Sales Promotion Decision Making

Steve Ogden-Barnes, Stella Minahan

• Publisher: Business Expert Press
• Year: 2015
• Print ISBN: 9781631570476
• eBook ISBN: 9781631570483
• Topic: Business
• Subtopic: Marketing
• Index: Business

Sales promotions are a fact of life for the majority of retailers, suppliers, and FMGC stakeholders commanding up to 75 percent of total marketing budgets. From straightforward discounts on products to more complex omni-channel consumer competitions and contests, sales promotions play a vital role as both strategic and tactical marketing tools. Those responsible for sales promotions must deliver real results in cut-throat competitive trading environments. However, with limited understanding of the options, principles, and practices that underpin effective sales promotion planning, managers often rely on past experience or preferences to guide their decision making. Not surprisingly, many sales promotions fail to achieve their potential. Sales Promotion Decision Making serves as a vital resource for practitioners. Distilled from over 700 articles and cases, it presents the findings of comprehensive global research which explores the DNA of sales promotions, including their role, nature, and function, the critical decision-making processes, and campaign evaluation. This is supported with case studies of sales promotion planning in practice based on research conducted in FMCG and retail organizations. The book offers the reader a deeper, more comprehensive and critical expert appreciation of the core concepts that define sales promotions. This will empower decision makers, consultants, and stakeholders to make more confident, informed, and effective campaign decisions.

CHAPTER 1

Sales Promotions and the New World of Retail

Introduction

This chapter serves two main purposes: it introduces the reader to sales promotions as a distinct and vital topic within marketing and it highlights the significance of effective sales promotions management in a dynamic, competitive environment, where effective decision making is more important than ever. The chapter also summarizes the key aims of the book and the rationale for its timely publication. We argue managers with responsibility for sales promotion management require a deeper understanding of the nature and efficacy of the alternatives available to them to optimize their significant investment in campaigns and initiatives.

Overview of the Book

Buy one get one free, below cost price, 20 percent off, clearance sale, new improved product, the best available, 25 words or less, redeem coupons, and online competition are all examples of sales promotions available to the marketer and the retailer. Sales promotions—what they are, how they can be used, and the decision-making process—are the focus of this book. Specifically, we look at the role of sales promotions within the general marketing framework. We argue that given the pervasiveness, associated costs and brand impact of sales promotions are worthy of sustained and critical attention.

To begin, we describe some of the challenges faced by the retail industry with an emphasis on how consumers’ purchasing habits and buying power have changed. These changes in consumer behavior have led to new demands across the supply chain. In order to remain viable, retailers must be constantly evolving their skills to meet the demands and challenges of this new retail environment.

We explore the challenges facing retailers around the globe. In an age of modern global consumerism, many retail sectors have seen an explosion of market entrants occupying a variety of competitive positions: mass, niche, value, discount, and convenience, for example. In addition, the industry has faced an exponential rise in the popularity of Internet shopping.

Would that Promotion Work Here?

Literature in the field of sales promotions is often hard to find and sometimes contradictory. For example, many academics and practitioners focus exclusively on price discounting tactics, while others present generic and sometimes overly complex models and frameworks that purport to show how decisions should be made. Invariably, these approaches are criticized because they are not relevant or effective in real-world scenarios where operational dynamics, the experience of decision makers, company sector and culture, and internal and external influences all merge to create a unique decision-making environment not readily navigated with off the shelf tools. Guidance often takes the form of a series of checklist questions, without presenting the rationale behind these questions. Sometimes marketing magazines and agencies present glossy overviews of sales promotion campaigns that have yielded positive results, but without the critical insight or comprehensive understanding of the reasons why specific campaign factors were chosen. This lack of knowledge and insight makes it difficult for practitioners to assess the potential of a particular campaign for their own organization.

The authors of this book all have longstanding industry and research profiles in the field of marketing, retailing, advertising, and sales promotion. We are conscious of the fact that although there is a vast body of academic and practitioner information relating to sales promotions, it is often difficult for the busy professional to access and digest succinct sources that have mainstream practical relevance. Many books could be written about each of the myriad of interrelated sales promotion tactics: discounting, pricing, merchandising, and coupons to name but a few. However, the authors believe that there was a need for a book that gets a business professional up to speed with the topic overall, without compromising readability or accessibility. This will provide the confidence and inspiration to delve more deeply into further areas of interest.

Scope of the Research

The research presented in this book is the result of five years of primary and secondary research. The authors interviewed marketing decision makers in diverse consumer-focused organizations. Over 700 academic papers, business cases, and articles were reviewed, critiqued, and analyzed to distil the key messages and learnings.

The research revealed that managers often have limited understanding of the concepts and principles that underpin sales promotions and rely on past experience or preferences to guide their decision making. We argue that the scale of the sales promotion budget calls for a more disciplined and informed management approach.

Aims of the Book

The authors believe that in order to make more effective sales promotion decisions, managers need to have a robust, in-depth working knowledge of the world of sales promotions presented in an accessible form. The key aims of the book are:

•To educate and inform about the intrinsic nature of diverse forms of sales promotions, including their role, rationale, nature and function, key decision-making processes, and campaign evaluation methods in a concise, user-friendly form.

•To inform the time-poor reader about the how and why of sales promotion effectiveness, focusing on the function, benefits, advantages, and limitations of diverse promotional options.

•To share research that has been conducted into consumers’ perceptions and reactions to help the reader understand the factors that influence consumers’ response and engagement.

•To illustrate the realities of sales promotion practice by sharing the results of original research conducted with decision makers in a sample of retail and consumer-facing businesses: retailers, manufacturers, buying groups, suppliers, and campaign agencies.

•To demystify the complex world of sales promotions with clear definitions and succinct overviews of the pros and cons of campaign alternatives to provide a common platform for discussion and debate, and highlight where further, more in-depth research, knowledge, and advice may be needed.

This book, while using concepts and models to structure discussion, does not do so in a prescriptive way. Rather, it aims to provide the reader with a sufficient body of knowledge to facilitate more critical, objective, and effective decision making in relation to the campaigns they manage.

The authors of this book are strong advocates of an evidence-driven approach to decision making, capitalizing on the extensive body of knowledge that exists to inform and guide decisions. Rigid frameworks and generic models have their acknowledged limitations. Using and interpreting research to shape thinking and define culturally relevant decision approaches increases both the quality of decisions and the effectiveness of outcomes. This book is our way of supporting an evidence-based approach to decision making in the dynamic field of sales promotion.

This book has value for the early career and seasoned professionals from marketing, advertising, purchasing, and category management as well as sales promotion planners and agency consultants. The insights are particularly relevant for retailers and their manufacturers and suppliers due to the increasing popularity of promotions in a challenging—and evolving—trading environment.

Dynamic World of Retail

There has been a fundamental change in how we shop. Internet-savvy consumers now compare features, prices, offers, and online deals before purchasing. Globally, mobile technologies and smartphones have added a new dimension to the omni-channel retail world, placing real-time price and product visibility firmly in the hands of the bricks and mortar shopper. For example, many consumers now participate in the activity known as showrooming. This is when shoppers inspect products in a physical store, then compare competitor pricing and availability via mobile devices, sometimes purchasing from another source while in a store. In response, some retailers have experimented with charging shoppers who view in-store but do not purchase (Knight 2013). This issue is significant with one survey showing that 36 percent of consumers engaged in showrooming (Jude and Singh 2012). For some retailers, the combined challenges of this rapid retail evolution have simply been too great, with some long-established brands disappearing from the sector forever. The consumer now researches and shops differently. This is a new retail paradigm as the balance of power has shifted toward the consumer. The retail industry must be more responsive, more informed, and more skillful in order to meet these challenges.

Retail: A Game of Skill

Retail is an industry that demands world-class operational competence in many areas. Knowledge and skills are required in information technology, buying, merchandise management, marketing and promotion, distribution, human resources, and consumer service. In order to be profitable and successful in these challenging times, retailers and suppliers must be at the top of their game across all of these areas, mastering strategy and optimizing capital investments. Effective decision making in these areas is vital for moving the product through the supply chain profitably to the point of purchase. In this book, we focus on strategies and tactics that underpin effective decision making in sales promotion in particular. Sales promotions provide the motivation for consumers to purchase products at the final stage of a product supply chain journey, resulting in the sales transaction, which is the life blood of the retail industry.

Sales Promotions in Focus

Sales promotions are vital strategic and tactical tools within the marketing value chain. In their various forms, they perform multiple roles and meet diverse objectives. Research has continued to illustrate the significance of sales promotions as a core marketing activity (Gardener and Trivedi 1998; Haskins and Hugli 1969; Jobber 1973; Kimball 1989; Peattie, Peattie, and Emafo 1997; Ziliani 2006). Furthermore, there has been a significant increase in the marketing budgets allocated to sales promotions. Estimates of the proportions of marketing budgets allocated to sales promotions vary considerably but range between 25 and 75 percent of total marketing spend (Palazon and Delgado-Ballester 2009; Spears 2010). It is essential therefore to ensure that an optimal return on the promotional spend is achieved.

They can be the catalyst to encourage:

•Store or website visitation

•Profitable changes in consumer behavior

•Purchase of greater volumes of products

•Shoppers to buy new products

•Trial of different brands

They can be used to launch new lines or to clear old stock. They can also act as a mechanism for collecting vital consumer information and serve as a tactical response to counter aggressive competitor activity.

Challenges for the Professional

There are many professional staff employed by manufacturers, agents, retailers, and advertisers who are responsible for sales promotion planning and implementation. Their role is to establish objectives, evaluate options, and negotiate outcomes to ensure that their initiatives deliver real results. They have to do this in dynamic, culturally diverse decision-making environments filled with a variety of sometimes conflicting opinions. This book is addressed to these practitioners.

Managers make decisions all the time in their professional capacities. Many decisions are straightforward or routine, while others will be more complex, critical, and significant. Managers do no always stop to consider and reflect upon their decision-making processes. Instead, they use a mix of insight, hindsight, experience, data, and negotiation to reach a solution. And they will always be judged on the effectiveness of their decisions by the results. Organizational culture and peer influence play a strong role and this is especially true in marketing decision making where there is seldom a black or white choice available, with evaluation sometimes being complex and contentious. This is understandable considering the time and task pressures that managers face.

Not surprisingly, many sales promotions fail to achieve their full potential with some analysts estimating as few as 17 percent achieve profitability targets (Kotler 2009). Consequently, there has been long-running and strong criticism leveled at those responsible for the perceived ad hoc and sometimes maverick approach to planning and decision making. This criticism also extends to marketing and advertising more generally, but sales promotions—with their high investment costs, high visibility, time-limited offer, and critical strategic and tactical significance—have arguably been most prominent in the firing line.

We also note that there is little opportunity for professionals to learn about successful sales promotion management. Imagine, for example, a young graduate embarking on a marketing career. Their entry to the world of sales promotions can be fraught with confusion and complexity as they navigate ingrained preferences, assertive campaign partners, creative agency pitches, powerful stakeholders, and the all-important budgeting discussions and campaign evaluation exercises. Sales promotions are studied at colleges and universities, but seldom in any great detail compared to the emphasis placed on marketing, advertising, and consumer behavior.

Chapter Highlights

•Retail is now a globalized, omni-channel industry.

•Effective decision making is more essential than ever.

•Sales promotions are vital to shopper engagement.

•It is important to understand the complexity, variety, and application of promotional alternatives.

•Many decision makers do not appreciate the nuances of options available.

•As result of these dynamics, sales promotions often fail to achieve their full potential.

CHAPTER 2

The Many Faces of Sales Promotions

Consumers face a variety of sales promotions designed to influence their choices of products. Coupons, rebates, bonus sizes, “buy one, get one” offers, sweepstakes, and product premiums, gifts with purchase are all promotional tools directed toward consumers that allow firms to achieve short-term results such as increased market share or unit sales. What these promotions have in common is provision of some extra utility to the consumer, primarily through direct monetary savings. (Fogel and Thorn...

Table of contents

• Cover
• Title
• Halftitle
• Copyright
• Abstract
• Contents
• Chapter 1 Sales Promotions and the New World of Retail
• Chapter 2 The Many Faces of Sales Promotions
• Chapter 3 Roles, Functions, and Benefits
• Chapter 4 Monetary Promotions
• Chapter 5 Nonmonetary Sales Promotions
• Chapter 6 Sales Promotion Decision Making: Processes and Influences
• Chapter 7 Case Study Research Method
• Chapter 8 Supermarket Industry
• Chapter 9 Hardware and Home Improvement
• Chapter 10 Department Store
• Chapter 11 Cross-Case Analysis
• Chapter 12 Improving Sales Promotion Decision Making
• References
• Index
• Adpage
• Backcover