upsetting channel
intermediaries
intrusion/invasion of privacy
high acquisition costs
heavy investment cost to build
database
risk

Lecture 8 HO MIMC

Direct marketing
Why has direct marketing grown?

market fragmentation
tailor-made technology
the list explosion
sophisticated software
hybrid marketing systems
search for cost effectiveness

Direct marketing
What is database marketing?
a database is distinguished by the amount
and quality of relevant data held on each
customer/prospect file
Historical (transactional/back) data: name,
address, recency and frequency, response and
value
Predictive (forward) data
which groups/subgroups most likely to respond

Direct marketing
Building a database
the database of customer information has the
potential to be a companys greatest asset
it can identify which prospects/customers are at
which stage of the buying cycle
this facilitates sequence selling, moving people
up the ladder of loyalty

Ladder of loyalty
advocates
clients
customers
prospects
suspects

Lecture 8 HO MIMC

Direct marketing
Data warehousing and
data mining
- keeping huge databases securely
- data mining is all about applying
advanced statistical analysis and
modelling techniques to data
- to find useful patterns and
relationships
- read about database manipulation