Chapter12_Promotion Through the Marketing Channel

8/2/2019 Chapter12_Promotion Through the Marketing Channel

1/21

Promotion through themarketing channel

Week 11

Instructor: Jungwan Lee


2/21

Coupon

1900s Atlanta druggist Asa Chandler-Handwritten notes-a free glass of Coca-Coal

Coupon face value-180billion/year

Coupon-2 % redeemed by customers-3.6billion/year

Coupon issuing and distribution costs-6.5billion/year

P&G-coupon test: elimination??


3/21

What is promotional strategy?

..controlled, integrated program ofcommunications methods and materialsdesigned to present a company and its

products to prospective customers. ..to communicate need-satisfying attributes

of products toward the end of facilitatingsales and thus contributing to long-run profit

performance.


4/21

Major tools for manufactures

promotional strategy

Advertising

Personal selling

Channel member support Publicity

Sales promotion


5/21

Factors influencing trade promotional

support

Item importance (16.3%) Promotion elasticity (9.3%) Manufacturer brand support (8.2%) Manufacturer reputation (7.3%)

Promotion wearout (6.4%) Sales velocity (5.4%)

Item profitability (4.5%) Incentive amount (4.2%) -Source: Ronald C. Curhan and Robert J. Kopp, Obtaining

retailer support for trade deals: Key success factors, Journal ofAdvertising Research, Dec.1987-jan.1988: p.54


6/21

Variables of Item importance

Item is significant enough to warrantpromotion.

Category responds well to promotion.

Closest trade competitor is likely topromote item.

Item regular sales volume. Deal meshes with trade promotional

requirements.


7/21

Variables of manufacturer brand

support

Manufacturers brand support in form of:

Coupons.

Radio and television advertising. Newspaper advertising.

Point-of purchase promotion (e.g.,

display)


8/21

Variables of promotion elasticity

Buyers estimate of sales increase on

the basis of:

Price reduction and display.

Display only.

Price reduction only.

Price reduction, display, and advertising


9/21

Pull versus Pushpromotional strategies

Pull strategy ..by building strong

consumer demand for a

product, themanufacturer will forcechannel members toautomatically promotethe manufacturers

products.

Push strategy ..requires more direct

involvement by the

manufacturer withchannel members in theuse of promotionalstrategies to securestrong channel memberpromotional support.


10/21

Pull promotions and channels

coordination Some manufacturers rely almost entirely on

promotion in the form of advertising to their targetmarkets, to pull their products through the channel.

Hence, indirectly secure channel membercooperation.

The belief underlying this pull strategy is that bybuilding strong customer demand for a product, themanufacturers will force channel members toautomatically promote the manufacturers products.

-source: Eitan Gerstner and James D. Hess, Pull promotions and

channels coordination, Marketing Science, Winter 1995, pp.43-60


11/21

Basic push promotional strategies in

marketing channels

Cooperative advertising

Promotional allowances

Displays and selling aids In-store promotions

Contests and incentives


12/21

kinder and gentler push

promotion strategies

Training programs

Quota specification

Missionary selling Trade shows


13/21

Examples

Cooperative advertising-50:50, 3% allowanceof purchases.

Promotional allowance-cash back payment. Displays and selling aids-promotional kits,

special in-store displays, and mailing pieces In-store promotions-short-term events, Vidal

Sassoon haircare Contests and incentives Special promotional deals-catch-all category

promotional deals: discounts, (buy one getone free, rebates, coupons)


14/21

Training program

..are more common for wholesalechannel members than for retail.

But,should not be narrowly confined

to being merely a sales pitch for theparticular manufacturers product.

Rather, worthy of the name should

help the channel members not only sellmore but to improve their overallbusinesses as well.


15/21

Quotas

are often used by manufacturers as adevice to increase channel members

sales efforts.

The key to using such sales quotassuccessfully is to present them in aconstructive and informative manner

rather than in a coercive way.


16/21

Missionary salespeople

often used by manufacturer to help focuschannel members attention on themanufacturers product and to assist the

channel members in their selling efforts. The use of missionary salespeople can be

very effective if channel members want thehelp that is offered.

But, if the missionary salespeople do not takeup too much of the channel members time.


17/21

Trade show

have a chance to exhibit their

products and to show off the caliber oftheir organizations provide an

opportunity to interact with channelmembers.

foster a sense of pride in channel

members who carry the manufacturersproducts.


18/21

Push marketing strategies

Not down the throats Push strategy is one of mutual effort and

cooperation between the manufacturer andchannel members in the development and

implementation of promotional strategies. In this sense, the manufacturer does not push

channel members into promoting its product,but instead seeks their participation and

cooperation to provide effective promotionalstrategies that will be mutually beneficial tothe manufacturer and the channel members.

-source: Donald R. Glover, Distributor attitudes toward manufacturer-sponsoredpromotions, Industrial Marketing Management, 1991, pp.241-249


19/21

Shortcomings with push

promotions Frequent promotion deals erode consumer franchises for

existing manufacturer brands, add to the expense ofestablishing new brands, and increase consumer pricesensitivity.

Frequent discounts to channel members offered on productsused in trade deals result in deal-to-deal purchasing by

channel members and hence uneven factory shipments andincreased production costs.

Trade buyers often take advantage of discounts but fail toprovide the merchandising support called for and do not passall price reductions through to consumers.

Some channel members respond to deals by purchasing well

above their own requirements and reselling the excess dealmerchandise to other retailers at a profit.


20/21

Rule of thumb

The effectiveness of the manufacturers

overall promotional strategy isdependent upon how skillful themanufacturer is in securing cooperationfrom independent channel members inthe promotion of products.


21/21

Channel Member Relationship

Management: CMRM Any marketing mix strategies calling for

channel member cooperation should not behaphazard one-shot, quick-fix approaches.

Rather, strategies that involve channel

members stand a higher probability of beingfavorably received by the channel memberswhen they are part of an overall program ofmanufacturer support of channel memberneeds.

Distribution programming and thepartnerships/strategic alliances can be veryvaluable in this regard.

Documents

Chapter12_Promotion Through the Marketing Channel