A New Promotion Mix Appropriation Model

This paper deals with the promotion budget and some popular appropriation models found in the standard marketing textbooks. All of these models are simplistic and state that relatively more money is spent on advertising and relatively less money is spent on personal selling in the promotion mix for consumer goods. They also state that the converse is true for industrial goods. A sample of 25 companies, all market leaders, was chosen with the objective of establishing how much they spend on promotion as a percentage of total sales. The objective was also to establish the percentage of total sales spent on each promotion mix element. The results were compared with the popular promotion mix appropriation models in the textbooks. In some cases the results were dramatic. From the findings of this study, the authors have put forward a new promotion mix appropriation model.     

A promotion mix budgeting model for retailing

Our two-equation model of retail promotion provides a well-balanced explanation of both retailers' perceptions of promotion tools and their budget allocation across the promotion mix. While previous studies have examined each of these two components separately, few have integrated both in the one study. Factor analysis was used to simplify the choices of promotion tools. This reduced the number of promotion tools to four, namely mass media, in-store promotion, sales promotion/direct mail and personal selling. We support earlier studies which link budget promotion mix spending (behaviour) to perceptions about the effectiveness of each medium (attitude). The range of determinants of perceptions has been extended by incorporating the roles of retail strategy, store ownership, culture and promotion intensity. We have estimated the budget promotion mix equation using a production function theoretical framework. Although this makes little difference to the strong relationship between retailers' perceptions of promotion tools and budget allocations, the theoretical framework does enable formal estimation of cross-media substitution. We find that the two short-term oriented promotion media are substitutes. Our model has been applied to apparel retailing in Australia, with considerable scope for applications to other retail categories and to other countries.     

Sales promotion practices of consumer goods companies in an advanced developing country

In recent years, manufacturers of consumer and industrial goods as well as service firms have been increasingly thinking in global terms and paying more attention to sales promotion in their overall promotional programmes and strategies. The purpose of this paper is to investigate the consumer sales promotion practices of consumer goods producing companies in the advanced developing country of Turkey. It was discovered that sales promotion activities are gaining importance in overall promotional practices of Turkish companies, though there are differences in its use by type of industry, size of company, area of business and locus of decision-making within the firm. Furthermore, differences were detected between companies using sales promotions versus other forms of promotional techniques such as mass media advertising, personal selling and publicity. Study findings may be applicable to other developing countries that are at a similar level of socio-economic, market and technological development as Turkey.     

The commercial contribution of clinical studies for pharmaceutical drugs

Pharmaceutical drugs are rigorously evaluated through clinical studies. The commercial consequences of such clinical studies, both to the promotion for and sales of drugs, are largely under-researched. The present study answers the following research questions: 1) How does the evolution of clinical study outcomes affect product sales? 2) How does the evolution of clinical study outcomes affect a firm's promotion expenditures to physicians and consumers? 3) Is the assessment of the responsiveness of sales to promotion expenditures biased when the analyst omits the role of clinical studies? We summarize a comprehensive body of clinical studies in three metrics: valence, dispersion, and volume. We extend the literature with the following findings. A higher valence and volume of clinical studies (i.e., more positive and larger number of studies) increase sales. A higher valence of clinical studies increases spending on both direct-to-consumer advertising and direct-to-physician promotion. A higher dispersion among clinical studies decreases spending on direct-to-consumer advertising. A higher volume of clinical studies has no effect on direct-to-physician promotion, but decreases direct-to-consumer advertising. Furthermore, the results show that omitting these metrics from a market response model leads to an overestimation of the responsiveness of sales to promotion expenditures.     

Advertising budgets in competitive environments

Firms can approach advertising competition either by setting advertising budgets (as in the percentage of sales method) or target sales levels (as in the objective and task approach). We study firms’ incentives to adopt one or the other posture using a two-stage model of duopolistic competition. In the first stage, each firm chooses to commit either to an advertising budget, letting its sales follow from the market response function, or to a desired sales level, promising to adjust its advertising spending accordingly. In the second stage, firms choose the actual levels of their advertising budget or sales target. When prices are exogenous, we show that, due to strategic effects, if a firm benefits from its rival’s advertising (as when advertising increases awareness of the product category) then setting an advertising budget dominates setting a sales target. On the other hand, if a firm is harmed by its rival’s advertising (as when advertising increases the firm’s share of a fixed market), then committing to a sales level dominates. We extend these results in several directions and show that when firms engage in price competition as well as advertising the nature of advertising and product-market competition interact to determine whether setting an advertising budget or sales target dominates.

An Electrical Circuit Analogue of Market Behavior—As Used in Advertising Decisions

An electrical circuit analogue is proposed in this paper to model sales response to advertising. For a given marketing and advertising strategy. and for a given advertising budget, the electrical circuit analogue is used to analyze sales behavior corresponding to various forms of advertising input. It is shown how this analysis can be used to plan the advertising time pattern most appropriate to the manager's requirements and as a means of evaluating the effectiveness of an advertising campaign.     

Consumer Response to Coupon Advertising

Because coupon advertising has both the characteristics of advertising and sales promotion, it may have distinctive effects on consumers that cannot be explained solely by coupons or advertising. Past studies present contradicting results as to the consumers' response to coupon advertising. Our experiment shows that while the coupon may be an incentive for loyal consumers of competing brands, it may be a distractor for brand-loyal consumers in processing the coupon advertising. For multi-brand users, coupons do not appear to have any distinctive effects on processing the coupon advertising. An empirical investigation of an integrated consumer response model to coupon advertising indeed shows that there are various interactive effects between the coupon and the main advertisement. These results may provide guidelines for making targeting and promotion decisions, especially for an internationally well-known brand that is entering a new market where local or other international brands are already serving the customers.     

Advertising in China and Hong Kong

A study of a selection of major US corporations was undertaken to determine how advertising budgets are appropriated. The relationship between profit and sales and the size of the advertising budget was examined to see if advertising allocations are being increasingly arrived at using ‘modern’ techniques such as mathematical decision rules or whether simple rules of thumb are still predominant in practice. Budget allocations for 80 companies to six media and their relations to sales and profit were also evaluated. Advertising budgets were examined in three matched categories: for brand advertising, for corporate advertising and for mixed advertising.     

Effective Public Relations. Cutlip,Scott M., and Allen H. Center. 5th Edition. Englewood Cliffs,New Jersey: Prentice-Hall, 1978

Abstract

ADSPLIT is a computer-based, interactive, marketing model which optimally allocates a specified corporate promotional budget among individual brands competing for limited resources. The model requires either (a) regression-based response function coefficients based on historical data, or (b) judgments on what sales should be for different values of price and advertising expenditure for the brands, which the program then uses to estimate the function parameters. The advertising-sales response function is modeled through a flexible form that allows both concave and S-shaped relationships, while sales are related to price through a constant elasticity (Cobb-Douglas) function. The model uses the estimated or input functions to compute the optimal budget allocation for the brands, given an upper bound for the total promotional expenditures and upper- and lower-budget bounds for every brand, using nonlinear optimization heuristics. Optimal prices for the brands are also computed.     

Sales Response to Advertising

Advertising research still has to make a major contribution, both theoretically and practically, providing a satisfactory answer to the question: how does advertising influence sales? This article tackles the problem by providing a thorough analysis of the causal relationship between advertising and sales, the strength of the effects and the occurrence of time lags. Time series data for advertising and sales are related to each other in a quantitative model to provide an answer to the question of how advertising contributes to sales. The method presented is applicable to other related studies and information can thus be accumulated about the usefulness of the model.     

Cross channel effects of search engine advertising on brick & mortar retail sales: Meta analysis of large scale field experiments on Google.com

We investigate the cross channel effects of search engine advertising on Google.com on sales in brick and mortar retail stores. Obtaining causal and actionable estimates in this context is challenging: Brick and mortar store sales vary widely on a weekly basis; offline media dominate the marketing budget; search advertising and demand are contemporaneously correlated; and estimates have to be credible to overcome agency issues between the online and offline marketing groups. We report on a meta-analysis of a population of 15 independent field experiments, in which 13 well-known U.S. multi-channel retailers spent over $4 Million in incremental search advertising. In test markets category keywords were maintained in positions 1-3 for 76 product categories with no search advertising on these keywords in the control markets. Outcomes measured include sales in the advertised categories, total store sales and Return on Ad Spending. We estimate the average effect of each outcome for this population of experiments using a Hierarchical Bayesian (HB) model. The estimates from the HB model provide causal evidence that increasing search engine advertising on broad keywords on Google.com had a positive effect on sales in brick and mortar stores for the advertised categories for this population of retailers. There also was a positive effect on total store sales. Hence the increase in sales in the advertised categories was incremental to the retailer net of any sales borrowed from non-advertised categories. The total store sales increase was a meaningful improvement compared to the baseline sales growth rates. The average Return on Ad Spend (ROAS) is positive, but does not breakeven on average although several retailers achieved or exceeded break-even based only on brick and mortar sales. We examine the robustness of our findings to alternative assumptions about the data specific to this set of experiments. Our estimates suggest online and offline are linked markets, that media planners should account for the offline effects in the planning and execution of search advertising campaigns, and that these effects should be adjusted by category and retailer. Extensive replication and a unique research protocol ensure that our results are general and credible.     

Two Studies on Using Specialty Advertising in Retail Sales Contests

Two studies were conducted to assess the impact of specialty advertising as a promotional tool in retail sales contests. In both cases, specialty advertising was directed toward the retail sales force rather than the consumer. It was felt that s~ecialtv advertisine could perform a reinforcement and reminder role as well as a mot: vating role for encouraging retail salespeople to participate in a contest. In the first study with Chick-fil-A, specialty advertising had an overall positive impact on employee performance. Total sales vol- ume increased in three of the four stores studied, while it increased in only two of the four stores that did not receive specialty advertis- ing. And while sales volume as a whole increased during the contest period, the largest percentage of increase occurred in those stores where specialty advertising was used. In the second study, the FanFair study, the effectiveness of spe- cialty advertising was very apparent. In both markets where special- ty advertising was used, Dallas and Phoenix, sales increases in graphics-the contest'objective-far exceeded total store sales. In the market where specialty advertising was not used, Milwaukee, sales of graphics were down much more than total store sales. Specialty advertising was found to be particularly cost effective in the Dallas market, where profitability far exceeded the cost of the specialties.     

Should you set up your own sales force or should you outsource it? Pitfalls in the standard analysis

Should you set up your own sales force or should you outsource it? The standard analysis is cost based and assumes that the direct sales force is a fixed cost and that the outsourced sales force's cost varies with sales. The standard analysis then calculates the sales volume at which the direct sales force's costs equal the outsourced sales force's costs and suggests that for sales volume above that quantity, firms should use a direct sales force. This analysis has two problems. First, several other cost factors are not considered in the standard analysis. Second, the standard analysis considers only cost, ignoring coverage efficiency and selling effectiveness differences between the two sales forces. Both problems will be detailed and developed in this paper.     

Identifying Sales Performance Gaps with Internal Benchmarking

This research investigates how retailers can benefit from identifying the sales growth potential of in-store salespeople in every product category. The proposed novel approach helps retailers develop an equitable evaluation of their sales force, using both observable and unobservable factors that affect sales. By extending stochastic frontier regression to a multivariate case, the resulting factor-analytic frontier formulation leverages the correlation pattern of sales across product categories and salespeople over time. A unique data set, from a franchise chain with 481 salespeople, operating in 35 stores and selling 11 related product categories, identifies a gap between observed category profits and an estimated profit frontier for each salesperson and category. This novel model also can benchmark each salesperson against all others across product categories while accounting for observable and unobservable factors. This approach has practical value, in that retailers can identify both top-performing salespeople and underperformers, who then might be matched to establish a positive learning environment that aligns top performers with proven sales expertise in a product category with peers who struggle with that category.     

Inducing Downstream Selling Effort with Market Share Discounts

Loyalty discounts and rebates are pricing schemes that offer incentives to buyers for reaching or exceeding certain sales thresholds. In the case of market share discounts, thresholds are expressed as a percentage of the buyer’s total purchase requirements. Although market share discounts may have exclusionary effects under certain circumstances when a seller has significant market power, there are plausible non‐exclusionary reasons for offering them as well. Two such reasons – rent extraction and inducing downstream selling effort – are explored in this paper. The paper considers the case of a manufacturer who sells a differentiated good through a network of heterogeneous, non‐exclusive retailers. The manufacturer offers market share discounts to induce non‐contractible selling effort such as brand‐specific information or customer service from those retailers who possess certain unobservable characteristics. In some instances, market share discounts induce increased selling effort and improve market performance as compared to linear pricing. In other instances, they have no effect on aggregate benefits, but merely shift the rents created by induced selling effort upstream to the manufacturer. In no instance, as long as the producers of substitute goods retain sufficient sales to remain viable, do market share discounts impair market performance.     

Managing advertising investments in marketing channels

This paper investigates how should manufacturers optimally allocate resources to retailer-initiated (retailer) advertising through cooperative advertising programs and own (manufacturer) advertising in a bilateral monopoly. Retailer advertising stimulates immediate sales but may also harm long-term (post-advertising) demand, whereas manufacturer advertising aims at building brand equity and stimulates both immediate and long-term sales. A game-theoretic model in which a manufacturer and a retailer set pricing and advertising decisions over a two-period planning horizon is developed to account for the differences between manufacturer and retailer advertising. We characterize equilibrium solutions for four advertising scenarios for the manufacturer, ranging from no investment in any advertising activity to undertaking own advertising and supporting retailer advertising simultaneously. Comparing the two players’ equilibrium strategies and profits across these scenarios, we find that manufacturers should avoid offering exclusively cooperative advertising programs to retailers. When retailer advertising positively influences long-term sales, manufacturers should offer cooperative advertising supports to retailers in addition to undertaking their own advertising. When retailer advertising negatively affects long-term sales, manufacturers can still undertake own advertising and offer cooperative advertising under certain conditions. However, if these conditions are not met, focusing exclusively on own advertising is their best advertising strategy. Retailers also prefer scenarios in which manufacturers advertise, but may choose not to participate in manufacturers’ cooperative advertising programs. This leads to suboptimal outcomes if cooperative advertising programs are not enhanced by additional incentives (e.g., side payments or other services).     

The Selling Cycle

Abstract

The selling cycle, a measure of calendar time from the initiation to the completion of a sale, is a significant factor in planning and assessing sales force deployment. Empirically-based analyses of the selling cycle are nonexistent, however. This paper reports an exploratory study of selected relationships involving the length of the selling cycle in various selling situations and in different types of sales organizations, and then concludes with management implications and further research ideas.     

Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters

Despite retailers’ intense use of both price cuts and store flyer advertising, it is still unclear whether and when it is beneficial for retailers to combine the two promotion tools at the same time as opposed to using them separately. We systematically investigate synergies between price cuts and store flyers for a broad set of 488 brands from 44 consumer packaged goods categories across six leading German retailers. We find that a clear majority of the brands benefit from positive synergies and hence, combining price cuts and store flyer advertising is recommended, especially at supermarkets. This synergy can be strong. For instance, a 15 % price cut without store flyer support at a supermarket, on average, increases sales by 11 %, and medium spending on store flyers for the brand at its regular (non-promoted) price results in a sales lift of 8 %. The combined use of both tools, however, increases sales by 52 %, much more than the sum of their separate effects (11 % + 8 % = 19 %). Yet, there is also substantial variance in the synergy, which we explain with retailer format (supermarkets versus discounters) as well as various brand and category characteristics. Our findings have important implications for the coordination of promotion activities by retailers.     

“One-deal-fits-all?” On Category Sales Promotion Effectiveness in Smaller versus Larger Supermarkets

Even within a store chain and format, supermarket outlets often exhibit substantial differences in selling surface. For chain managers, this raises the issue of correctly anticipating the promotion lift, and of profitably managing promotion activities, across these outlets. In this paper, we conceptualize why and how store size influences the category sales effectiveness of four promotional indicators (depth of the promotional discount, display support, feature support, and whether the promotion is quantity-based). We then estimate the net moderating effect on four product categories for 103 store outlets belonging to four chains. For each of the promotion instruments, we find the percentage sales increases to be lower in large stores. For instance, whereas a 10% point increase in feature activity enhances category sales by about 1.64% in a 700 m² store, this figure drops to only 1.03% in a 1300 m² store – a 59% reduction. This moderating effect is especially pronounced for discount depth, the relative sales lift from a typical price cut being about 78% lower in the larger-sized outlet. However, since large outlets also have larger base sales, the picture changes when we consider absolute sales effects. The net outcome is that deeper discounts or quantity-based promotions do not systematically generate larger or smaller absolute sales bumps in large stores, whereas for in-store displays and features, we obtain a clear positive (be it less than proportional) link between store size and absolute category sales lift. When it comes to margin implications, we show that large stores gain higher profit from price cuts than small outlets only as long as the retailer keeps part of the manufacturer discount to himself. Managers can use these insights to improve their promotional forecasts across outlets, as well as to tailor their mix of instruments to store selling surface.     

An Exploratory Analysis of the Impact of Salesperson Customer-Orientation on Sales Force Productivity

Abstract

Consumer sovereignty is a concept that is well-established in the marketing literature. It is widely assumed the customer satisfaction is a crucial variable in determining the long-run prosperity of a business. Since the sales force often has the most contact with the customer, it seems logical that their efforts toward satisfying the client would be imperative. The selling orientation-customer orientation (SOCO) scale developed by Saxe and Weitz (1982) was used to determine the customer-orientation of 180 real estate sales personnel. The results of the research indicate that real estate sales representatives can practice customer-oriented selling without fear of losing sales due to their being too “soft” in their selling methods. In addition, the results indicate that companies wishing to enhance their sales personnel's level of customer-orientation may do so through professionally designed sales training programs.