The term advertising (often referred to as 'above-the-line expenditure') can be defined as all non-personal communication in measured media by an identifiable sponsor. This includes television, cinema, radio, print, and outdoor media. Sales promotion, for which the term 'below-the-line expenditure' is often used as a synonym, is not so easily defined. For example, Americans use the term to describe all forms of communication, including advertising and personal selling. In Europe, some use the term to describe any non-face-to-face activity concerned with the promotion of sales; some use it to describe any non-media expenditure; while others use it specifically to mean in-store merchandising. Managers concerned with sales promotions must, therefore, be clear about the nature and scope of such activities and how they can best contribute to the organisation's marketing goals.
• Nature and Scope of Sales Promotions Activities
In practice, sales promotion is a specific activity, which can be described as the making of a featured offer to defined customers within a specific time limit. In other words, to qualify as a sales promotion, someone must be offered something which is featured, rather than just being an everyday aspect of trade. Furthermore, the offer must include benefits not inherent in the product or service, as opposed to the intangible benefits offered in advertising, such as adding value through appeals to imagery. As such, it is an important tool in developing relationships with the various markets an organisation wishes to address.
Seen this way, every other element of the marketing mix, including advertising, personal selling, point-of-sale material, pricing, after-sales service, and so on, can be used as part of a structured sales promotion in order to achieve specified objectives. Thus sales promotion is essentially a problem-solving activity designed to get customers to behave more in line with the economic interests of the company. Typical tasks for sales promotion are
• Clearing slow moving stock • Counteracting competitive activity • Encouraging repeat purchase
193
M. Meldrum et al., Key Marketing Concepts © Mike Meldrum and Malcolm McDonald 1995 194 Understanding Marketing Relationships
• Securing marginal buyers • Getting bills paid on time • Inducing trial purchase and so on.
From this, it will be seen that sales promotion is not just concerned with volume increases. It is, for example, often used to assist production and distribution scheduling by persuading customers to bring forward their peak-buying from one period to another. In this way, sales promotion can seek to influence many different audiences in a number of different ways:
Salespeople to sell Customers to buy Customers to sell more, earlier, faster, etc. Users to buy Users to use The many and varied types of sales promotions are listed in Table 37.1. Each of these different types is appropriate for different circumstances and each has advantages and disadvantages. A typical example can be provided by a promotion that consists of a free case bonus: it is possible to measure precisely both the cost of the extra cases and the additional volume resulting from the offer; it is fast and flexible; it is effective where the customer is profit-conscious; it can be made to last as long as required; and it is simple to set up, administer and sell. On the other hand, it has no cumulative value to the customer, is unimaginative, and can often be seen as a prelude to a permanent price reduction. Among the alternatives available, points schemes in their various forms have become increasingly popular in the 1990s. Their advantages to the sponsoring organisation cover their wide appeal; the absence of any need to hold stocks of gifts; the difficulty faced by customers who try to cross-value gifts, and their ease of administration. On the other hand, they offer no advantages in bulk-buying, are difficult to budget, and lack the immediacy of dealer-loaders. Great care is necessary, therefore, in selecting a scheme appropriate to the objective sought.
Although in recent years sales promotion activity has increased to such an extent that it now often accounts for as much expenditure as above-the-line advertising, it is important to realise that, on its own, sales promotion will not replace selling, change long-term trends, or build long-term customer loyalty.
......
1.0 1.0
Vo Vo
' '
for for
for for
for for
admission admission
admission admission
systems systems
Points Points
Events Events
Events Events
Vouchers Vouchers
Vouchers Vouchers
Stamps Stamps
services services
services services
Cooperative Cooperative
Competitions Competitions
Indirect Indirect
Vouchers Vouchers Coupons Coupons Coupons Coupons
services services
Competitions Competitions
Coupons Coupons
advertising advertising
Competitions Competitions
promotions promotions
trading trading
and and and and
Services Services
Services Services
services services
reduction reduction
Free Free
Reciprocal Reciprocal
Risk Risk participation participation
Free Free
Special Special
Special Special
events events
Group Group
events events
participation participation Guarantees Guarantees
schemes schemes
Group Group
Group Group
participation participation displays displays
Guarantees Guarantees Stamps
displays displays
exhibitions exhibitions exhibitions exhibitions
events events
schemes schemes
Direct Direct
Training Training
equivalent equivalent
equivalent equivalent
equivalent equivalent
system system
Points Points
Stamps Stamps
Money Money
Money Money
Money Money
Competitions Competitions
Vouchers Vouchers
Vouchers Vouchers
competitions competitions
Coupons Coupons
Competitions Competitions
Indirect Indirect
Coupons Coupons
Coupons Coupons
Vouchers Vouchers
promotions promotions
12) 12)
offers offers
offers offers
offers offers
Product Product
for for
goods goods
gifts gifts
gifts gifts
gifts gifts
offers offers
13 13
Free Free
Free Free
Premium Premium
Free Free
Free Free
(eg. (eg.
Trade-in Trade-in
Trial Trial
Direct Direct
Trade-in Trade-in
credit credit
invoicing invoicing
return return
equivalent equivalent
equivalent equivalent
equivalent equivalent
system system
or or
Money Money
Points Points
Delayed Delayed
Extended Extended
Vouchers Vouchers
Competitions Competitions
Coupons Coupons Sale Sale Money Money
Money Money
Coupons Coupons
Vouchers Vouchers
Competitions Competitions
Coupons Coupons
Indirect Indirect
Vouchers Vouchers
promotions promotions
promotions promotions
buying buying
Price Price
schemes schemes
loaders loaders
sales sales
reduction reduction
of of
Price Price
Full-range Full-range
Bonus Bonus
Dealer Dealer
Incentives Incentives
Commission Commission
Loyalty Loyalty
Direct Direct
Types Types
market market
force force
37.1 37.1
Trade Trade
Consumer Consumer
Sales Sales
Target Target Table Table 196 Understanding Marketing Relationships
• Sales Promotion Strategy and Tactics
Unfortunately, the tactical nature of most sales-promotion activities means that they often amount to little more than a series of spasmodic gimmicks lacking in any coherence. This is a stark contrast to the commonly held beliefs that advertising should conform to some overall strategy. Perhaps this is because advertising has always been based on a philosophy of building long-term brand franchises in a consistent manner, whereas the basic rationale of sales promotion is usually to help the company to retain a tactical initiative. In fact, there is no reason why there should not be a strategy for sales promotion, so that each promotion increases the effectiveness of the next, so that a bond between seller and buyer is built up, so that tactical objectives can be linked in with some overall plan, and so that there is, generally, a better application of resources.
In spite of this, there is widespread acknowledgement that sales promotion is one of the most mismanaged of all marketing functions. This is mainly due to the absence of any strategy, which contributes to the confusion about what sales promotion is, and which in turn, often results in sales-promotion expenditure being inadequately recorded. One of these problems may be in locating the expenditure, let alone evaluating it. Some companies include the expenditure with advertising, others as part of sales-force cost; some as a general marketing expense, others as a manufacturing expense (as in the case of extra product, special labels, or promotional packaging), while the loss of revenue from special price reductions is often not recorded at all.
The objectives of each pormotion should be clearly stated from the outset
Such failures can be extremely damaging, especially since sales promotion can be such an important part of marketing strategy. Indeed, with increasing global competition, troubled economic conditions, and growing pressures from distribution channels, the focused nature of sales promotion is turning into a more attractive, widespread and acceptable marketing tool. This highlights the need for organisations to set good objectives, to evaluate results after the event, and to have some organisational guidelines for their sales promotion campaigns. For example, a $1 case allowance on a product with a contribution rate of $3 per case has to increase sales by 50 per cent just to maintain the same level of contribution. Failure at least to realise this, or to set alternative objectives for the promotion, can easily result in loss of control and a consequent reduction in profits. Sales Promotion 197
Managing an organisation's sales-promotion expenditure effectively thus requires an objective for each individual sales promotion to be established in the same way that an objective is developed for advertising, pricing, or distribution activities. The objectives for each promotion should be clearly stated, in terms such as product trial, repeat purchase, increased distribution, more prominent display, a shift in buying peaks, combating competition, and so on. Thereafter, the following process should apply:
• Select the appropriate technique. • Pretest. • Mount the promotion. • Evaluate in depth.
The in-depth evaluation requires spending to be analysed and categorised by type of activity (eg. special packaging, special point-of-sale material, loss of revenue through price reductions, and so on). For the sales promotional plan itself, objectives, strategy and brief details of timing and costs should also be included. It is important, however, that the activities planned are compatible with, and compliment, other activities within an organisation's promotions or communications mix.