Typical Sales Promotions & How Firms Use Them to Get You to Buy

Summary

Professor Wolters explains the role of sales promotions within integrated marketing communications. He covers various promotion types including loyalty programs, contests, coupons, rebates, product placements, and discounts. The video highlights how these incentives can drive purchases, create excitement, and inspire customer loyalty. Wolters also addresses the potential costs and risks of sales promotions, such as brand impact and cannibalization of sales. Ultimately, businesses must balance short-term gains with long-term brand strategy to ensure that promotions benefit both the customer and the company.

Takeaways

• 😀 Sales promotions are incentives designed to encourage customers to make purchases and increase excitement about products.
• 😀 Common types of sales promotions include Buy One, Get One Free (BOGO), loyalty programs, contests, coupons, rebates, and product placement.
• 😀 Loyalty programs, like Delta’s Medallion program, are effective at fostering repeat business but can be costly for companies.
• 😀 Contests, such as McDonald's Monopoly, generate excitement and foot traffic, but require careful management to ensure fairness.
• 😀 Coupons have evolved with technology, making it easier for consumers to find and use them, but they can reduce a company’s profit margin.
• 😀 Rebates are popular with retailers as they require customers to submit forms to claim a refund, but they often lead to high abandonment rates.
• 😀 Product placement in media (e.g., movies, TV shows) helps boost visibility for a product and shows consumers how it can be used in real life.
• 😀 Deals, such as significant discounts or sales events, can drive immediate sales but may harm long-term brand perception if overused.
• 😀 Companies must consider the impact of sales promotions on inventory, as offering deals like BOGO increases the need for stock and storage space.
• 😀 Sales promotions must be evaluated for their long-term impact on brand value, as frequent discounts can lower customer perceptions of a product's worth.
• 😀 Metrics like cost of additional inventory and the risk of cannibalizing other products should be carefully assessed when planning sales promotions.

Q & A

What is the main focus of the video script?

The main focus of the video is on sales promotions as part of integrated marketing communications (IMC), exploring various promotional strategies such as loyalty programs, contests, coupons, rebates, product placements, and deals.

How do loyalty programs contribute to customer retention?

Loyalty programs reward customers for repeated purchases, making them more likely to continue buying from the same brand. For example, Delta's Medallion program offers perks like free upgrades and early boarding, which create incentives for customers to stay loyal.

What is a potential downside of using loyalty programs for businesses?

While loyalty programs encourage repeat business, they can be costly for businesses. For example, upgrading customers from economy to first class can result in a significant loss of potential revenue.

What is the role of contests in sales promotions?

Contests create excitement and engagement by offering customers the chance to win prizes, such as free products or trips. This can drive customers to stores or websites to participate, boosting foot traffic and sales.

Why is it important to ensure fairness in contests and sweepstakes?

Ensuring fairness in contests is crucial because if customers perceive the contest as rigged or unfair, they may lose trust in the brand. The McDonald's Monopoly scandal serves as a cautionary tale of what can happen if contests are not properly monitored.

What are some advantages and disadvantages of using coupons in sales promotions?

Coupons offer a direct incentive for customers to buy products at a discounted price. The advantages include driving immediate sales, while the disadvantages include operational costs (e.g., printing and distributing) and the potential for reduced profit margins if the discount is too large.

How do rebates work and why are they appealing to retailers?

Rebates allow customers to pay full price upfront, then submit for a refund later. Retailers prefer rebates because they maintain full-price sales initially and shift the burden of claiming the rebate onto the customer.

Why might customers not always redeem rebates, despite the promise of a refund?

Customers often fail to redeem rebates because the process can be cumbersome, requiring them to submit forms and wait for a refund. As a result, billions of dollars in rebates go unclaimed each year.

What is the purpose of product placement in marketing?

Product placement involves integrating a product into movies, TV shows, or other media content to subtly promote it. The goal is to increase brand awareness by showing the product being used in a real-world context, as seen with iPods in *Blade Trinity*.

How can offering deals like '50% off' influence customer behavior?

Offering deals like '50% off' can create a sense of urgency and drive immediate traffic to stores or websites. However, businesses must carefully assess whether such promotions risk devaluing their products or affecting brand perception.

What should businesses consider when planning a sales promotion to avoid negative brand impacts?

Businesses must consider the long-term impact on their brand when planning sales promotions. For example, offering deeply discounted products too frequently can create customer expectations of lower prices, which may harm the brand’s perceived value.

What is the risk of sales promotion cannibalization, and how can it affect revenue?

Sales promotion cannibalization occurs when a promotion encourages customers to buy one product at the expense of another, potentially reducing overall revenue. For instance, a buy-one-get-one-free deal may reduce the sale of other products that customers would have purchased.