The Growth of Sales Promotion

While sales promotion has been part of the marketing process for a long time, its role and importance in a company's integrated marketing communications program have increased dramatically over the past decade. Consumer sales promotion-related spending increased from $56 billion in 1991 to nearly $100 billion in 2001.4 Marketers also spend an estimated $150 billion each year on promotions targeted at retailers and wholesalers. Consumer packaged goods firms continue to be the core users of sales promotion programs and tools. However, sales promotion activity is also increasing in other categories, including health care, computer hardware and software, consumer electronics, and service industries.

Not only has the total amount of money spent on sales promotion increased, but the percentage of marketers' budgets allocated to promotion has grown as well. For many years advertising was the major component in the promotional mix of most consumer-product companies. Until the 1980s, nearly half of marketers' promotional dollars was spent on advertising campaigns designed to create or reinforce brand awareness and build long-term loyalty. However by the mid- to late 80s, a fundamental change had occurred in the way most consumer-product companies were marketing their products. The proportion of the marketing budget allocated to sales promotion rose sharply, while the amount spent on media advertising declined. The increase in spending on sales promotion at the expense of media advertising continued throughout the decade of the 90s and into the new millennium. Currently, estimates are that marketers spend between 60 and 75 percent of their promotional budgets on sales promotion, with the remainder being allocated to media advertising.5

Allocation of marketing budgets among consumer promotions, trade promotions, and media advertising varies by industry and company. For example, trade promotion accounts for nearly 50 percent of the budget for consumer packaged-goods companies, with 27 percent going to consumer promotion and 24 percent to media advertising.6 Moreover, a significant amount of the monies that marketers allocate to media advertising is spent on ads that deliver promotional messages regarding contests, games, sweepstakes, and rebate offers.7 Surveys have shown that marketers devote about 17 percent of their ad budgets to promotional messages.8 Promotional messages are also used to help attract attention to image-building ads. For example, the ad shown in Exhibit 16-2 delivers a message informing consumers of the Chevy Avalanche Outdoor Adventure Sweepstakes.

Continue reading here: Using Sales Promotion to Target African Americans

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