Posts Tagged ‘front-load’
During the early 90′s, the brand Horlicks faced a problem in West bengal. Though the brand is well known and the consumers are buying it, the consumers are not buying the 1Kg pack and are repeatedly buying the 450gm size pack. Though the 450 gm size pack helped gain new users (trials), the repeat purchase is still happening at 450gm pack size only. Consumers are not buying the 1Kg pack.
To make the existing consumers to uptrade to 1Kg size, and capture the heavy users of the competitive brands like Complan and Viva.
Promotion Vehicle Chosen: Container Premium
The 1Kg Horlicks was packed in an attractive premium glass jug. The jug decorated with a floral pattern, and had a plastic handle. The lid was embossed with a big logo.
Sales of the 1Kg bottle in West Bengal increased by 28% and an increase of 10.4% in the controlled market Bihar.
This is an example of an excellent promotion targeted at housewives. This is a very ambitious promotion as this Horlicks jug involves changing all the existing ground rules. There are a lot of changes required like the factories are requried to fill a glass jug rather than the usual bottle requiring change in production processes. The whole logistics are to be changed as the jugs require larger cases for transit. The jugs occupy more space in the shelf, and has to be negotiated with the retailer.
Every promotion has an objective to increase sales, brand-building, building added values to the brand, increase purchase frequency, introducing a new sample product, etc. Based on the objective to be achieved, category/brand managers and key account managers develop and implement a promotional programme that gives the maximum return on investment and maintains the trade off between profits and share, and among different stakeholders like suppliers, finance, merchandising, distributors, retailers and other trade partners.
For example, some of the simple reasons for a price promotion are:
1. Offensive Sales Gain: To offset competitive threats where the manufacturer is ready to forego short term profits for long term base and traction.
2. Recover Market Share: The player has lost some market share to competitors and want to recover the share.
3. Stimulate Sales and increase profitability: The company will increase the sales revenue which wouldn’t have come without the promotion, as a result it increases the total profit from the promotion.
4. Switches and Trials: Certain promotions are made to attract the consumers using competitive products and let them switch to our product
5. Increase purchases and push stocks/volumes: Certain promotions are made to let the consumer buy more than required. So the consumer buys three t-shirts instead of one t-shirt.
6. Trade promotions are given to trade partners like distributors and sellers to maintain the product on the shelf, and push the product. These include more margins, etc.
Promotions Management is one of the key challenges faced by the marketing and brand managers. It is one of the most interesting areas in marketing involving a lot of creativity and understanding of the customers. Various decisions are taken about:
- What to promote?
- When to promote?
- How long to promote?
- Which bundle of products to select?
- What is the effect on the brand equity?
- What do the trade partners, production process, etc. require to do?
- How do I communicate the promotions?
- What sort of impact will the promotions make on my baseline consumer sales?
Some of the different promotions are:
- Price promotions
- Volume Promotions
- Saver packs
- Different banded packs, pack free promotions
- Cash refunds
- Container premiums
- Promotional Games
Let us see how one of the Toothpaste brands used promotions to increase its share.
Promise Toothpaste Promotion
Test marketing a new brand in a single area before extending distribution nationally can produce invaluable data. This is about how Promise discovered in test market that a sales promotion was needed to achieve a market share target.
Promise toothpaste was test marketed by Balsaras in Delhi in early 80′s. The product was similar to Colgate toothpaste in taste and packaging, but media advertising stressed the clove oil content of Promise.
Three months after the Delhi launch, a tracking study was conducted and the study indicated that Promise had achieved a 17% trial rate and repeat purchase rate of 22%. This meant that if the marketing support for the brand is unchanged in a national launch, it would achieve a market share of 17% X 22% = 3.74%. As the target market share was at least 8%, this predicted result was unacceptable.
The agency indicated that a repeat purchase rate of 22% is good in a product category like Toothpaste. So, the problem is the media advertising had not induced enough people to try the brand. If the trial rate could be increased to 40% and the repeat purchase rate is maintained at 22% then Promise would achieve 40% X 22% = 8.8% market share.
Promotion Vehicle Chosen: Sampling
Free samples of Promise were distributed to approximately 1 lakh homes in Delhi. Care was taken that the free samples were not placed in those households which had already tried the brand.
Within three months of the promo Promise’s market share climbed to 10% in Delhi.
It is interesting to see how promos are used to achieve various objectives. In the further blogs, I will analyze a set of earlier promotions and a set of recent promotions to understand how marketers are using promotions to achieve different targets.
Based on a set of factors mentioned below (not comprehensive) the managers decide to go for a PUSH or a PULL strategy. In practice, generally both PUSH and PULL strategies are used in combination to achieve the objective.
1. Product category
2. Consumer Behaviour in the category and the interaction
3. Competition Promotions and Marketing Spends
4. Marketing spend
5. Effectiveness of the different options in that category
6. and more
1. Value Promotions
2. Volume Promotions
3. Banded Packs giving some other category free
4. Banded Packs giving a LUP of the same category free
5. BTL promos
6. ATL promos
8. and more
1. Increasing trade promotions and incentives
2. Increasing distribution
3. Increasing margins and pushing it to the retailers
4. Helping the retailer increase his sales and yours by different consumer activations,etc.
5. Provide more credit extensions, etc.
6. Building different incentives like if you sell this much you will get washing machine free, or this much worth stock of this brand free, etc.
7. and more
If a firm decides to use push strategy, its efforts are directed at resellers and the manufacturer becomes very dependent on their personal selling abilities and efforts. The promotional efforts are focused at pushing the product through the distribution channels; the resellers may be required to display, demonstrate and offer discounts, to sell the product. The communication to resellers is generally through trade circulars or the sales force.
Push strategies are generally appropriate for:
- Product categories where there is low brand loyalty
- Where many acceptable substitutes are available in the market
- Relatively new products are to be launched
- When the brand choice is often made in response to displays in the stores
- The product purchase is unplanned or on impulse
- The consumer is familiar and has reasonably adequate knowledge about the product
- Manufacturers, who cannot afford to engage in sustained mass advertising, often use push strategy and offer effective incentives to dealers
Example for Retailer promotion: Buy Cadbury’s products worth Rs.3000/- and get any 30 chocolates worth Rs.5 each free.
Through this offer the company is pushing its product to the retailers and now that the retailer has enough incentive the retailer stocks more and thus it becomes essential for the retailer to push the product to the consumers.
Disadvantages of Sales Promotion:
1. Increased price sensitivity
Consumers wait for the promotion deals to be announced and then purchase the product. This is true even for brands where brand loyalty exists. Customers wait and time their purchases to coincide with promotional offers on their preferred brands. Thus, the routine sales at the market price are lost and the profit margin is reduced because of the discounts to be offered during sale-season.
‘The Diwali Bonanza Offers’ on electronic goods.
2. Quality image may become tarnished:
If the promotions in a product category have been rare, the promotions could have a negative effect about its quality image. Consumers may start suspecting that perhaps the product has not been selling well, the quality of the product is true compared to the price or the product is likely to be discontinued because it has become outdated.
The Smyle Powder offer of “Buy 1 and get 2 free” went on and on. Ultimately people stopped asking for the product as the on-going sales promotion strategy made the customers perceive it to be a cheap and an inferior product.
3. Merchandising support from dealers is doubtful:
In many cases, the dealers do not cooperate in providing the merchandising support nor do they pass on any benefit to consumers. The retailer might not be willing to give support because he does not have the place, or the product does not sell much in his shop, or may be he thinks the effort required is more than the commission/benefit derived.
4. Short-term orientation:
Sales promotions are generally for a short duration. This gives a boost to sales for a short period. This short-term orientation may sometimes have negative effects on long-term future of the organization.
Promotions mostly build short-term sales volume, which is difficult to maintain. Heavy use of sales promotion, in certain product categories, may be responsible for causing brand quality image dilution. While sales promotion is a powerful and effective method to produce immediate short term positive results, it is not a cure for a bad product or bad advertising. In fact, a promotion is speed up the killing of a bad product.
How promotions may take your market share down?
Let us suppose a Pepsodent toothpaste gave a volume promotion that ‘Buy 1 and Get1 free‘ on a toothpaste. So, as toothpaste is a category where people don’t mind to buy for future purchase (buying more than what is required today), many people may want to take advantage of this offer and they buy two packs of it, which means you’re having four toothpastes for the next few months. A lot of people bought this, and the volumes shoot up increasing your volume share.
A very important thing is the consumption is constant in this category. A consumer who bought four toothpastes will not suddenly start brushing his teeth four times in a day. This means though he bought four packs, his rate of consumption hasn’t changed. So, this essentially means the consumer will not buy the toothpastes in the coming months. However, based on your penetration, marketers would like to see if we could bring in new consumers to use Pepsodent and are they being retained after the promotion goes off. If people buy Pepsodent only on offers and they don’t buy normally, it becomes extremely difficult for the marketer to handle it, and may eventually have to reduce the price of Pepsodent.
So, the promotion might result in the following which causes a decline in the market share in the forthcoming period.
- Existing consumers did a lot of pre-buying during the promotion and will not purchase in the coming months
- New consumers to the brand switched back to their earlier brand
- Couldn’t pull new consumers into the category
The whole strategy of having the right promotions programme to gain maximum share and profits is not so easy as it is on paper or written in a blog. It depends on hundreds of factors which change across cultures, and regions.
Surely, there are advantages with promotions which will help you achieve your marketing objectives. But, one has to be very careful while handling brand promotions because it can easily put the brand in a worse situation than it was before the promotion.
In marketing, there are different types of promotions that are provided to consumers and trade partners. Broadly, they are divided into two categories: front-loaded promotions and rear-loaded promotions.For example, when using price packs, direct mail coupons, FSI coupons or peel-off coupons, consumers obtain an immediate benefit upon purchase or a front-loaded incentive. However, when buying products with in-pack coupons or products affiliated with loyalty programs, promotion incentives are obtained on the next purchase occasion or later, i.e., a rear-loaded incentive.
The decision of whether to go for a front-loaded incentive or a rear-loaded incentive is dependent on the innate choice process of consumers in a market (variety-seeking or inertia). While in both variety-seeking and inertial markets, the sales impact and the sales on discount are higher for front-loaded promotions than for rear-loaded promotions, from a profitability perspective, rear-loaded promotions may be better than front-loaded promotions. Research has shown that in markets with high variety-seeking it is more profitable for a firm to rear-load, and in markets with high inertia it is more profitable to front-load.