Ch 12: Promotion Through the Channel

MKTG 4354 Chapter 12: Promotion through the marketing channel Introduction Together, Pepsi and Starbucks will partner up and spend some $20 million on TV, Magazine, outdoor and Internet advertisements to make Frapuccino and Double Shot so well recognized by consumers that the giant retail chains will have to stock these products to meet swelling customer demand Channel member support is one of the major tools of the manufacturer?s promotional mix. This is because most products and services are not sold directly to final customers Pull Strategy: by building strong consumer or industrial user demand for a product, the manufacturer will force channel members to automatically promote the manufacturer?s product because it is on their obvious list. Push Strategy: manufacturer develops mutual effort and cooperation in the development and implementation of promotional strategies by working directly with members to develop strong and viable promotional support Promotional Strategies and Channel Member Cooperation All of the studies suggest that ad hoc, quick-fix, and frequently offered push promotions do not foster high levels of channel member support on a consistent basis Push promotions should be viewed as a part of strategic channel management rather than as mere tactical actions to elicit quick channel member responses to sell more products Given the wide range of factors that can affect channel member?s response to promotions, manufacturers should study channel members needs carefully before launching major push promotions A tradition of post promotion research to evaluate channel responses to push promotion is needed if manufacturers expect to make steady progress in improving the effectiveness of push promotions Despite the manufacturers best efforts, large and powerful channel members will inevitably come into conflict with the manufacturer over promotional issues because their interests and goals will at times diverge Basic Push Promotional Strategies in Marketing Channels Cooperative Advertising Many variations but the most common is sharing in the cost on a 50-50 basis up to some percentage of the retailer?s purchases from the manufacturer Promotional Allowances Offer the channel member a direct cash payment or a certain percentage of the purchases on particular products Make sure the allowance program is consistent with channel member needs Why is it offered? Encourage retailers to buy more of the manufacturers products Give the products more prominent shelf space Feature the products in a special floor or end of aisle display Engage other similar promotional activity Slotting Fees Payments by manufacturers to persuade channel members to stock, display and support new products Most popular in the grocery industry Controversial because manufacturers and retailers have different views Attracted attention of legal entities FTC, General Accounting Office, Congress Investigation of whether it violates anti-trust laws or is a form of ?Payola?: bribery or under the table payments Displays and Selling Aids Includes identification signs, promotional kits, special in-store displays and mailing pieces Problems include: overabundance and apparent usefulness of materials In-store promotions Includes store visits by famous celebrities, unusual and dramatic events, trunk shows and the use of samples Main concern for channel manager: whether the retailers perceive benefits from it Contests and incentives Includes cash incentives, free merchandise, and free trips Main concern for channel manager: conflict with their objectives Special promotional deals and merchandising campaigns Comprise a ?catch-all? category and may overlap one or more of the other six promotional strategies Concerns include trade loading, forward buying or channel stuffing in which manufacturers induce retailers and wholesalers to buy far more products than they can sell in a reasonable period. Kinder and Gentler Push Promotion Strategies Promotional strategies that are less straightforward and use more finesse, subtlety and more circuitous route Training Programs Manufacturers help to offset costs of training programs Wholesale Level Help wholesaler?s knowledge of the manufacturer?s product, selling techniques, and skill s in counseling the customers they call on Topics covered include: listening skills, trust building and tension reducing skills, feedback skills, skills in selling to difficult types of people, how to protect image of excellence and knowing when and how to sell features and or benefits Retail Level: help wholesaler?s knowledge of the manufacturer?s product, selling techniques and skills in counseling customers on product usage Quota Specification The sales volumes that manufacturers specify for channel members to generate during a certain time period Manufacturers set quotas in the belief that they will spur channel members onto greater effort in return for rewards offered for reaching or exceeding the quotas Missionary Selling Any of the manufacturers sales people in a number of department stores selling activities of channel members Examples: Liz Claiborne uses its own salespeople in a number of department stores Trade Shows Annual events organized by associations in particular industries ranging form toys to equipment