Faculty
Professor Scott A. Neslin
Objectives
The objective of the Sales Promotion course is to develop an in-depth understanding of the theories, functions, and workings of sales promotion. Topics to be covered include (1) economic and behavioral theories of sales promotion, (2) how sales promotion affects sales, (3) what we know and don't know about consumer promotions, retailer promotions, and trade promotions, (4) quantitative evaluation of sales promotion, and (5) strategic issues in sales promotion. Sales promotion is a big and growing field, however, the emphasis in this course is in-depth examination of a selection of important issues rather than "touching the bases" on all aspects of sales promotion.
An additional objective of the course is to develop the student's ability to access frontier research in the field of sales promotion, think critically about it, and synthesize the key results, that is, what the research has to say about the effective management of sales promotion. This objective is very important in a field that is rapidly changing and where academic theories and methods are being put to work in the real world.
Intended Audience
The course is intended as a specialized elective for students whose careers will entail heavy involvement with sales promotion. This includes students whose immediate career objectives are marketing management or marketing consulting.
Format
The course will be taught as a round-table seminar discussion of current research. Normally, three papers will be discussed each day, and three students will be assigned to lead the discussion of the three papers. For each reading, the student should be prepared to:
Summarize the general topic addressed and the method.
Summarize the key results developed in the paper.
Distill the key managerial implications of the paper.
Develop a set of 2-3 questions for discussion.
Since each class lasts 90 minutes, each paper is allotted 30 minutes. The student responsible for a given paper should accomplish the first three issues in 5-10 minutes, leaving 20-25 minutes for the discussion questions.
Requirements
Workload
1. Class participation: Each student will be expected to be thoroughly prepared and ready to discuss each paper. The small class size helps ensure that everyone can get "air time" but also requires that everyone be ready to contribute. By taking this course, the student is expressing a commitment to participate at the highest quality level.
2. Paper presentations: Each student will be responsible for leading 2-4 paper discussions, depending on the size of the class. The student leader is responsible for preparing a 2-3 page outline of the paper that presents his or her remarks and discussion questions. This should be in at least 14-point font. On the day of the presentation, the outline is to be distributed to the class and to the instructor. Presentations will be scheduled at the end of the first week of class. Please note that the dates on this schedule represent the earliest presentation date – sometimes, due to extra discussion, paper presentations have to be pushed back in the schedule.
3. Course project: There will be a term paper. This paper can involve an empirical analysis or an extensive qualitative discussion of an important sales promotion issue. The final paper is due by Monday, May 26, and should be approximately 10 pages in length double-spaced, plus exhibits. Students are responsible for choosing their own topics and submitting a project proposal. A suggested list of topics is included at the end of this syllabus. Students can work either alone or in pairs on the term project.
4. Homework: There are four homework assignments in which students may be asked to synthesize a group of papers, work a numerical example, or invent a numerical example, etc. These are individual assignments. The last one counts double the previous three in terms of your grade.
Possible Course Project Topics
1. Evaluate a particular promotion. Obtain objectives, promotion materials, and data from an organization and evaluate the promotion in terms of these objectives.
2. Promotion's effect on consumption - run an experiment among Tuck students to determine whether increased purchase quantities result in a higher consumption rate.
3. Conduct an examination of what types of products are displayed, featured, etc., in local supermarkets. For example, how does display frequency relate to category penetration, number of brands available, importance of the store brand, etc.?
4. The role of negotiation in trade promotion - Interview a few sales directors and retail buyers; discuss the role of negotiation and present managerial implications for how to manage such negotiations.
5. New developments in trade dealing strategy. Review the popular literature and interview managers to identify what is happening in the market place. Use the theories and issues discussed in class to explain why.
6. Compare different quantitative measurement techniques (e.g., PROMOTER, regression, logit) in their estimates of incremental sales due to promotion. Do these methods yield the same results? Which methods are preferred under which conditions?
7. Replicate and extend the Dickson-Sawyer paper (Journal of Marketing, July 1990). Working with a local supermarket, interview shoppers to determine their level of price and promotion awareness.
8. Sales promotion outside North America. For example, conduct a comparative study of how sales promotion methods differ among three countries. Explain any differences in terms of institutional, competitive, or cultural considerations.
9. Review and forecast future usage of new promotional techniques such as loyalty programs, internet promotions, or pay-for-performance trade deals. Draw on class material to motivate the existence and future success of these promotions.
10. Chronicle the history of rebates in the automobile industry. Use the popular press to develop a history of rebate usage in this industry. Explain this history in terms of competitive and consumer forces.
11. Develop a promotion for a particular product. Use a survey to pretest promotion alternatives and select the best one.
12. Using data from the IRI Fact Book and other sources, determine the correlates of private label market share across product categories. In which types of product categories do private labels achieve higher market shares.
13. Use data from local supermarkets to determine how much money shoppers can save depending on their purchase strategy. Elements of purchase strategy to consider includes store loyalty, brand loyalty, and purchase acceleration.
14. Analyze store-level scanner to determine the degree to which promotions should be targeted at the store level rather than the chain level.
15. Devise a profile of a brand's promotion and non-promotion buyers in terms of deal-prones, loyals, stockpilers. Derive implications for the brand-s promotion strategy.
16. Evaluate the "price-rollback" strategy employed by Post Cereals in 1996. In this strategy, Post cut wholesale prices and also cut back on trade deals. Look at this as a natural experiment and compare the market before 1996 to after 1996.
17. Evaluate the state-of-the-art and future potential of frequent shopper programs. How are these programs being used? What is the role of the manufacturer and the retailer? What is the best "model" for implementing these programs. Will frequent shopper programs be a major or a minor part of future retailing strategy.
18. Evaluate the current and future success of online couponing. What types of firms are using this form of promotion? What are the various ways it can be implemented? What factors contribute to its success?
19. Evaluate the online promotions strategy of websites in a particular industry. For example, choose an industry such as consumer electronics. Visit the websites of both bricks-and-clicks and pure player Internet companies. Count the number and type of promotions and evaluate how and why they differ by company. List some potential objectives of promotions for these companies and evaluate how well their promotion strategies fit these objectives.
20. Compare the promotions strategies of online versus offline (bricks-and-mortar) grocery stores. How do these channels compare in terms of regular price, promotion frequency, promotion depth, types of promotion, categories promoted, etc., and why?
21. Examine the relative power structure of manufacturers versus retailers by calculating profitability of each over an extended time frame. This is a follow-up of the Ailawadi, Borin, and Farris article.
22. Conduct an empirical study on the determinants of automobile promotions. Use the reports in Edmunds.com to identify which automobiles are promoted in which way. Quantify how this promotion activity is correlated with various auto characteristics.
23. Is deal proneness an inherited trait? Investigate the reasons why consumers are deal prone, focusing on the deal proneness of their parents. Survey consumers, ask whether they are deal prone, whether their parents are deal prone, and measure other control variables that could explain deal proneness.
24. Hedonic versus utilitarian promotions. Replicate and extend the Chandon et al. paper. For example, focus on “cause promotions” as a type of hedonic promotion.
Materials
The book Sales Promotion: Concepts, Methods, and Strategies (Prentice-Hall 1990), by Robert C. Blattberg and myself, is optional recommended reading. The book provides background reading for the articles and is available in Feldberg Library.
Attendance and Laptop Policies
Due to the interactive nature of this course, attendance is absolutely required, and use of laptops in class is permitted only for use relevant to that day’s class. The course will adhere to the Attendance and Laptop policies specified in the Student Handbook. Violation of these policies will result in a lower course grade.
Grading
Class Participation 20%
Discussion Leading 20%
Homework 25%
Project 35%
Schedule
March 24
Introduction
Lecture
B&N Chapter 1
March 25
Consumer Behavior Foundations
Attribution Theory
Behavioral Learning Theory
Mental Accounting
B&N Chapter 2, pp 19-40; 50-52
Dodson, Tybout and Sternthal, Journal of Marketing Research February 1978
Rothschild and Gaidis, Journal of Marketing Spring 1981
Thaler, Marketing Science Summer 1985
April 1
Consumer Behavior Foundations
Consumer Decision Making
Utilitarian and Hedonic Benefits
Inman, McAlister, and Hoyer, Journal of Consumer Research June 1990
Chandon, Laurent, and Wansink, Working Paper, 1997
REVIEW – Consumer Behavior Foundations
April 7
Economic Foundations
Price Discrimination, Brand Loyalty, Cooperation
B&N Chapter 4, pp 95-108
Raju et al, Management Science March 1990
Farris and Quelch, Sloan Management Review, Fall 1987
Lal, Marketing Science Summer 1990
HOMEWORK #1 DUE
April 8
Economic Foundations
Inventory Transfer
Demand Uncertainty
Informed Consumers
B&N Chapter 4, pp. 83-94
Blattberg, Eppen and Lieberman, Journal of Marketing Winter 1981
Pashigian and Bowen, Quarterly Journal of Economics November 1991
Varian, American Economic Review September 1980
April 14
How Promotion Affects Sales
Switching, Acceleration, and Deceleration
B&N Chapter 5, pp. 112-118, 128-140
Kumar and Leone, Journal of Marketing Science May 1988
Macé and Neslin, Journal of Marketing Research August 2004
REVIEW – Economic Foundations
PROJECT PROPOSALS DUE
April 15
How Promotion Affects Sales
Acceleration, Repeat Purchasing, Consumption
B&N Chapter 5, pp. 118-128; 133-139
Thompson and Noordeweir, Journal of Economic and Business Statistics October 1992.
Gedenk and Neslin, Journal of Retailing (4) 1999
Ailawadi and Neslin, Journal of Marketing Research August 1998
HOMEWORK #2 DUE
April 21
Trade Dealing
B&N Chapter 11, pp. 313-340
Neslin, Powell, and Stone, Management Science, May 1995
Walters, Journal of Retailing Summer 1989
Gomez, Rao, and McLaughlin, Journal of Marketing Research 2007
REVIEW - How Promotion Affects Sales
April 22
Retailer Promotions
B&N Chapter 12 pp. 374-378
Mulhern and Leone, Journal of Marketing October 1991
Van Heerde, Leeflang, and Wittink, Marketing Science Summer 2004
Lam, Vandenbosch, Hulland, and Pearce, Marketing Science Spring 2001
April 28
Consumer Promotions (Coupons, Rebates, and Loyalty Programs)
B&N Chapter 10, pp. 280-309; Chapter 14, pp. 401-406
Neslin, Marketing Science Spring 1990
Tat, Cunningham, and Babakus, Journal of Advertising Research Aug/Sept 1988
Kopalle and Neslin, Review of Marketing Science Volume 1, 2003
April 29
Consumer Promotions (Loyalty Programs, Online, and Special Event Promotions)
Lewis, Journal of Marketing Research August 2004.
Chtourou, Chandon, and Zollinger, Journal of Euromarketing 2001.
REVIEW – Types of Promotions
May 5
Guest Speaker
May 6
Calculating Promotion Profitability
Trade Deals, Retailer Promotions, Coupons, Rebates
HOMEWORK #3 DUE
May 12
Measuring Promotion Effectiveness
B&N Chapter 8, pp. 217-226; Chapter 9, pp. 250-254; Chapter 11, pp. 322-331; Chapter 12, pp. 365-372
Abraham and Lodish, Marketing Science Summer 1993
Wittink et al, Working Paper May 1987
Guadagni and Little, Marketing Science Summer 1983
May 13
Sales Promotion Strategy
Procter and Gamble’s Value Pricing Strategy
HOMEWORK #4 DUE
May 19
Sales Promotion Strategy
Ailawadi and Harlam, Journal of Marketing January 2004
Dhar and Hoch, Marketing Science, 1997
Hoch, Dreze, and Purk, Journal of Marketing 1994
May 20
Summary
Ailawadi, Borin, and Farris, Journal of Retailing, Fall 1995.
REVIEW – Sales Promotion Strategy
Course Summary
