Advertising expenditure and the trade cycle.docx

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Management Information Systems
MGIS 317
Ronald Schlenker

Advertising expenditure and the trade cycle Is spending less on promotion during a recession the right strategy to adopt? It could be argued that advertising is needed most when sales are beginning to slow down or even decline due to economic forces. Perhaps consumers could still be encouraged to buy if they were exposed to really influential adverts or promotions, even if household incomes are quite restricted. Sales promotion These are incentives such as special offers or special deals directed at consumers or retailers to achieve short-term sales increases and repeat purchases by consumers. This is often known as “below-the-line promotion”. “below-the-line production” is promotion that is not a directly paid-for means of communication, but based on short term incentives to purchase. There are several incentives and activities that come under the umbrella term “sales promotion”. They include: - Price deals: a temporary reduction in price, such as 10% reduction for one week only - Loyalty reward programmes: consumers collect points airmiles or credits for purchases and redeem them for rewards. - Money-off coupons: redeemed when the consumer buys the product - Point-of-sale displays in shops: e.g. an “aisle interrupter” is a sign that juts into the supermarket aisle from a shelf; a dump bin is a free standing bin centrally placed full of products dumped inside to attract attention - BOGOF: “buy one, get one free” - Games and competitions. E.g. on cereal packets. These examples suggest that sales promotions is very much an active approach to marketing – it is not just about informing consumers. In many cases of sales promotion, consumers already know about a product´s existence and any promotion campaign is all about stimulating consumers to buy it. Sales promotion can be directed either at: · the final consumer, to encourage purchase (pull strategy) or · the distribution channel, e.g. the retailer, to encourage stocking and display of the product (push strategy) 1. Personal selling This is when a member of the sales staff communicates with one consumer with the aim of selling the product and establishing a long-term relationship between company and consumer. 2. Direct mail This directs information to potential customers, identified by market research, who have a potential interest in this type of product. These “mailshots” can contain a great deal of detailed information. 3. Trade fairs and exhibitions These are used to sell products to the “trade”, i.e. retailers and wholesalers. These firms, if they stick the product after a trade fair, will then increase the chances of it gaining increased sales of consumers. Companies seldom sell much directly at trade fairs, but contacts are made and awareness of products as increased. 4. Sponsorship This the payment by a company to the organisers of an event so that the company name becomes associated with the event. 5. Public relations This is the deliberate use of free publicity provided by newspap
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