Page 643 - Encyclopedia of Business and Finance

eobf_P 7/5/06 3:18 PM Page 620

Promotion

media stories or consumer complaints. A strong, Advertising specialties. Companies frequently create
well-organized public relations department will and give away everyday items with their names
ward off potential trouble by being honest, and logos printed on the items such as bottle/can
friendly, positive, and helpful to government reg- openers, caps, coffee mugs, key rings, and pen-
ulators and members of the news media. cils. Companies prefer to use inexpensive hand-
outs that will yield constant free advertising when
Stockholders. Another key interest group for any
company that offers publicly traded securities are used by the recipient.
the stockholders. If company stockholders gener- Cash refund offers/rebates. A cash refund or rebate is
ally receive positive news about a company, they similar to a coupon except that the price reduc-
are more likely to maintain investment, which tion comes after the product is already pur-
helps keep the stock price up. Negative news that chased. In order to receive the cash refund/rebate,
is not countered with positive public relations the consumer must send in a proof of purchase
can create uncertainty about how the company is with the company offer in order to obtain the
running and encourage stockholders to sell and refund. Rebates are often an excellent form of
to invest in other companies. This action can sales promotion for a company to use because a
high percentage of consumers will not send in
cause the stock value to decrease, making it diffi-
the forms for the refund.
cult to attract new investors.
Contests and sweepstakes. Many companies use con-
Suppliers. Positive public relations are essential for a
company’s relation with its suppliers. Suppliers tests and sweepstakes to increase the sales of a
product. As a reward for participating, consumers
are most concerned about being paid for the
might win cash, free products, or vacations. With
product they are selling to a company. Since
a contest, participants are required to demon-
most suppliers are generally not paid until ten to strate a skill; for example, entrants might be
twenty days after delivery of their product, they asked to suggest a name for a new product,
must have faith in the ability of a company to
design a company logo, or even suggest a com-
pay its bills. Any negative news regarding a com-
pany name change. Contest entries are then
pany’s financial position in the absence of a full
reviewed by a panel of judges; the originator of
and complete explanation from the public rela- the winning entry receives a prize, usually in the
tions department may result in a damaged repu- form of cash or a vacation. In contrast to the skill
tation with suppliers. Suppliers could stop
required with contests, a sweepstakes winner is
shipping their products or demand that payment
determined by chance. For example, consumers
is made at the time of delivery. Neither option is
maybe given a scratch card in a fast-food restau-
appealing to a company, and both could cause
rants; if three-of-a-kind or another predeter-
critical delays in getting its products to market. mined criterion is achieved, the consumer would
be given a free hamburger or some other selected
Sales Promotion. Sales promotions are marketing prac- prize.
tices designed to facilitate the purchase of a product that
Coupons. Coupons are certificates that give con-
do not include advertising, personal selling, or public rela- sumers a price savings when they purchase a
tions. Companies use sales promotion for a variety of rea- specified product. Coupons are frequently
sons, including (1) to attract new product users who will
mailed, placed in newspapers, or dispensed at the
hopefully turn into loyal consumers who keep buying the
point of purchase. In addition, some companies
product; (2) to reward existing consumers with a price
have coupons generated when an item is scanned
reduction, thereby maintaining their loyalty; and (3) to at the register. Companies can promote both new
encourage repeat sales from occasional consumers. and mature products through the use of coupons.
Patronage rewards. Awards provided by companies to
SPECIAL PROMOTIONAL promote and encourage the purchasing of their
ACTIVITIES products are called patronage rewards. Airlines
Companies use a variety of sales promotion tactics to use this strategy by awarding frequent-flyer miles
increase sales, including advertising specialties, cash to consumers who use their services often. When
refund offers/rebates, contests and sweepstakes, coupons, a consumer has earned enough frequent-flyer
patronage rewards, point-of-purchase displays, premiums, miles, he or she can redeem a free ticket. Credit
price packs/cents-off deals, samples, and trade shows. card companies also use patronage rewards by

620 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION