Only $2.99/month

Advertising Exam #4

Key Concepts:

Terms in this set (61)

1. Sales promotion is expensive. Inducements offered via sales promotions reduce per-unit profit. In fact, only about 1/6 of sales promotions are profitable. One of the few profitable sales promotions you are aware of is McDonald's Monopoly Game which sent sales soaring. Even though virtually every McD's customer won something, those customers visited McDonald's more often and purchased as much or more than usual.

2. Sales promotions devalue products. Why buy a vehicle now when you can wait for a $3000 rebate? In 2004 and 2005 Chevrolet and Ford imploded, largely because they battled over which manufacturer would give most or all profit back to consumers. Why buy anything for regular price when you can wait and purchase it for much less later. If a $60.00 perfume regularly goes on sale for $30.00, was it ever really worth $60.00? When was the last time you saw Mercedes offering rebates? A vehicle is worth $100,000 or it isn't. Offering an expensive car for less than its sticker price suggests (1) it isn't worth the sticker price, PLUS (2) it would allow people with less substantial fortunes to buy a big Mercedes, thereby lowering the snob appeal (O.K., let's be positive—its status) of the car which is one of its primary differentiating elements. Often negative attitudes initiated by sales promotions toward brand values persist in the long-term.

3. Sales promotions often incite retaliation from competitors. (See Ford/Chevy comment above) Seldom does Pepsi-Cola stage a sales promotion without Coca-Cola responding with a sales promotion; when McDonald's forges a movie tie-in, Burger King will offer a two-fer.