Promotion

Promotion is often divided into two general categories: consumer promotion (e.g. promotion targeting consumers/end-users) and channel or dealer promotion (e.g. promotion targeting the distribution channel). In NewShoes, there are two consumer-oriented decisions and two channel promotion decisions to be made in each region. The following are brief descriptions and some guidelines regarding decisions for the four different types of promotion in NewShoes. Consumer Promotion Consumer advertising is money spent on promotion presented through the media (television, radio, newspapers, magazines, websites etc.) that targets the consumers of your product. In Period 0, advertising expenditures were $1.5 million in the home and $2.0 million in the domestic market. You need to enter the dollar amount for consumer advertising for each region, but be aware that expenditures over $2.0 million per period in a market will have little marginal effect on sales. Consumer sales promotion is money spent in promotional items aimed at the consumer, such as rebates, contests, and premiums. You will need to enter a dollar amount appropriate for the market. Period 0 amounts were $2.5 million in the home market, and $1.5 million in the domestic market. Management thinks the previous marketing team placed too much emphasis on consumer sales promotion, and wants your team to take a look at these expenditures. It is thought that spending more than $1.0 million per period in any market will have little effect on generating additional sales. Channel or Dealer Promotion Personal selling involves having a salesperson from your company contact a distributor to persuade them to carry your product. Salespeople only call on middle-people in the distribution channel and do not deal with consumers or end users of your product. You must decide the

13

number of the salespeople in each region. The effect of your salespeople varies by region, but having more than 10 salespersons in any market region will have little effect on generating additional sales. Each salesperson’s salary, commission, benefits, support, travel, and other expenses cost your company $80,000 each period. Salespeople may be hired or fired at any time with no training or separation expense. In Period 0, you had 7 salespeople in the home region, and 7 in the domestic region. To change the total number of your salespeople, simply change the number of salespeople for each region. Dealer sales promotion is the money spent on a variety of promotional items aimed at the middle-person in your distribution channel. These items include sales assistance and training, contests, and free displays. You need to decide the appropriate dollar amount to spend in each region. Expenditures per period over $1.0 million in any market region seem to have little marginal effect on sales. Your firm’s expenditures in Period 0 were $1.2 million in the home market, and $1.0 million in the domestic market. All four promotion variables can be adjusted separately in each of the three market regions and primarily affect sales in the period in which money is allocated to them. There is little carryover into the following periods. The amount spent in any of these areas of promotion can be changed as often as desired while you are making your decision. Simply change the number in your decision input. Just be sure to review your decisions before the simulation is advanced to confirm that the last input entered is your final decision for the period.