In the past twenty years, all categories of sales promotions have experienced tremendous growth as marketers offering more value to customers has become an increasingly necessary part of overall marketing programs. In fact, as a percentage of total marketing expenditures, sales promotions frequently
receive larger combined budget allocations than standard media advertising, according to Promo Magazine’s annual survey of marketing managers. In 1997, business-oriented sales promotion received almost half of the total marketing budget, while consumer-oriented sales promotions and advertising evenly split the remaining half. By 2002, the allocations shifted back to media advertising, which received 37% of promotional dollars, with business-oriented sales promotions and consumer-oriented promotions receiving 27% and 30%, respectively.
The point to this discussion is to correct any misperceptions that promotional budgets tilt heavily in favor of media advertising. In truth, they do not. Sales promotions of all kind play a large and sometimes even dominant role in marketers’ efforts to get products into the hands of consumers.
Several reasons account for the importance of sales promotion. First, as discussed in earlier notes, the growth of retailer power in distribution channels has led to an increase in consumer promotions. Sometimes, manufacturers make special offers to consumers because a powerful retailer insisted that they do so. Other times, manufacturers make special offers to consumers as a way of counteracting retailer power by strengthening the bonds of loyalty consumers may feel toward the brand. Either way, retailers frequently serve as the driving force behind consumer promotions.
Second, the nature of competition has changed remarkably over recent years resulting in ever greater consumer price sensitivity. The proliferation of brands and brand extensions, highly segmented consumer markets, and lower brand loyalty have combined to make consumers much more aware of price given that many product categories are populated by several competitors.
Third, price deals have become the rule rather than the exception for many products. Rebates on certain brands of automobiles, department store sales, and coupons on many grocery items are only a few areas where consumers have grown to expect price breaks. Indeed, the expectation has become so strong that, when possible, many consumers will wait for promotional offers rather than buy with no deal.
Fourth, advertising clutter has forced marketers to find new ways of getting consumer attention. Product benefits alone frequently prove insufficient to prompt consumer action much less get their attention. Thus, marketers increasingly look to sales promotion to find ways of breaking through to customers who face a constant bombardment of promotional messages.
receive larger combined budget allocations than standard media advertising, according to Promo Magazine’s annual survey of marketing managers. In 1997, business-oriented sales promotion received almost half of the total marketing budget, while consumer-oriented sales promotions and advertising evenly split the remaining half. By 2002, the allocations shifted back to media advertising, which received 37% of promotional dollars, with business-oriented sales promotions and consumer-oriented promotions receiving 27% and 30%, respectively.
The point to this discussion is to correct any misperceptions that promotional budgets tilt heavily in favor of media advertising. In truth, they do not. Sales promotions of all kind play a large and sometimes even dominant role in marketers’ efforts to get products into the hands of consumers.
Several reasons account for the importance of sales promotion. First, as discussed in earlier notes, the growth of retailer power in distribution channels has led to an increase in consumer promotions. Sometimes, manufacturers make special offers to consumers because a powerful retailer insisted that they do so. Other times, manufacturers make special offers to consumers as a way of counteracting retailer power by strengthening the bonds of loyalty consumers may feel toward the brand. Either way, retailers frequently serve as the driving force behind consumer promotions.
Second, the nature of competition has changed remarkably over recent years resulting in ever greater consumer price sensitivity. The proliferation of brands and brand extensions, highly segmented consumer markets, and lower brand loyalty have combined to make consumers much more aware of price given that many product categories are populated by several competitors.
Third, price deals have become the rule rather than the exception for many products. Rebates on certain brands of automobiles, department store sales, and coupons on many grocery items are only a few areas where consumers have grown to expect price breaks. Indeed, the expectation has become so strong that, when possible, many consumers will wait for promotional offers rather than buy with no deal.
Fourth, advertising clutter has forced marketers to find new ways of getting consumer attention. Product benefits alone frequently prove insufficient to prompt consumer action much less get their attention. Thus, marketers increasingly look to sales promotion to find ways of breaking through to customers who face a constant bombardment of promotional messages.
Finally, consumer promotion’s growth can also be attributed to increased pressure on marketing management for short-term results. Publicly traded companies find themselves especially prone to this orientation. Many investors look to immediate
bottom-line results rather than the long-term health or stability of the companies in which they invest. Responding to this pressure, marketing managers seek quick fixes for sagging bottom lines. Sales promotions are often seen as ways to boost near term sales. However, as their use becomes more common, their costs become regular and recurring and therefore potentially self-defeating.
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