CHAPTER 18

Sales promotion
SUE PEATTIE and KEN PEATTIE

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Introduction

Sales promotion defined

In 1697 Jonathon Holder, a London haberdasher, decided to offer customers spending over a guinea in his shop a free stock and price list. His pioneering decision to offer his customers something extra was not universally welcomed. The newspapers of the day condemned this sales promotion as a dangerous innovation and one which, would be destructive to trade, if shopkeepers lavished so much of their capital on printing useless bills. Over 300 years later, trade still flourishes and so do sales promotions, which now account for more capital than any element of marketing communications except selling. During 2000, promotional expenditure in the USA (excluding discounting programmes) exceeded $100 billion for the first time, according to industry figures. Despite sales promotions growing importance, something of the scepticism that Mr Holder encountered lives on. In the study and practice of marketing, sales promotion has always been overshadowed by the more glamourous world of advertising. This situation is now changing, with sales promotion beginning to attract the academic study and practitioner scrutiny that its cost and increasingly strategic role surely demands.

Sales promotion is frequently defined in terms of what it is not, typically as those marketing communications activities which do not fall into the categories of advertising, selling or public relations. This is not very helpful, but definitions trying to explain what this encompasses are often flawed, by failing to embrace all of the marketing tools regarded as sales promotions in practice. We can define sales promotions as marketing activities usually specific to a time period, place or customer group, which encourage a direct response from consumers or marketing intermediaries, through the offer of additional benefits. The three key elements of this definition are that sales promotions are: 1 Non-standard. Promotions are usually temporary, and may be limited to certain customer groups (such as airline frequent flier schemes) or specific to a particular distribution channel (as in tailor-made promotions involving a producer and a single retailer). 2 Response orientated. Promotions seek a direct response from customers, or those who deal with customers on the producers behalf (see Figure 18.1). The direct response sought is not

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Sales promotion

459

TRADE PROMOTIONS 'PUSH'

PRODUCER
INTERNAL PROMOTIONS 'ENCOURAGE'

DISTRIBUTOR

JOINT PROMOTIONS DIRECT PROMOTIONS 'PULL'

SALES FORCE

CONSUMER Figure 18.1 Sales promotion targets

necessarily a sale. Promotions may encourage consumers to send for a brochure, visit a dealer or consume a sample. The ultimate aim is always sales, but this is true of marketing generally. 3 Benefit orientated. Promotions offer their targets additional benefits, beyond the standard marketing mix. The enhanced mix could include extra product, a reduced price or an added item, service or opportunity. The everyday vocabulary of marketing promotions is full of inconsistencies. For simplicity and brevity, the word promotion will be used in this chapter to refer to a sales promotion, rather than its broader context of marketing promotion.

writing in Marketing Week, expressed it, the sector suffers largely from a poor definition a price promotion is not the same as a valueadded promotion but the two are often lumped together . Coupons and discounts are among the most widely used promotions, and research evidence and practical experience from such price-based promotions dominates the literature. This has encouraged: A limited view of what promotions can achieve. An overly rational economic view of their effects on consumers. A tactical and short-term view of promotion, since economic incentives are only effective while they are on offer. A negative perception about the impact that promotions may have on brands and brand positioning. All of these negative perceptions of sales promotion, and more, were encapsulated in Jones (1990) Harvard Business Review article The Double Jeopardy of Sales Promotion. He concludes that companies, faced with saturated markets, have been misguidedly channelling money away from above-the-line advertising and fighting with fury for market share; using

Understanding sales promotion a tale of price and prejudice

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The Marketing Book

promotions (generally a high cost activity) as unpackaged draught beers require special price the main tactical weapon. evenings, gamecard competitions and promotional merchandise catalogues. Such indictments, extract leading Chapter published in Promotions also var y in their popularity and journals, have helped to prejudice many mansuitability internationally between countries agement academics and some practitioners (Huff and Alden, 1998). In Japan, redeeming against promotions. However, it is worth coupons at point-of-sale is considered remembering that many of the most outspoken embarrassing, and so competitions are the critics (Jones included) are former top advertismost popular promotional tool there. ing practitioners. Advertising Hall of Fame member David Ogilvys view is that: The 4 Consumer appeal. Consumers like extra manufacturer who finds himself up the creek is benefits. In the USA, 70 per cent of consumers the short-sighted opportunist who siphons off http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1377 now hold at least one retailer loyalty card, and all his advertising dollars for short-term proover 80 per cent use coupons. However, motions (Ogilvy, 1985). It is also worth noting different types of promotion appeal to different that much of the criticism, including Joness, is people. Research by Gallup and numerous based on an assumption that in most circumsales promotions agencies suggests that our stances, promotions mean price reductions. age, sex, nationality, socio-economic grouping and ethnic origin can all influence which Buy this file from http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1377 The reality is that sales promotion needs to promotions we prefer. be understood for what it is a diverse and versatile marketing toolkit, in which the major5 Marketing capabilities. Free samples are ity of tools emphasize creativity over simple obviously useful for encouraging product trial, economics. The different promotional tools while a prize draw can provide a mailing list vary in terms of: for future promotions. 6 Implementation priorities. While printing security 1 Their targets (see Figure 18.1). Push is important for gamecards, accurate redemption forecasting is vital for coupons and promotions target marketing intermediaries, giveaways, and anticipating competitor reaction supporting the selling effort to get products is important in price promotions. onto retailers shelves, while pull promotions target consumers and complement advertising in persuading them to pick products off the Space constraints prevent a detailed discussion shelves again. of each technique, but Table 18.1 provides

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examples and notes on some of the most popular forms of consumer promotions. Academic research to develop a clearer understanding of promotion has taken time to emerge. Between 1965 and 1983 there were only around 40 academic studies published about promotion (Blattberg and Neslin, 1990). This compares to over 200 studies of promotion published between the mid-1980s and the mid1990s (Chandon, 1995). Despite the increase in the amount of research, nearly all of it has remained focused on value-increasing techniques such as couponing. There have been relatively few studies, such as those by Chan3 Product/market suitability. While canned beers don et al. (2000) or Peattie et al. (1997), of valuefavour 13 per cent in the title page holds the copyright for this document adding promotions. The publisher detailed extra free offers, or on-pack competitions and coupons, 2 Type of benefits offered. One fundamental distinction is between value-increasing and value-adding promotions. Value-increasing promotions alter the product/price equation by increasing the product quantity or quality, or decreasing its price. Value-adding promotions leave the basic product and price intact, and offer something different in terms of premiums (free or self-liquidating), information or opportunities. The benefits can be instant (scratch-and-win competitions), delayed (postal premiums) or cumulative (loyalty programmes).

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