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Flashcards in Chapter 5 Deck (44):
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Promotion includes

sales promotion, advertising, personal selling, direct marketing, public relations and sponsorship.

It is therefore necessary to look at the bigger picture when making sales promotion decisions. In other words, sales promotion has to complement and not compete with other elements of the promotional

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briefly discuss the benefits and limitations of sales promotion.

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here are factors that should be considered in determining the promotional route that should be taken.

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A marketer should as a rule of thumb answer the following questions:

Which sales promotion objectives are we pursuing? Which product are we selling? Who is our target audience? Does the organisation have enough resources to pursue the chosen technique? What are the situational factors surrounding the organisation at the time of promotion?

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The promotional campaign being implemented should be in harmony with the other elements of the promotional mix.

Give an example.

For example, a company may be running a television or radio advertisement (above-the-line) with the aim of simply making the target market aware of the above mentioned product (brand awareness).

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The push and pull activities

Are illustrated in figure 6.1 on page 131 of the prescribed book.

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The push and pull strategies

Marketers can creatively encourage intermediaries to stock and promote a particular product through personal selling, trade advertising and trade-oriented sales promotion (push strategy).

The marketer can also use sales promotion efforts to create a demand for the product by consumers (pull strategy). Make sure you understand these two strategies and can apply them.

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As a general rule, objectives should have the following characteristics:

They should be measurable.
They should be realistic.
They should be challenging.
They should have clearly assigned responsibilities for their accomplishment.
They should be clear, unambiguous and in writing.

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Consumer-oriented sales promotions include the following:

Price deals.
Bonus pack or banded pack.
A refund or rebate promotion.
Coupons
Contests/sweepstakes.
Special events.
Premiums.
Continuity programmes.
Sampling.

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What are Price deals?

These save the buyer money when the product is purchased, for example discounts, rebates/refunds, coupons and bonus pack deals.

Price deals intend encouraging trial use and can recruit new buyers for a matured product.

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- When do price deals work most effectively?

They work most effectively when price is the consumer’s main criterion for decision making or when the brand loyalty is low.

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- How do buyers learn about price discounts?

Buyers learn about price discounts at a point of sale or through advertising. For example, consumers see there is a price deal on signs next to the product or on promotion leaflets being distributed. Consumers can be notified about price discounts through leaflets, and through radio, television and newspaper ads.

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- When will price reduction strategies be more effective?

For price reduction strategies to be more effective, they must have the support of all distributors in the channel.

Existing customers perceive discounts as rewards and often respond by buying in large quantities. Price discounts alone, however, usually do not persuade first-time buyers.

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Bonus pack or banded pack.

Consumers are offered an extra amount of the product for free when a standard size of the product is bought at the regular price. For example, Coca-Cola offering an extra 110 ml in its standard Coke can

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A refund or rebate promotion

Is an offer by a marketer to return a certain amount of money when the product is bought. Various car companies offer cash-back plans to consumers when buying a certain product.

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Coupons

Are legal certificates offered by manufacturers and retailers. They grant specified savings on selected products when presented for redemption at the point of purchase. Coupons are offered in some supermarkets by placing a little coupon dispenser machine next to the product.

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Contest or Sweepstakes

Contests require entrants to perform a task or skill to be deemed a winner

sweepstakes involve a random drawing or chance contest that may or may not have an entry requirement. With Vodacom, a consumer can register to become a VIP and stand a chance to win a car.

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Special Events

Marketers organise a special event or a sponsorship to attract a homogeneous audience in a particular event, and if the event is successful the product is associated with the event and the sales promotion becomes successful.

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Premiums

This entails a form of compensation that is given as an incentive for per- forming a particular act – usually buying a product. The premium may be given for free, or may be offered to consumers for a reduced price. For example, consumers are offered an additional product for free or at a reduced price when buying a product.

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Continuity programmes

Continuity programmes retain brand users over a long period by offering ongoing motivation or incentives, and consumers have to keep on buying a product in order to get the premium in the future.

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Sampling

This normally happens when the product is new and the marketer gives the customer a free sample of the product. Some marketers use magazines to distribute samples such as cappuccino sachets or small bars of soap.

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Trade-oriented sales promotions target resellers and their objective is to develop in-store merchandising support and improve distribution by opening up new sales areas.

There are three types of trade-oriented sales promotions.

These are as follows:


A. General trade-oriented sales promotions
Point-of-purchase displays.

(Point-of-purchase displays.
Trade shows.
Commissions.
Deal loaders.
Advertising allowance.)


B. Price-based sales promotions

(Off-invoice discounts.
Performance incentives.
Sales quotas. )

C. Non-price-based trade promotions

( Slotting allowances.
Promotional allowances.
Spiffs.
Trade contests.
Cooperative advertising. )

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General trade-oriented sales promotions:

Point-of-purchase displays.
Trade shows.
Commissions.
Deal loaders.
Advertising allowance.

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Point-of-purchase displays.

Manufacturers display units free to retailers in order to
promote a particular brand.

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Trade shows.

A group of manufacturers display their products at exhibitions and take orders at these exhibitions/trade shows. These shows provide an opportunity for manufacturers to demonstrate the product and disseminate important information. For example, South African Automotive Week (www.saaw.co.za).

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Commissions.

Manufacturers give salespeople extra money for meeting a specified sales goal (salesforce-oriented).

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Deal loaders.

These pertain to a premium given to the retailer by the manufacturer for ordering a certain quantity of the product.

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Advertising allowance.

This entails a dividend paid by a marketer to a reseller for advertising a certain product.

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B. Price-based sales promotions

Off-invoice discounts.
Performance incentives.
Sales quotas.

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Off-invoice discounts.

Manufacturers simply deduct some percentage from the invoice price for purchasing from the invoice price for purchases made by the retailer during the promotion period. Although this method encourages the retailer to buy more of the manufacturer’s products, it can entice some retailers to hold back the discount for themselves and not pass it on to final consumers.

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Performance incentives.

To reduce the chance of retailers keeping the discount to themselves, manufacturers may offer performance incentives only if the retailer has sold at a discount price to the consumer. This method may present a lot of administrative discomfort because the manufacturer would have to verify the retailer’s sales during the deal period.

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Sales quotas.

This entails the manufacturer setting sales quotas for retailers and offering a discount for retailers who have met the manufacturer’s sales quotas.

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C. Non-price-based trade promotions

Slotting allowances.
Promotional allowances.
Spiffs.
Trade contests.
Cooperative advertising.

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Slotting allowances.
Promotional allowances.
Spiffs.
Trade contests.
Cooperative advertising.

These entail prices retailers charge manufacturers for shelf space. Retailers defend the practice by pointing out that these charges are to compensate for the risk of carrying a product that may not sell at the expense of another well- known product.

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Promotional allowances.

These refer to the money paid to retailers by manufacturers to encourage the former to carry the manufacturers’ products.

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Spiffs.

Manufacturers set out sales goals for the salespeople of the retailer carrying the manufacturer’s product and pay the salespeople directly for attaining such goals (salesforce-oriented).

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Trade contests.

These do not differ much from spiffs. The difference is that the sales- people of a participating retailer do not get a cash price upon reaching the targets set by the manufacturer; instead they win a holiday trip to a particular destination or any other non-cash reward (salesforce-oriented).

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Cooperative advertising.

Manufacturers establish cooperative advertising programmes to encourage retailers to include the manufacturers’ products in their retail advertising.

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Slotting Allowances

These entail prices retailers charge manufacturers for shelf space. Retailers defend the practice by pointing out that these charges are to compensate for the risk of carrying a product that may not sell at the expense of another well- known product.

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There are various factors that should be considered when developing a promotion strategy. They include among others the following:


I. Timing.
II. Stage in the product life cycle.
III. Stages of the consumer’s purchase decisions.

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I. Timing.

Consumers’ buying trends differ from season to season, for instance most people get their bonuses or 13th cheque around December, so at this very period the promotion campaign should not necessarily emphasise lowest prices, but rather availability.

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II. Stage in the product life cycle.

As with various stages of the product life cycle, trade-oriented sales promotion must also inform (introduction phase), persuade (growth) and remind (maturity) consumers about the company’s product mix.

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III. Stages of the consumer’s purchase decisions.

During the pre-purchase stage, the emphasis should be on using free samples and discounts to get consumers to try the product.

Coupons, point-of-purchase displays, rebates and samples should be used to stimulate the demand.

Finally, during the post-purchase stage, consumers need to be reminded about the company’s offering. This could mean that the salespeople make regular visits to re-sellers and encourage repeat purchases through special offers and coupons.

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Study this section in your prescribed book and pay special attention to planning the sales promotion strategy.

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