Coordinating Sales Promotion

Prof. Dr. Tang

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Agenda

Evaluation of Promotion Promotion Coordination Sales Promotion Trap Case Study

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Case Presentation: Giant Consumer Products

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Performance Metrics

Top-line revenue

Sales revenue

Marketing Margin

Contribution margin = Revenue - Variable cost

ROMI Return on Marketing Investment

Incremental prots (net of cost of promotion)/Cost of promotion

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Marketing Margin
Marketing Margin reects the amount that the item contributes to corporate costs and overhead charges after all marketing expenses are incurred. It is calculated by subtracting selling, distribution and advertising expenses from gross margin.

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Performance Metrics

Promo Cost/Promo Point is the cost associated with securing 1% of stores to promote the product for one month

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Exercise
Explain the following concepts: Point-of-sale scanner data Retail Pass-through Cross brand cannibalization Brand equity erosion Line priced

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Answer
Scanner data are collected at the point of sale by supermarkets using electronic scanners in the check-out lines Retail pass-through: a measure of retailer response to manufacturer trade promotions. Retailers receive products at a discounted PTR and then not passing along the savings to consumers via a discounted PTC (non-compliance with pass-through) Cannibalization: promoting one item and having any incremental volume come at the expense of another item Brand equity erosion: implementing a price-off deal on a superpremium brand tarnishing its premium image Line priced: the suggested retail price/unit was the same for all varieties
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Forward-buying
Explain the problem of forward buying, how is it different from stock piling?

Forward-buying: retailers purchasing a large quantity of the product while it is available at a lower price-to-retailer (PTR). Retailers could either raise the price-to-consumer (PTC) back to the regular price level after the intended period of the promotion and pocket the difference, or they could continue to sell the product at a lower PTC beyond the intended period and thereby condition consumers to expect our well- trusted brands on deal. Stockpiling by consumers means buying large quantities to store for future use.

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Category Management
Managing each product category (ready-to-eat breakfast cereals, carbonated soft drinks, etc.) as a separate business unit and customizing merchandising and promotion activities to optimize the retailers (and possibly the producers) returns. This practice allowed retailers to tailor their product assortment to a given market, determine the best location of products on their shelves, and develop promotions in each category to best satisfy the needs of the local customer base.

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Promotion
Duration one week

Timing

based on seasonality, purchase frequency, and production capacity fund for end-aisle display, temporary price reduction featured price in the retailer's weekly insert/circular.

Type

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Evaluation

ROMI

19.1%

-12.2%

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Evaluation: Cannibalization Effects

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Evaluation

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Sales Promotion in Communication Mix

Customer Solution

Customer Cost

Convenience

Communication

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Advertising vs. Sales Promotion

What factors should we consider in the choice between advertising and sales promotion? Introduction Growth Maturity advertising to keep awareness consumer promotion to maintain loyalty, attract new customer protection against competition trade promotion to maintain shelf space retailer margin retailer support What other factors should we consider?
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Decline

sampling/couponing to induce trial

advertising to stress brand difference

remove ad & promotion

Media Support

Coordinated theme Announcing the promotion

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Case Presentation: Boots

Objective Strategy/Tactics Target Product Target Customers Time period IMC
drive sales volumes trade-up consumers retain or build brand equity. three for the price of two (3 for 2) gift with purchase (GWP) on-pack coupon a line of professional hair-care products: shampoos, conditioners and gel current Boots consumers existing purchasers of mass-market brands Christmas season December 1 to 31 no media advertising highlighted in in-store yers signage (in-store/exterior visible

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Case Presentation: Culinarian Cookware

Product Scope on popular items or slow movers? on the higher- or lower-price points? how broad a product grouping be offered? push slow movers do not benet trade very much promotion on high price item damages quality image promotion on low price item minimize cannibalization sufciently broad to attract interest 20% in previous years, 30% well received by the trade imitation & pressure of high list price ask for retailer participation in absorbing promotion cost one promotion in fall (traditional strong period) a couple of weeks (quality image) trade informed well in advance

Discount Rate

how much should be the discount rate?

Timing

frequency of promotion duration of each event, selection of specic dates

Communication

channel & message

companys national magazine advertisements cooperative advertising in newspapers with retailers

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Case Presentation: CINEPLEX

Partner Vendor Reward Structure
Scotiabank three major urban theaters as Scotiabank Theatres. SCENE was selected as the program name Gamma as the database vendor Upon membership sign-up, 250 points were awarded 100 points were issued with the purchase of a movie ticket. 10 per cent off concessions at all times. Rewards included movie tickets, concession combos and special screenings and could be redeemed with a minimum balance of 1,000 points. promoted through pre-show advertising in theaters, point-of-purchase displays at Scotiabank retail branches, in theater magazines, and through local radio and newspaper advertisements rst tested among Cineplex head ofce employees in December 2006 Greater Toronto Area in January 2007 nationally May 2, 2007 over 30,000 sign-ups per week

Communication

Launch

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Case Presentation: Phillips Foods

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Coordinated Theme

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Coordinated Theme

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Coordinated Theme

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Sales Promotion Trap

Explain the sales promotion trap for suppliers Our Firm all other rms cut back promotion maintain promotion

cut back promotion

Higher prot for all

Market share goes to our rm

maintain promotion

Market share goes to all other rm

Market share constant lower prot

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Sales Promotion Trap

Read the case Snapped in a promotion trap and discuss: What are the sales promotion traps for the consumers? What is meaning of *Conditions apply? What should retailer do to ensure a successful promotion?

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Case Presentation: SVEDKA VODKA

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What We Learnt: Coordinating Sales Promotion

Topic
Evaluation of Promotion

Key Concepts
Marketing Margin /ROMI Retail Pass-through Cross brand cannibalization Brand equity erosion

Key Capability
Be able to evaluation sales promotion from marketing metrics

Promotion Coordination

Theme

Understand the role of sales promotion in the brand life cycle Use IMC with theme to announce promotion

Sales Promotion Trap

Sales Promotion Trap for suppliers n print

understand the strategies to avoid promotion trap

Quiz 11
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