6.5: Types of Sales Promotions

Restaurant operations use two common strategies within the broad sphere of sales promotion: ‘push’ promotion and ‘pull’ promotion. Marketing managers uses the ‘push promotion strategy’ when they want to push the product-service mix through the service delivery system or channels of distribution. This approach encourages an increase in purchases and consumption by consumers. A ‘pull promotion strategy’, on the other hand, aims at stimulating consumers’ interest and having them pull the product through the channels of distribution. This in turn puts additional pressure on the retail outlets to supply the products and services most in demand by consumers. Some of the most commonly used push and pull techniques follow.

Techniques for push promotions

• Point-of-sale (POS) displays. The displays you usually see at the counter of fast-food restaurants or as table tents in other types of restaurants, called ‘point-of-sale (POS) displays. Their purpose is to stimulate an increase in sales. Similarly, signs, banners, and table tents are often useful displays in restaurants as well.
• Cooperative advertising. A national chain normally provides advertising at the national, regional, and local levels to support outlets. In addition, franchisees will often receive financial assistance with local advertising, in addition to chain’s national advertising, as part of the franchise agreement. This practice references ‘cooperative advertising’.
• Advertising materials. To encourage the local property to run advertising, the national chain will supply camera-ready advertising materials as well as radio commercials.
• Traditional and electronic collateral material. Many firms supplement their other promotional efforts with materials such as brochures, flyers, or directories of other outlets within the chain. Beyond the traditional print collateral materials, firms use Web-based promotion to communicate with current and prospective customers.
• Convention and owners’/managers’ meetings. National chains use these meetings as a method to introduce new products and services to those who will be working in the individual units. These meetings are useful for sales and service training.

Techniques for pull promotions

• Sampling. This technique is useful and effective for foodservice operators. Distribute samples of menu items at the table or in the lobby area of the restaurant. Thereby encouraging customers to try the product. The goal is to convert this trial into regular use and repeat purchase. This technique is common in banquet sales where operators allow patrons to ‘sample’ the products and services before they make a final decision about the host restaurant for an upcoming event.
• Price reduction promotion. Price reductions for a limited time can encourage trial and increase sales. Many restaurants use price reductions to increase volume during otherwise slow periods of the week, or daypart. As with all promotions, restrictions should apply and a definite time- period.
• Coupons. These are certificates entitle the consumer to receive a discount upon presentation at the restaurant. Distribution can occur in newspapers, magazines, face-to-face, direct mail, or through the Internet utilizing a customer e-mail bank or Web function.
• Combination offers or bundling. This involves combining two or more products or services and offering them for less than what they would cost if the purchases occur separately.
• Premiums. Extra merchandise or gifts that the restaurant gives away or sells at a very reasonable price to guests are ‘premiums’. Examples include items such as hats, tote bags, glassware, and T-shirts with the logo of the restaurant on them. If the restaurant is able to cover direct costs of the item, the premium refers to ‘self-liquidating’. Some operations sell a considerable volume of logo merchandise. Hard Rock Café T-shirts are virtually collector’s items from national restaurants and international locations as well.

Common Promotional Techniques

The most common sales promotion techniques in the hospitality and tourism industry are coupons, sampling, and premiums. A more in-depth discussion of these techniques follow.

Coupons

The primary objectives for coupons are to stimulate trial of your products and services by reducing the price, encouraging multiple purchases, and generate temporary sales increases. Coupons offer several advantages.

• The coupon represents a tangible inducement, offering a savings or benefit.
• The price reduction is for a limited time and will not affect profit margins in the long term.
• Coupons can be used to accomplish specific objectives, such as boosting business during non-peak periods or slower sales days
• The maximum cost of the promotion calculation occurs in advance. For example, previous experience allows you to estimate the coupon redemption rate.
• If codes are present on the coupon and a corresponding record indicates ‘where’ the coupon distribution occurs, the operator can gain an understanding of ‘where’ the new business is coming from.

Coupons have disadvantages as well:

• Some employees will be tempted to defraud the business. It is possible for them to take cash and substitute coupons. The higher the value of the coupon, the more supervision is necessary.
• Redemption rates are not an easy prediction. Among the environmental factors that can affect the redemption rate are the value of the coupon, timing, and the activities of direct competitors. This is most common with new promotions because there is no prior history on which to predict future coupon redemption rate

Sampling

Encouraging trial of new or existing products; is the primary objective of ‘sampling’. If consumers will at least try the product, there are more likely to purchase it in the future. Sampling is also an excellent way to persuade consumers to trade up to more expensive products and services. Sampling can tie in with other types of promotions. Sampling offers these advantages:

Getting consumers to try the product is superior to getting them to look at an advertisement - It provides the operator with instant feedback.

It represents value to the consumer. Many consumers like to think that they can get something free. For example, including small portions of entrée and appetizer items ‘complements of the chef’ or in the free offerings during ‘happy hour’ is an excellent way to stimulate dining room business.

Some disadvantages of sampling include:

• Giving away products can become a major expense if it occurs for an extended period.
• Samples of food products must reach the customers when they are fresh. If the operation intends to hold the products for a lengthy period, care is necessary to ensure that the product quality sustains until it reaches the customer.

Premiums

Premiums – items that you give away – are useful to bring in new guests, to encourage frequent visits by current customers, and to build positive word of mouth about the operation. Advantages include the following.

• Most consumers like to get something for nothing or for a good price. It helps to build goodwill for your business, especially if the customer places a high value on the premium.
• If the premium is clever or unique, it will build positive word of mouth as consumers tell others where they found it. When your logo is included on the premium, the message is always in front of the consumer.

Disadvantages of premiums include:

• Storing and handling the premium items can be a challenge if they are large or bulky.
• Employees and others may take the premiums for their own use or for their families and friends.
• The quality of the premium must be equal or superior to the image of the restaurant facility. If the premium does not work properly or breaks, it will diminish the image the consumer has of the facility or organization.
• Anticipating demand from premiums is difficult. If the operation’s advertising indicates that the premium is available, it is imperative that a sufficient inventory is available so that consumers will not walk away empty-handed.