A Communications Framework to Evaluate Sales Promotion Strategy Assignment

A Communications Framework to Evaluate Sales Promotion Strategy Assignment Words: 1551

1. 0Introduction Sales promotion was largely considered to be a tactical marketing tool in the past, mainly concerned for providing short-term incentives to encourage consumers to purchase/sale of a product or service. However, with the advent of loyalty programs and other sales promotional techniques aimed at brand loyalty thus repeat purchases, sales promotion practitioners have attempted to reposition their discipline due to the increased, intense, competitive environment that many organisations face. Managers therefore must fundamentally understand and evaluate the impact of their promotional strategies.

A communications paradigm has four levels: 1. Ability to gain the consumers attention 2. Difficulty level of interpretation 3. Its persuasive capability (describing benefits or specific characteristics) 4. Promotional impact causing purchase intent. The conceptual framework discussed in the article provides sequences with a brand by creating awareness, communicating the core benefits, promoting trial, and therefore optimistically a supported purchase. And if the consumer becomes satisfied with the product or service, repeat purchases and brand loyalty maybe established (Gardener, Elizabeth, Trivedi, & Minakshi.

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Journal of advertising Research, May/Jun98, Vol. 38 Issue 3, p67, 5p). The four main types of sales promotion strategies that we will be analysing are: Bonus Packs, On-Shelf Coupons, Free-Standing Inserts (FSI) coupons, and On-Packs promotion. 2. 0Sales promotion strategy definition The Association of Promotion Marketing Agencies (APMA) introduced the following definition of promotion management: “the strategic and tactical marketing planning and execution for a brand using the full mix of business and communications designed to work in concert to influence behaviour in ways that build sales and reinforces brand image”.

Sales promotion strategies are actually a subsidiary of the overall Integrated Marketing Communication (IMC) mix. In spite of the pivotal role played by sales promotions, however, research within this area appears to offer little by way of oversimplified conclusions. Thus, while promotional impact has always been a topic of great interest to managers and researchers alike, there has been a somewhat disconcerting disparity in research findings (Gardener, et al. 1998).

Some researches have discovered that consumer satisfaction with a promoted brand leads to increased repeat purchasing even after the promotion has been withdrawn (eg. , Rothschild and Gaidis, 1981), while other research results suggest that consumers revert back to the pre-promotion behaviour (eg. , Bawa and Shoemaker, 1987). 3. 0Framework to evaluate promotions The article presents a framework that has been designed to assist managers in evaluating the effectiveness of their promotion strategies. There are four primary promotional methods that companies use to demonstrate the use of the framework.

These are FSI (free-standing inserts) coupons, on-pack promotions, bonus packs, and on-shelf coupon dispensers. Each method is evaluated in terms of its ability to communicate at each of the levels in the communication paradigm. Though since the articles publication in 1998, there have been new sales promotion strategies introduced. Some of which include: Sales Promotion However this article specifically discusses the previous four methods and how managers can evaluate there promotional influence. 3. 1Free-Standing Insert (FSI) coupons

FSI coupons have been used as major promotional tools for years as a means of offering the consumer a one-time reduction in price and building brand awareness and loyalty as well (Gardener, et al. 1998). A generation and a half has grown up on coupons and considers them a valuable method to manage their budget. FSI coupons are distributed to mass audiences-traditionally disseminated to consumers through the ‘Sunday paper’ but now FSi’s can be specifically channeled through various newspapers (local/state), coupon books, direct mail, magazines, and packages.

This method of promotion has recently gained considerable attention because of concerns over issues such as its inefficiency and high costs. Some of FSI’s advantages consist: it targets primarily price sensitive consumers, allows price reductions without involving the retailer, decreases consumer perceived risks for trial, a good source when establishing a new product in the market, and finally they can induce brand switching.

Limitations of FSI’s include: although FSI coupons are distributed to mass targets, they are only effectively utilized by a small percentage of consumers (difficult to determine the response rate), the lengths of time vary before expiry though research states that majority of consumers utitlise the coupons just before they expire rather than early during the drop-off periods, also it is difficult to attract new customers as existing consumers will use the coupon to save money therefore reducing an organisations profit margin, finally misredemption by means of falsely printed coupons. . 2On-pack promotions On-pack promotions offer free gifts or give-a way’s in an attempt to attract the consumer and alter purchase behaviour by adding to the perceived value of the product. There are several noteworthy factors operating here. First of all, such promotions are often left for the consumer to discover when they encounter the product in the store. Since the details of the on-pack promotions are often cramped into a small space and offered on the product itself, it gives rise to the possibility that the offer will go unnoticed.

Even when shoppers do spot the offer, since the description tends to be small and lengthy, consumers may disregard the promotion and make their purchase selection based on other criterias (Gardener, et al. 1998). This disregard on the part of the consumer may be further pronounced since the nature of the on-pack incentive and the consumer’s attraction for the same may vary widely. In fact, this technique can actually prevent a purchase if consumers do not find the premium attractive. 3. 3Bonus packs

Bonus packs offered by the manufacturer adds value to the product by offering additional amounts of the product/unit at the regular price. For example, a package of laundry detergent may be 25 per cent larger than a normal package, but offered at the normal price. Another example could be 60 tea bags in a package at the same price as the normal 50-tea-bag box (Peter Reed). Some of the advantages of bonus pack promotions are: they give marketers a direct way to provide extra value without having to get involved with complicated coupons or refund offers.

The additional value of a bonus pack is generally obvious to the consumer and can have a strong impact on the purchase decision at the time of purchase and bonus packs can also be an effective defensive maneuver against a competitor’s promotion or introduction of a new brand (Gardener, et al. 1998). Disadvantages include: shelf space may become more expensive if size alteration is severe, bonus packs may appeal already to current users who would have purchased the product regardless of the promotion, and unsatisfied consumers will not become brand loyal. . 4On-shelf coupons On Shelf coupons promotional strategy involves coupons that are distributed in the store using a coupon dispenser located near the product on the store shelf. Most coupons that are distributed in stores are thought ActMedia’s Instant Coupon Machine. This coupon dispenser is mounted on the shelf in front of the product being promoted. It has blinking red lights to draw consumers’ attention to the savings opportunity.

These in-store coupons have several advantages: they can reach consumers when they are ready to make a purchase, increase brand awareness on the shelf, generate impulse buying, and encourage product trial. They also provide category exclusivity. In-store couponing removes the need for consumers to clip coupons from FSI’s or print ads and then remember to bring them to the store. Redemption rates for coupons distributed by the Instant Coupon Machine are very high, averaging about 6 to 8 percent (Gardener, et al. 998). 4. 0Conclusions The objectives stated in the report was satisfied, had all areas involving sales promotion strategies been addressed, and we were also able to evaluate the various communications. According to the four promotional methods, each one in terms of its ability to communicate at each level of the communication paradigm we discovered that FSi’s, and bonus packs had more advantages through its promotional impact ability to gain attention were higher then in-store coupons and on-pack promotions.

Though the most effective strategy discovered was the in-store coupon program which usually resulted with high response rates. Finally On-pack promotions were also discovered to have an ineffective affect on new consumers though it is a good way to increase short-term sales through existing customers. 5. 0Recommendations From the above analysis, promotional strategies displayed the most beneficial results when all the levels of the communication paradigm are communicated well to the consumer.

Thus, attention must be effectively gained and a positive impression created. Benefits must be clearly communicated so that the consumer understands the nature of the incentive offered. The incentive itself should represent a value-added offer that consumers would find simple to take advantage of without incurring excessive costs. (Gardener) We recommend that because on-shelf coupon strategies had the best response rate that more organisations should utilise such techniques. This strategy works particularly well for several reasons.

It has all the advantages of a mail-in coupon, but saves the consumer the cost of cutting the coupon, saving it, and producing it at the purchase location. And they can reach consumers when they are ready to make a purchase, increase brand awareness on the shelf, generate impulse buying, and encourage product trial. They can also provide category exclusivity (McGraw. Hill). Also, once promotional strategies are implemented, constant monitoring of the affects should be comprehensive.

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