Tag: Marketing

The Best Metrics For ‘Pull’ Sales Promotion

Posted on by The University Marketing Blog

Pull promotions target the consumer and aim to change there behaviour. Successful sales promotion that focus on using a ‘pull approach’ seek to gain new customers, increase the frequency or way in which existing customers purchase the product, all of which aiming to increase demand and therefore sales (Bendle et al. 2016).

Baseline Sales aims to measure regular sales activities from period to period to view trends in sales patterns to ensure if there is improvement in sales, it is due to the sales promotion and not just a peak in the regular trends (Bendle et al. 2016).

Incremental Sales identifies the effects of promotion to see the exact impact that the promotional effort improves sales of the product (Bendle et al. 2016). This helps an organisation evaluate the extent to which they rely on sales and may reveal they do not require sales as frequently to maximise profit.

Beyond this, they can also reveal the historic performance of sales and reveal trends to which may be the best time to make marketing efforts and which form of promotion worked best.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.

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Measurements for Push Promotion Marketing

Posted on by The University Marketing Blog

Push promotions are a method that focuses on the supply chain and offers incentives to get the product in front of the consumer rather than creating demand to pull the product through this supply chain (Bendle et al. 2016).

When using this method of promotion there are some key metrics (or measurements) that Bendle et al. (2016) identifies as being most relevant for this style of promotional activity.

Percentage of sales on deal seeks measure how dependant an organisation is on their promotional efforts (Bendle et al. 2016). This could reveal that an organisation doesn’t require promotional activities and that the supply chain is willing to pay full price for the product, informing the organisation of potential missed profits.

Pass-through is a metric that focuses on how far down the supply chain are the promotional activities carrying i.e. are customers receiving the benefits of the promotional activities or are the retailers absorbing all of the perks at their level (Bendle et al. 2016). The most effective marketing efforts will see the promotional activities benefit all levels of the supply chain right down to the customer.

Finally, price waterfall measures a similar thing to pass through but breaks down each step to identify the percentage that each level of the supply chain benefits from the promotional activity (Bendle et al. 2016). This metric can be of particular usefulness to identify the most effective channels and allow the organisation to shift their focus to other channels they may not have been utilising enough.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.

What Can Go Wrong With Sales Promotion

Posted on by The University Marketing Blog

Bendle et al. (2106) identifies 2 key considerations that should be made when evaluating a sales promotion campaign.

The first aspect is the financial component, it must be ensured that the price reduction of the sale or offering is offset by the increase of sales volume and the organisation is not put into a negative position (Bendle et al. 2016).

The second key consideration is a significant long-term component. The market position of the firm can be altered as a result of sales being too frequent or too extreme, it can cause the consumer to view the product or brand as lesser (Bendle et al. 2016).

This can have a flow on effect to increasing peak sales time and decreasing in off-peak periods which may need to be considered when taking stock or planning for revenue predictions.

This can be seen in brands like Unilever and P&G as they have reduced the frequency of their sales to protect their brand and product’s image (Bendle et al. 2016).

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.

What Successful Sales Promotion Looks Like for A Marketer

Posted on by The University Marketing Blog

As discussed in the most recent blog ‘The Types of Sales Promotion’, these efforts can be categorised as push or pull approaches, as discussed by Bendle et al. (2018). Success will differ depending on the approach.

Push promotion has a different objective to pull, with the focus being on changing the behaviour of the marketing channel and hopefully impact the supply of goods within the market. While the success of any campaign is tailored, the overall objective could be to: counter a competitor’s actions and flood the market; fill a shortage of supply in a market; clear storage or reduce inventory or to stimulate new channels of production (Bendle et al. 2018).

Pull promotions differ as they intend to impact or change the behaviour of the customer rather than the market channel. The goals that could be measured to determine the success of a pull promotion campaign could include: gaining new customers to try a product; increase sales to existing customers; change the way existing customers use or the time in which they use products (Bendle et al. 2018). This type of promotion seeks to improve the immediate or short term market position of the product and looks to gain new customers and improve the loyalty of existing customers.

Bendle et al. (2018) summarises by stating that sales promotions can be seen as successful if the organisation changes its target audience, with the short term being at existing customers and the long term focusing on new customers.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.

The Types of Sales Promotion

Posted on by The University Marketing Blog

Sales Promotion can be seen as the extra enticement of an offer that increases the value or incentive to buy the product for the customer, this is turn aims to increase the number of sales (Bendle et al. 2018).

Bendle et al. (2018) categorises sales promotions into two large groups of either push or pull. A push approach is more targeted towards the supply chain to increase the presence of the product in the market and essentially pushed towards the market.

On the other hand, a pull approach creates demand to the point that customers essentially pull the product through the supply chain due to a high demand for the product.

Bendle et al. (2018) gives examples of both as the following:

Push:

  • Contests and dealer incentives
  • Displays (e.g. food stands in a super market)
  • Trade Shows
  • Cooperative advertising

Push

  • Samples
  • Refunds
  • Rebates
  • Coupons
  • Bonus pack or portion
  • Price reductions
  • Loyalty programs
  • Event Marketing

While ever market and product requires a tailored approach to their marketing efforts, there is no reason why a combination of both push and pull can not be utilised at different stages of a products life cycle to suit the demand for that product.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.

The Marketing Consequences of a New Product

Posted on by The University Marketing Blog

An ideal result of any new product is growth, be it for the brand or for the sales of that product. There is a risk though…

If a company already has a product in that market a consequence could be customers buying this new product instead of the original offering, customers may see this as an improved product or be using it as an unpredicted substitute for the other offering (Bendle et al. 2016).

Bendle et al. (2016) defines this as cannibalisation which results in the company not attaining as many new customers as they would of if cannibalisation hadn’t occurred. It is measured by dividing the sales lost from existing products by the sales of new products to give you a percentage of cannibalisation (Bendle et al. 2016).

This occurrence is less likely to happen in markets that are going through a growth stage due to the nature of the time of that market’s life cycle. Cannibalisation may also be customers simply moving to an upgraded or improved version of the product which is often ideal for a company (Bendle et al. 2016).

The ideal alternative of cannibalisation is drawing in customers from competing firm’s offerings by meeting their needs more effectively or at a lower price point, this is far more likely in a differentiated market (Bendle et al. 2016).

References

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.

How Marketers Measure Market Share

Posted on by The University Marketing Blog

Edeling and Himme (2018) report that market can positively predict an organisation’s performance. With this in mind, measuring this metric is a key component to any business.

The first step to an accurate measurement of market share is defining the market. This should be made quite specific as to only reflect the immediate competition and not the larger market. This is so the measurement reflects their performance among relevant competition.

Another consideration is to look at revenue or the number of units sold. This should be chosen depending on the market and goals of the company.

Once these considerations have been made, Edeling and Himme (2018) explain two measures of market share:

  • Revenue market share: sales revenue as a percentage of market sales revenue
  • Unit market share: unit sales as a percentage of market unit sales

References

Edeling, Alexander and Alexander Himme (2018) “When does market share matter? New empirical generalizations from a metra-analysis of the market share-performance relationship” Journal of Marketing, 82(May), 1-24.

The Cost of Retaining Customers

Posted on by The University Marketing Blog

If the acquisition of new customers is an expensive effort and the value these customers offer to your business, the focus should be targeted at customer retention. Keeping what you have.

This is a delicate balance for marketers and business as a whole with a delicate balance between spending too much and too little resulting in extreme negatives.

On one side, a business can spend too much on customer retention and result in no profit being made as the customer is not providing enough value to justify the spending on their retention.

The other end of the scale is neglecting customers to the point that they leave for a competitor’s product or a substitute.

Calculating the cost of retention can be done by dividing the retention spendings by the number of customers retained (Bendle et al. 2016). This number must be less than the value of the customer to prove profitable. The metric is not flawless and as Bendle et al. (2016) points out, there are 3 potential issues:

  1. It is unknown how many customers would be retained if there was no retention spending (i.e., calculating the baseline can be difficult)
  2. The metric may be difficult to calculate as it is not easy to isolate retention spending from other marketing spending.
  3. Using the metric in practice may be difficult, as the organisation might not want to know how much, on average, it will cost to retain any customer. Rather the organisation might be interested in knowing how much, on average, it will cost to retain specific types of customer (e.g., top tier).

Even with these issues considered, attempting to measure retention costs can, at the least, provide an additional data input to a better informed decision.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey

The Cost of Acquiring a Customer

Posted on by The University Marketing Blog

Working out this number seems simple enough. Bendle et al. (2016) Simply states that you divide the amount spent on acquisition efforts by the amount of customers acquired will give you the cost of each.

Why is this important?

If this number can be calculated, the financial standing, on paper, becomes simple for a business to be profitable. Ensure that this cost is less than the value a new customer will provide to the organisation and it is a simplified formula for success.

To calculate the value a new customer can provide, Bendle et al. (2016) suggests using prospect lifetime value or PLV. This does require the customer lifetime value which has been discussed in previous blogs.

PLV allows an organisation to estimate the value of customers and in some cases segment these to provide a tiered valuation which can identify primary targets etc. From here, an informed decision can be made as to focus on customer retention if the value is low and cost is high of new customer prospects.

In the case of the PLV being high, this will allow an organisation to estimate their acquisition budget to ensure their efforts remain profitable.

This becomes a key metric in marketing strategy to verify the viability of success or at least add accuracy to strategic decisions to improve the likelihood of success.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey

The Indirect Value of a Customer

Posted on by The University Marketing Blog

Some measurements of customer value such as customer lifetime value (CLV) and customer profit (CP) aim to measure the direct economic value of a customer (Kumar, 2018).

As many of us understand, the customer’s value goes far beyond this with their indirect value they provide through their engagement with the brand and those around them.

The indirect value of a customer is generated through activities such as making recommendations (word-of-mouth), influencing others’ purchase decisions, and providing insights and feedback to a company (Kumar, 2018).

The TRUE overall value of a customer must take into account both the direct and indirect activities for the following reason:

A customer who frequently buys a product such as shampoo will have a far greater direct value to the company. But a customer who may infrequently buy the shampoo but influences 5 or more of their friends to buy the shampoo will produce a far greater indirect value and potentially overall value than the first customer.

Understandably, calculating these indirect values of a customer is an extremely complex task and is why measurements such as CLV and CP avoid accounting for them (Kumar, 2018).

References:

Kumar, V (2018) “A theory of customer valuation: Concepts, metrics, strategy, and implementation” Journal of Marketing, 82 (January), 1-19.