Sales promotions are becoming increasingly popular not only in consumer goods and are also packaged goods but also in other product categories such as services, industrial goods and are also used by non-profit organizations.
Companies spend huge sums of money each year on sales promotion to industrial customers to generate business and stimulate purchases, reward customers and motivate sales people.
“Sales promotion includes these activities, which enhance and support mass selling and personal selling and which help compete and/or coordinate the entire promotional mix and makes the marketing mix more effective.”
1. What is Sales Promotion? 2. Definition of Sales Promotion 3. Characteristics of Sales Promotion 4. Objectives 5. Evaluation 6. Importance
7. Devices 8. Methods 9. How are Sales affected by Sales Promotion? 10. Measures to Influence Sales Promotion on Sales 11. Activities 12. Programmes with Limitations 13. Advantages and Disadvantages 14. Growing Importance.
What is Sales Promotion: Introduction, Definition, Meaning, Growing Importance, Nature, Objectives, Devices and Techniques
- What is Sales Promotion?
- Definition of Sales Promotion
- Characteristics of Sales Promotion
- Objectives of Sales Promotion
- Evaluation of Sales Promotion
- Importance of Sales Promotion
- Devices of Sales Promotion
- Methods of Sales Promotion
- How are Sales affected by Sales Promotion?
- Measures to Influence Sales Promotion on Sales
- Activities of Sales Promotion
- Sales Promotion Programmes with Limitations
- Advantages and Disadvantages of Sales Promotion
- Growing Importance of Sales Promotion
What is Sales Promotion – Meaning?
Nearly thirty years ago, sales promotion was looked upon as everything that was left after providing for advertising, personal selling and publicity.
An early definition given to sales promotion is as below:
“Sales promotion includes these activities, which enhance and support mass selling and personal selling and which help compete and/or coordinate the entire promotional mix and makes the marketing mix more effective.”
This early definition gives the idea that sales promotion is a subordinate element of the promotional strategy, having lesser importance than advertising and personal selling. This view is no longer exists – Sales promotion is now considered as one of the most powerful and an important element of the promotion-mix. It requires the same careful planning and strategy development as other areas of marketing. Sales promotions are everywhere, every day, as observed by almost all of us.
Sales promotions are becoming increasingly popular not only in consumer goods and are also packaged goods but also in other product categories such as services, industrial goods and are also used by non-profit organizations. Companies spend huge sums of money each year on sales promotion to industrial customers to generate business and stimulate purchases, reward customers and motivate sales people.
The present trends indicate that as more and more brands enter the market without significant and persuasive differentiation, which are really important from the consumers’ point of view sales promotions will increase at a rapid pace in almost all product categories.
The central idea behind any promotional activity is to communicate the benefits or reasons why customers should buy a particular product or service. If customers cannot identify or are unable to comprehend any advantage or benefit in a product, which have the potential to satisfy their needs or wants, then it is very unlikely that the product or service will be bought. What is important is not the real benefit or the advantage but rather the consumer’s perception about the benefit or the advantage.
Sales promotion offers are generally communicated to the target groups by using any one or more of the following methods of advertising, personal selling, publicity or direct marketing.
Sales promotion is the only method, among all available promotional methods, that can make use of a combination of “pull-push” strategy to motivate consumers, traders and the sales force simultaneously in transacting sales. The two major target groups towards whom the sales promotion methods are directed are consumers and traders.
Temporary incentives, to motivate the sales force, are also considered as sales promotions directed at the sales force and are often referred to as ‘sales-force promotion.’ These incentives are part of the motivational programmes to build enthusiasm in sales-force for the task at hand. Often sales-force promotions are aimed as much at raising the morale of the sales-force towards sales.
What is Sales Promotion – Definitions Given by Philip Kotler, A.H.R. Delens, Mason and Rath, L.K. Johnson and William J. Stanton
In a time when customers are exposed daily to a nearly infinite amount of promotional messages, many marketers are discovering that advertising alone is not enough to move members of a target market to take action, such as getting them to try a new product. Instead, marketers have learned that to meet their goals they must use additional promotional methods in conjunction with advertising.
Other marketers have found that certain characteristics of their target market (e.g., small but geographically dispersed) or characteristics of their product (e.g., highly complex) make advertising a less attractive option. For these marketers better results may be obtained using other promotional approaches and may lead to directing all their promotional spending to non-advertising promotions.
Finally, the high cost of advertising may drive many to seek alternative, lower cost promotional techniques to meet their promotion goals.
In discussion of promotion decisions, let us look at a second promotion mix item: sales promotion. Sales promotions are used widely in many industries and especially by marketers selling to consumers. We will see that the objectives of sales promotion are quite different than advertising and are specifically designed to encourage customer response.
What is sales promotion?
Sales promotion describes promotional methods using special short-term techniques to persuade members of a target market to respond or undertake certain activity. As a reward, marketers offer something of value to those responding generally in the form of lower cost of ownership for a purchased product (e.g., lower purchase price, money back) or the inclusion of additional value- added material (e.g., something more for the same price).
Sales promotion is one of the four aspects of promotional mix. Sales promotions are non-personal promotional efforts that are designed to have an immediate impact on sales. Media and non- media marketing communications are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability.
Sales promotion means and includes all the activities that are performed by a producer or by a dealer or by a businessman to increase his sales. Main purpose of sales promotion activities is to encourage and persuade the consumers to buy a particular product.
Many eminent authors have defined sales promotion in their words as follows:
In the words of Philip Kotler, “Sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade”.
American Marketing Association, “Those marketing activities, other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibition, demonstrations and various non-recurrent selling efforts not in the ordinary routine”
According to A.H.R. Delens, “Sales promotion means any steps that are taken for the purpose of obtaining or increasing sales.”
Mason and Rath, “Sales promotion consists of those activities that are designed to bring a company’s goods or services to the favorable attention of consumers.”
L.K. Johnson, “Sales promotion consists of all those activities whose purpose is to supplement, to co-ordinate and to make more effective the efforts of the sales force of the advertising department, and of the distributors and to increase the sales and otherwise stimulate consumers to take greater initiative in buying”.
William J. Stanton, “Sales promotion is an exercise in information, persuasion and influence”.
Sales promotions are often confused with advertising. For instance, a television advertisement mentioning a contest awarding winners with a free trip to a Caribbean island may give the contest the appearance of advertising. While the delivery of the marketer’s message through television media is certainly labeled as advertising, what is contained in the message, namely the contest, is considered a sales promotion.
The factors that distinguish between the two promotional approaches are:
1. Whether the promotion involves a short-term value proposition (e.g., the contest is only offered for a limited period of time), and
2. The customer must perform some activity in order to be eligible to receive the value proposition (e.g., customer must enter contest).
3. The inclusion of a timing constraint and an activity requirement are hallmarks of sales promotion.
Sales promotions are used by a wide range of organizations in both the consumer and business markets, though the frequency and spending levels are much greater for consumer products marketers. One estimate by the Promotion Marketing Association suggests that in the US alone spending on sales promotion exceeds that of advertising.
What is Sales Promotion – 24 Main Characteristics: Irregular and Non-Recurring Activity, Scope, Motivation, Various Marketing Activities and a Few Others
Some distinct characteristics of sales promotion can be identified in the above mentioned definitions:
1. Irregular and non-recurring activity – Sales promotion is an irregular and non-recurring effort to increase the sales. In other words, the routine activities of marketing efforts are not included in it. The technique is used on certain specific circumstances, such as decline in demands, fall in profits, acute competition in the market, or when a new product is to be introduced in the market.
2. Scope – Sales promotion is a supplementary effort to advertising and personal selling. It does not include advertising and personal selling, publicity and public relations.
3. Motivation – It is an effort by which the consumers, traders and sales force are motivated towards maximum sales.
4. Various marketing activities – It includes all such activities to attract the consumers at the selling points, such as the use of decorations, displays, premium offers, etc.
5. Objective – The objective of sales promotion is to establish better coordination between the activities like advertising, personal selling, publicity’s, etc. In the words of Stanton, “Really the major function of sales promotion is to bridge the gap between advertising and personal selling; so that efforts of these two areas could be supplemented and coordinated.”
6. Universal activity – It is an universal activity adopted by all the economies of the world in their sales efforts.
7. Investment – Money spent on sales promotion is not a waste, but an investment. It will bring return on the investments in future.
8. Short-period effect – The sales promotion techniques have a short term effect of the consumers, but it is an objective oriented tool to get maximum sales during a short period of time.
9. Tripartite activity – It is a tripartite activity involving the distributors/middlemen, consumers, consumers and salesmen of the company to achieve the desired goals.
10. Means of marketing communication – It is an important means of communication by which views and ideas of the consumers about the products and services are exchanged with the producers regularly.
11. Personal and impersonal nature – Sales promotion is both, a personal and impersonal activity. Certain promotional tools such as premium, samples, demonstration, training, repairing, etc. are of personal nature, whereas certain other tools such as contests, decorations, trade fairs, etc. are of impersonal nature.
12. An element of promotion mix – Sales promotion is one of the important elements of promotion mix, other than advertising, personal selling and publicity.
13. Aim – The aim of sales promotion is goal-oriented to achieve sales/marketing objectives, which are short-term and immediate.
14. Variation with product category – The distinction between short-term and long-term results often may vary with the product category and the particular industry.
15. Viewed as a non-recurrent selling activity – The sales promotion has been traditionally viewed as a non-recurrent selling activity and has been defined as such in some definitions. However, this does not portray the present day, intensely competitive market conditions.
16. Maximum effect at minimum cost – When the nature of promotion objective is such that it can best be achieved by sales promotion, rather than advertising alone, and the objective is achieved at minimum cost.
17. Motivates consumers to buy now – Successful sales promotions induce a sense of urgency to buy now and avoid postponing purchase. The consumer is moved to take immediate action and gets involved in the transaction.
18. Offers what the consumers want – Sales promotion must not attempt to push any offer that is not regarded as desirable by target consumers. They cannot attract consumers towards offers that are not perceived as interesting, exciting and valuable to them.
19. The promotion should be clear and uncomplicated – It offers a single but powerful incentive to engage in transaction. Any subsidiary offer stems from or is closely related to the main offer. In a simple and clear language, it communicates how consumers can take advantage of the promotional offer. Too many hurdles discourage consumers to participate.
20. Promotion should be highly visible – The offer must draw attention of target consumers. The media selection is important. Effective promotion draws attention from high visibility and from creative qualities.
21. Promotion should benefit all concerned – Usually promotions involve cooperation of sales force and channel members. They need to be motivated to make the efforts successful.
22. Promotion must be believable and honest – It makes reasonable and believable claims, tells the truth, there are no exaggerations, and it respects public’s intelligence.
23. Promotion must be legal – The marketers must check the legality of promotion before announcing it.
24. Promotion must be implemented efficiently – In some types of promotions, handling houses and premium suppliers are involved. Proper arrangements must be made with these outside parties to avoid any complication.
What is Sales Promotion – 4 Major Objectives: Stop and Shop, Shop and Buy, Buy Bigger and Repeat Purchase
Sales promotion efforts are generally designed to complement other communication activities undertaken by a store. For example, awareness may be generated through advertising but sales promotion may be used tactically to overcome any resistance to purchase. The desire may be created by advertising, but its conversion into sales would be done by sales promotion by offering a short-term incentive. Thus, a quicker sales response results from sales promotion.
The various objectives of sales promotion can be summed up as follows:
Objective # 1. Stop and Shop:
Customers who are just passing by, with no intention of purchasing, would be encouraged to enter the store. The promotional activity may be such that it does not directly hint at a purchase, but just a free trial. For example, free hairstyling done using a hair gel sold by the store.
Objective # 2. Shop and Buy:
Once the customers have been persuaded to enter the store, they have to be convinced to purchase by presenting the merchandise in such a manner that the customer feels a desire to buy. For example, the store could offer a money-off voucher with the hair gel bottle or the customer would be entitled to get a shampoo if they purchased the hair gel.
Objective # 3. Buy Bigger:
The promotional activity aims to persuade the customers to buy in a greater quantity or buy other products in addition. For example, customers who buy a bigger pack may be entitled to enter a contest, or get a free gift or customers who purchase merchandise more than a specified amount would get similar benefits.
Objective # 4. Repeat Purchase:
The final objective is to encourage customers to return again and again to the store. This is achieved by instilling loyalty among the customers through previous purchases. The goodwill can be created by schemes such as continuity programmes or store cards. Regular customers are offered cards whereby after a certain amount of purchases they are entitled to a gift, for example, a trip to Mauritius.
Sales can basically be increased by two methods. Either the number of transactions is increased or the size of the average sale is increased.
This can be achieved by a number of activities; some of them are as follows:
Increasing the Number of Transactions:
This can be done in the following ways-
1. Sales promotion methods can be used to persuade more people into the store and convince them to buy.
2. Point-of-sale incentives can be improved to generate quicker sales response.
Increasing the Size of the Average Sale:
This can be done in the following ways-
1. Promotions can be introduced on high-margin goods, so the overall profitability improves.
2. Customers may be encouraged to buy more quantities by offering them various incentives.
What is Sales Promotion – Evaluation: Pre-Testing, Concurrent Testing and Post-Testing
Measurement of results in any area of business activity is related to the objectives that are set. To accomplish this, a set of evaluation criteria is laid down before the implementation of a sales promotion programme. Measuring the success or otherwise of sales promotion can pose some difficulties because of the nature of and variety of objectives. In the topic “Sales Promotion Objectives”, it has been pointed out that sales promotion objectives can be either proactive or reactive.
A number of these objective are directly related to sales. In all cases, the measurement does not pose any complexity and the sales based techniques can be used with relative ease. For instance, it is quite easy to measure the sales effect before, during, and after the sales promotion. In case of objective not related to sales, such as trial purchase, or change in consumer awareness and attitude as a result of increase in perceived value of the product, measurement is more difficult. In certain types of promotion, the re-seller support is important and can have significant effect on marketer’s promotion performance.
In general, marketers can use sales data, experiments, and consumer surveys to evaluate promotion progress and results. Promotion managers are generally reluctant to use experiment because in many cases of promotions there is only short lead-time. Experiments also involve the risk that competitors would be alerted. For these reasons, managers tend to rely heavily on sales data and experience. The thinking is, “what has worked in the past will work again”.
How sales promotion is to be communicated and what would be communicated to the target groups is important and can be pre-tested. For example, the pre-test may find out what is likely to be perceived value and the risk. A customer considers whether it would be wise to buy an unknown brand of sports goods at 45% discount. Is this offer worth the risk of buying an unfamiliar brand? The pre-test can be conducted to assess these factors by using focus groups and consumer panels.
Another approach, ballot method, consists of mailing a ballot paper to a list of consumers. They are requested to evaluate different illustrated promotions and vote for the most like and return the ballot to the firm. A relatively expensive but more accurate method is portfolio test. A portfolio of sales promotion is prepared and shown to consumers in person and their responses are noted. Other methods that can be used are jury method and mall intercept.
To test consumers behavioural response, such as trial purchase, or repeat purchase, etc., pre-testing consists of experimenting in certain markets or individual stores in a market or individual stores in a market. All others factors remain the same, only the sales promotion device being tested in the variable is manipulated.
It is often quite helpful to evaluate the response of re-sellers before implementing the promotions programme. The simplest way is to visit several important retailers and wholesalers and discuss the programme and seek their opinion and suggestions. This may prove to be quite favourable in case the support of re-sellers is considered to be of paramount importance for promotion results.
2. Concurrent Testing:
This Testing is done when the sales promotion is in progress. Concurrent testing may permit the promotion manager to modify the sales promotion if needed. This type of testing is conducted in terms of sales data, which can be obtained on weekly or monthly basis. If the promotion is a consumer contest and the consumer is not required to purchase anything, the response to promotion can be adjudged by the number of entries received at some interval, and if need be the contest period can be extended. In case of coupon distribution programme, similar approach can be adopted by keeping a track of coupons redeemed.
Post-testing is done after the promotion period is over. To assess the change in consumer awareness and attitude, telephone calls, questionnaire mailed to consumers, and personal interviews can be used. In these methods, the most expensive is the personal interview method and least expensive is the mail. The information sought pertains to the promotion event. In case of samples or premiums distributed through retail stores, intercept interviews at the point-of sale can reveal more reliable information.
To measure the sales effect, sales figures before the promotion period can be compared with figures at the end of the promotion, and one month after the promotion ends. If the promotion objective was to increase sales by 30% in a certain period and the pre-promotion sales for a similar period were worth five million rupees and the sales jumped to in excess of 5.6 million in the promotion period. This would show that the objective was achieved. It is very likely that in the ensuing month after the promotion, the sales will come down to, say 3.5 million rupees.
If the sales return back to five million rupees in the long run, then perhaps the sales jump was because of brand switchers and deal prone consumers. However, if the regular sales settle at 5.5 million rupees in the long run, then definitely the promotion proved successful in increasing the long run sales by attracting new customers, and may have also attracted customers away from other competing brands.
What is Sales Promotion – Importance to Manufacturers, Middlemen and Consumers
Importance of sales promotion may be divided into three parts such as:
2. Middlemen; and
1. To Manufacturers:
i. Helps in creating the demand for new products.
ii. Helps in getting new customers for existing products.
iii. Encourages the middlemen to take more and more interest in the sale of the product.
iv. Maintain the demand of a product during the season.
v. Helps in communicating new uses of the product to the customers.
vi. Helps in facing the competition successfully.
vii. Increases the goodwill of the enterprise.
2. To Middlemen:
i. Helps in selling the product.
ii. Helps in increasing the sales of the middlemen.
iii. It becomes convenient for the middlemen to sell the product to the consumers for which sales promotion measures are adopted by the product.
iv. Increases the goodwill of the middlemen.
v. Increases the profits of the middlemen.
vi. It offers many monetary as well as non-monetary incentives to the middlemen.
3. To Consumers:
i. It gives knowledge of new products available in the market to the consumers.
ii. Gives information of new uses of existing products to the consumers.
iii. Distribution of free samples to consumers provides an opportunity to them to use and test the product.
iv. Many schemes of sales promotion provides goods and services to the consumers at reduced prices.
v. Vides an opportunity to the consumers to participate in the competitions.
vi. Improves the standard of living.
What is Sales Promotion – 3 Main Devices: Consumer Promotions, Trade or Middlemen or Dealers’ Promotion and Sales Force Promotion
The various sales promotion devices (other than advertising, personal selling and publicity) are numerous and may be grouped as follows:
Sales promotion devices directed at consumers are aimed at increasing the demand of the company’s product among existing consumers, or to attract new consumers to the company’s product. Such devices may be used to retaliate the Competitors’ Sales Promotion or other promotional efforts.
Such promotional devices may include:
At the time of introducing a new product in the market, the company distributes samples (Some quantity of the same product) free of cost of the purchaser of the product. Samples are distributed with a view to allow the customer to test the quality of the product so that he may’ recommend the use of the product to others.
The samples may be distributed door to door, offered in a retail store, or to professional for recommendation. The method is quite useful for promoting brand loyalty among consumers. It is a good method of demand creation because the user comes to know the result as soon as he uses the sample and buy the brand. Samples may be distributed before purchase or along with the purchase.
Offering samples is quite expensive because it has cost and its distribution cost is also high. It may create a problem if product does not resemble with the quality of the sample offered.
A coupon is a chit of stated value mostly kept inside the package, is given direct to the consumer at the time of purchase. It entitles the consumer to a specified saving in the form of price reduction at the time of next’ purchase. Sometimes, coupons are encashed by the retailers on behalf of the manufacturer. The retailers are reimbursed the value of coupons by the manufacturers. Since coupons are directly tied with the purchase of the product, it provides short term stimulus to the sale of the product.
What is important is that coupon does not affect the stated price of the product nor does it impair the dealer’s margin.
iii. Premium or Bonus Offer:
It is an offer of certain amount of product (whether produced by the same manufacturer or not) to consumer free of cost along with the purchase of the company’s product of a stated value or a special pack thereof.
There are various forms of premium’ or bonus offer:
(a) Coupons are supplied for effecting price reduction.
(b) Factory in-pack Premium – Such premium item is generally packed by the company in the box or package itself. It is very popular in case of baby food and tin food items. Spoons, cups, measuring glass etc., are generally packed with the product inside the container itself. Tooth paste companies offer a free tooth brush inside the tooth paste pack.
(c) Self-liquidating Premiums – Under this type of premium, the cost of premium is collected from the customers though it is considerably low. Such premium items are offered along with the purchase of company’s goods. This becomes possible because the manufacturer purchases these items in bulk.
iv. Money Refund Offer:
This offer is generally stated on the package itself or in the media advertising that the manufacturer will return the price of the product, if it is not upto the satisfaction of the consumer. This offer is valid only for a stated period. For example Bull-worker exerciser is promoted this way.
v. Price-Off or Bargain Offer Price or Temporary Price Reduction:
The customer is offered a price reduction over the printed or list price on purchases made during a fixed period. This is done to attract consumers of other brands to this brand or when a new product or brand enters the market.
This method is supposed to be a weaker and less desirable method of sales promotion. It is because some retailers do not pass the price reduction benefit on to the consumer. This method is not conductive is building up brand loyalty because consumers temporarily shift their loyalty until the producer offers this scheme.
vi. Contests or Sweepstakes:
At times, contests are arranged with a view to attract new users to the company’s product. Entry forms to contest are available with the purchase of the goods or carton flaps are tagged with the entry forms. An opportunity under this device is given to consumer to contest with a chance to cash prizes, or articles or free air trips. It is an indirect manner of introducing a new product or stimulating sales of an existing product.
vii. Bonus Stamps:
A premium in the form of stamps is given by the seller to consumers. The value of stamps received by the purchaser depends upon the value of purchase. The consumer goes for collecting stamps unless he has sufficient quantity of to obtain a desired merchandise in exchange for the stamps from the stamp redemption centers.
This is a method of promoting a new brand or article in the market. The product is demonstrated in producer’s or sellers’ stores, at fairs and exhibitions, temple festivals or even on door to door basis depending upon the size and value of the product. This method is most often employed for household appliances and new beverages. Tea in India was introduced in the market through demonstrations. Demonstrators are employed by the producers for this purpose.
ix. Buy-Back Allowance:
This is an allowance following a previous trade deal and offers a certain amount of money for new purchases based on the quantity of purchase made on the first trade deal. The retailer on behalf of the producer collects empty cartons, bottles, flaps, tubes etc., from the consumers of a certain brand and encash them at a fixed price if they purchase the company’s brand afresh. It extends the life of the trade deal and helps to prevent past deal sales decline. It greatly strengthens the buyer’s motivation to cooperation the first trade deal.
2. Trade or Middlemen or Dealers’ Promotion:
When products are sold through middlemen (wholesalers and retailers or both), certain incentives are offered to those middlemen so that they may store the company’s product in large quantity.
Such promotions or incentives are:
i. Buying Allowance or Discount:
A discount on purchases is red to the dealers to induce them to purchase company’s product. Such discount may be either deducted on invoice price or on cash paid. Such allowance or discount may be given at a fixed percentage of total purchases above the minimum fixed made during a fixed period of time or an extra purchases over a minimum at every purchase. It increases the profit of the dealer/and sales to manufacturer.
ii. Buy-Back Allowance:
This method of promotion is practised to prevent a post deal sales decline. Under this method, the manufacturer offers a certain amount of money for additional new purchases based on the quantity of purchases made on the first trade deal.
iii. Store Demonstration:
Demonstrations for company’s product are arranged in the premises of wholesalers and retailers. These demonstrations are arranged by the producer’s sales force. For store demonstrations dealers are paid. It is good mode of advertising company’s product especially new product. A good demonstration will attract new customers. Customers may ask questions from the demonstrators to clear their doubts. Demonstrations can explain peculiarities of the product to the prospecting consumers.
iv. Display and Advertising Allowance:
In this method, dealers display the company’s product and they are paid advertising allowance by the company. The advertising allowance is paid on the .basis of space provided to display the manufacturer’s product in the shop. In this way, company shares its advertising budget with the dealers.
v. Special Contests:
This is an indirect way of promoting sales. It is to stimulate and motivate distributors, dealers, and their sales staff and arranged by the manufacturer. Such contests may take the form of window display, internal store display etc., or sales volume contests. Cash prizes are offered to those who win the contest or make the highest sales’ during a fixed period of time. This certainly involves financial commitments. In view of the winning chances, sellers participate in the contests.
vi. Advertising Materials:
Certain companies provide advertising materials such as store signs, neon-sign boards, shelf sign boards etc., with the dealer’s name for advertising purposes. Other free goods like calenders, diaries and other publicity materials with the dealers’ name and address are also provided. This type of promotion performs the twin functions of consumer education and convincing of retailers in the need for cooperation in the promotion.
vii. Dealer Premium.
The dealer is offered a gift at the time of every purchase if the dealer purchases over a fixed quantity of the product. Such gifts are sometimes encashed at a fixed price.
3. Sales Force Promotion:
Personal selling by far is the most important method of Sales Promotion. To make it highly effective, sales force promotion schemes are felt necessary.
The tools for Sales Force Promotion are:
i. Bonus to Sales Force:
A sale quota is fixed for each salesman during a fixed stated period on company’s terms. Bonus is allowed to salesmen on sales in excess of the quota fixed. The salesmen try to sell maximum possible quantities of product in a thrust to earn more bonus.
ii. Sales Force Contest:
Sales force contests are announced by the company for the salesman. The top performer is offered cash prize in the form of cash or in some other forms (such as promoting a person showing good performance etc.). The salesman takes interest and makes efforts to redouble the company’s sales.
iii. Sales Meetings:
Conventions and Conferences are conducted by the manufactures for the purpose of educating, inspiring and rewarding the salesmen. New products and new selling techniques are discussed in such meetings.
What is Sales Promotion – 3 Methods: Consumer Promotion, Middleman Promotion and Sales Force Promotion
Three fold ways of sales promotion are described as follows:
Method # 1. Consumer Promotion:
It is basic form of sales promotion since customer is the final recipient of the product and services.
It is done with a view of saving previous customers and increase in number of customers for the company’s product. To reduce the effect of sales promotion strategy of the competitor, consumer sales promotion may be directed toward this aim.
Following objectives can be achieved with the help of consumer promotion:
i. Introduction of new product in the market.
ii. Offsetting pricing competition.
iii. Activating slow selling products.
iv. Opening of new avenues of market previously unknown.
v. Increase in brand popularity and knowledge about same in minds of consumer.
vi. Obtaining key information in the form of customer reviews, suggestions etc.
Forms of Consumer Promotion or Sales Promotion:
i. Coupons, offers, discount- Specific discount is received by the consumer if he possess specific coupon.
Such offers attracts more and more customers towards product which increases customer base.
ii. Free sample- Many daily usable products are generally marketed with this technique. Many shampoo producers distribute free sachets with daily newspapers to catch attention and thereby boost sales.
iii. Refund offer- Use our product and if unsatisfied with the result take your money back.
It’s the common practice now a day to offer money refund on certain products.
iv. After sales service- Many consumer durable products are sold with extended warranty free of cost or with nominal charges. People attract toward this because they feel the risk is minimized with this extended warranty.
v. Road shows/contests- Road shows and contests are arranged with special intention of attracting new customers as a part of sales promotion.
Method # 2. Middleman Promotion:
Apple introduced unique scheme in United States in which dealers are offered apple’s newly launched products with 0 interest EMI schemes.
This offer created respect in minds of dealers and distributors towards apple and they were highly inspired to sale apple product more efficiently.
This type of trade deals have shown increased acceptance.
Following are some common types of trade deals:
i. Buy back allowances- In this method producer offers certain amount of money for additional new purchases based on quantity of purchases made on the first trade deal. This is done with the intention of preventing post deal sales decline.
ii. Display and advertising allowance- This allowance is given for display of producer’s products in dealers showroom or shops.
The allowance is given on the basis of space provided to display the product.
iii. Buying allowance discount- This is the direct allowance on the quantity of product dealer is purchasing. This is given for attracting dealers to buy more and more quantity of products.
Such allowance may be given as a fixed percentage or can be deducted from invoice price.
iv. Free Gifts- This is given as a part of boosting quantity of purchase by dealers. Many free gifts are offered in order of quantity of purchase.
If certain amount of quantity purchased then certain gift.
v. Credit facility- This is not actual promotion factor but it encourages dealers to buy quantity of products.
Generally credit is offered for 21 days as a normal trade practice.
But it can be altered according to the relations of dealers with producers.
Method # 3. Sales Force Promotion:
Sales person or sales staff is the most effective and most efficient way of sales promotion and increase in sales. Every organization is keen in selecting sales force for better marketing promotion mix.
Sales force is offered following attractions for motivation:
i. Sales Force Competition:
Incentive over and above the normal salary motivates salesman to perform their job more effectively. Competition increases performance of people but such competition must be done with proper motivation because ill effects of such competition are often disturbing.
ii. Sales Meeting, Sales Conference, Presentations:
Sales conference and presentation by marketing experts is a powerful motivator because it imparts education in the minds of salesman as a result they tend to perform more fluently.
New products and new selling techniques are described and discussed in such meetings.
iii. Bonus to Sales Force:
Sale over and above targeted number is awarded with extra bonus. In order to get this extra bonus, salesman try to cross this number of sales.
So these methods of sales promotion are implemented in organization to increase turnover and profits. These methods must be used in accordance with other methods of marketing promotion mix such as advertising and publicity etc.
What is Sales Promotion – How are Sales Affected by Sales Promotion?
It is interesting to explore how sales promotions affect the sales.
Mostly it is thought that there are four basic mechanism involved:
1. Brand switching – The objective of some sales promotions is to induce brand switching, which is encouraging consumers to purchase the promoted brand instead of the regular brand that would have been purchased had there been no sales promotion.
2. Repeat buying – Sales promotions influence the consumers in a manner that increases the chances of purchasing the same brand again in future.
3. Purchasing more, or accelerating timings – Consumers purchase more quantity than their immediate requirements, or the purchase timings are changed.
4. Increasing category expansion and consumption – Consumption of total product category is increased by the consumers as a result of sales promotion.
1. Brand Switching:
Some promotions encourage consumers to buy a different brand than the one they bought on earlier purchase occasion, or had the intention of buying now. This type of brand switching is often termed as “aggressive switching”. The second type of promotion effect on brand switching considered as “defensive switching”. In this case the objective is to retain the customer by encouraging her/him to buy the same brand as was bought on earlier occasion instead of switching to a different brand on this purchase occasion.
The manufacturer’s concern is to compete with other similar brands, while the concern of re-seller is to encourage customers to buy from her/his store (not especially the manufacturer’s brand). When a retailer promotes, consumers respond by switching stores, that is, they purchase from the store that is promoting instead of the regular store. This store switching would not have happened had the retailer not offered a promotion. It is clear that from retailer’s point of view store switching is more important than brand switching.
Promotions offering price deals, influence the attitudes of consumers toward buying the brand. Much would depend on the size of the discount and the consumers’ sensitivity toward price and how much importance consumers place on price than quality. If the attitude toward the brand has been quite low compared to some other brands, then a price promotion is likely to encourage a switch to the promoted brand.
Such price promotions may also encourage consumers to buy an otherwise expensive brand, which they could not afford on the normal list price.
Displays at the point-of-purchase may induce brand switching because they serve as conditioned stimuli associated with price promotions (classical conditioning theory). Over a period of time consumers get trained to associate displays with price reductions and respond even when the price reduction is not there.
Both high and low-involvement decision situations provide some explanation. A display shows a low priced, low-involvement product and the consumer buys it because it is convenient. In high-involvement situations, the consumers’ search activity may lead to some other brand, which was displayed, and led to purchase. An example would illustrate the point. A customer goes to market with the intention of buying a Philips colour television. In the dealer’s showroom, Thompson brand is displayed prominently and the customer ask the dealer to switch the set on. What the customer sees impresses her/him and the customer buys it.
Consumer’s price perception may also have significant effect on brand switching. If the consumer has a coupon of some value for a certain brand and on reaching the store sees the sign “sales” for another brand. For this brand on sale, the consumer has only slight preference. The extent of price reduction on this brand with slight preference would be influenced by the customer’s perceived reference price of that brand. If the disparity is high then the consumer is likely to buy the brand for which she/he has the coupon. Consumers do not completely accept the suggested reference prices and at times they are suspicious of “sale” signs.
If the amount of price reduction is equal, then consumers prefer to use the coupon in switching the brand compared to in-store price reduction, that is, coupons are more effective in inducing brand switching. There is another aspect of coupons. Consumers having a coupon find themselves in a controlling position, with a sense of pride in using the coupon.
If most of the consumers are inclined toward low prices because of economic conditions, the majority of them are assumed to be buying low priced brands. However, if the price on an expensive item is reduced because of promotion, then some consumers from low quality category will switch to the promoted brand. But when the low quality product is promoted, there is no switching because the consumers have been buying the brand without promotion. The consumers from high-income group are unlikely to switch to low priced brand because of promotion and the sales gains would not be there.
2. Repeat Buying:
When a consumer buys a product on promotion, this may lead to developing the habit towards purchasing that brand and some evaluation about the performance of the brand. This may also happen that since the brand is purchased on promotion the consumer’s attitude toward the brand weakness and the probability of purchase in future declines. Repeat purchase may result because of habit formation that may develop because the brand is bought more than once due to sales promotion.
Much depends on the satisfaction of the consumer with the brand purchased on promotion. For example, if a customer purchased Godrej refrigerator on promotion and was satisfied, it is very likely that next time when the need arises, the customer would purchase the same brand again on promotion, or other products of the same manufacturer when available on promotion. Instrumental conditioning (operant conditioning) views sales promotion as rewards and consumer learns to continue buying the product.
However, the nature of reward may have significant effect on behaviour reinforcement. The reward should be strong enough to encourage and reinforce the purchase behaviour to sustain it.
Repeat purchasing is often the result of habit formation and learning. Sales promotions stimulate the consumers to buy a product and this becomes the first step toward establishing a habit. Another route is not to allow the brand user to shift to some other brand by rewarding and reinforcing the already established behaviour.
In case of low-involvement product, the role of habit is more important. The consumer does not want to devote much time to thinking and pre- purchase evaluation in making a purchase decision. Habit helps the customer avoid any cognitive effort and helps as a simple and convenient way to decide which brand to purchase.
In case of high-involvement products, it is assumed that learning takes place when the consumer experiences the actual performance of the product and makes an evaluation. A favourable evaluation is likely to help sustain the habit. In some cases, even consumers with low-involvement often make evaluations that may have repercussions with regard to developing the habit.
3. Purchasing More or Accelerating Timing:
Purchasing more and accelerating timing refers to those situations when consumers buy more than their immediate requirement or change their purchase timing as a result of promotions. When re-sellers buy more than their normal requirement, it is called “forward buying”. Building excessive inventories in this manner often leads to stock diversion in non-deal areas. Another important repercussion of this purchase bahaviour is that it merely shifts the purchases, which would have occurred anyway.
For example, if a consumer buys more than the immediate requirements, than in the next purchase period that is if this consumer buys the refrigerator now, though the intention was to buy after two months, this is purchase acceleration. Another effect of promotion can be that consumers who have bought in excess of their requirements should be out of market. Similar would be the case, when the retailers’ shelves are full. This can help in preventing brand switching and in some cases more consumption of the product (such as Maggi noodles or similar products).
The reverse may also be true in certain situations, that is, negative acceleration when the consumers buy less or decide to purchase later rather than now. This may happen when the sales promotion stimulates brand switching. The consumer wants to try the product and buys a smaller quantity to reduce the risk associated with using something new. The consumer may also postpone the purchase of a product because she/he learns from some source about the forthcoming sales promotion, or anticipates it.
4. Increasing Category Expansion and Consumption:
Sales promotions are likely to stimulate demand by creating new occasions for purchase, or by increasing the consumption rate by consumers. In certain situations the purchase of a product category gets accelerated.
Sales promotion, such as displays can create new purchase occasion by reminding the customer that the displayed product is good for the growing children (protein biscuits). Other products, for example noodles or potato chips, purchased on promotion in multiple units, can increase the consumption rate, which is often the objective of many promotions. One example can be of condensed milk, ‘Milkmaid’. An attractive display of this brand is arranged and a free recipe book is given on purchase of two packs. This is quite likely to increase the rate of consumption of this product, as consumers will be tempted to prepare different recipes.
In cases of many high-involvement products, promotions can help consumers to realise that a certain product would serve as a good gift item (a silk Sari, Camera, Rayban sunglasses, etc.). In some cases, there is a certain price limit beyond which the customer would not buy a product, however, a price promotion offer lowers the price of the product below the customer’s price limit, and thus a purchase occasion is created. Many customers buy autos when available on promotion, such as interest free installments, which otherwise they are not in a position to buy on down payment.
Of late, this is happening in case of almost all known brands of computers.
Observations in the market place point to the likelihood that brand switching, repeat purchasing, purchase acceleration and consumption, all occur simultaneously. The net result, however, is that sales promotions work.
What is Sales Promotion – 4 Measures to Influence Sales Promotion on Sales
There are four following measures by which sales promotion influence sales:
(a) Brand Switching – Some sales promotion techniques have objectives to introduce brand switching i.e., encouraging consumers to purchase the new launched brand/product rather than buying an established brand.
(b) Repeat Purchase – Sales promotions influence the consumers in a manner that increases the chances of purchasing the same brand again in future.
(c) Increasing Category Expansion and Consumption – Consumption of total product category is increased by the consumers as a result of sales promotion.
(d) Purchasing more than requirement – Consumers purchase more quantity than their immediate requirement or the timings for purchase are altered.
Sales promotion offering price deals, influence the attitudes of consumers for buying the brand. Price promotion may encourage a switch to the new promoted brand by consumers.
Consumers possessing coupons find themselves in a controlling position for the purchase. Repeat purchase results due to habit formation and depends on satisfaction of the consumer. Theories of Consumer Behaviour have developed popular models of consumer decision making process, such as Nicosia Model, HowardSheth Model, and Eugel-Kollat-Blackwell (EKB) Model. EKB model considers the concept of high and low involvement of consumers in making a purchase decision.
The consumer decision process starts with the recognition of need, then he/she goes through the process to choose the product. A display or any other promotion may remind the consumer about the need. Because of sales promotional communications, need recognition may get triggered in both high involvement and low-involvement consumers.
The high involvement purchase may get triggered by an attractive exchange offer or interest-free instalments offer for a consumer durable good, i.e., TV, PC or washing machine etc. For the low-involvement situation, the sales effect is likely to be immediate because of impulse or top-of mind recall of the brand. The low involvement consumer having visited the store with the intention of buying a certain product but the in-store display persuaded him/her to switch the brand or take to impulse buying.
The “Complex Buying Behaviour” is shown by a consumer when he/she is satisfied with the available information for a product, then he/she makes a well-considered purchase. The other three types of consumer behaviours are perceived according to the degree of perceived differences among brands and the level of consumer’s involvement in a purchase situation.
“Dissonance-reducing buying behaviour” results when the consumer’s involvement in a purchase is high due to the product being expensive or not frequently purchased. After the purchase, consumer experiences dissonance, and this causes uneasiness and the consumer looks for reassuring information and avoids disconcerning information.
“Habitual-Buying Behaviour” results when the consumer’s involvement is low and there are no significant differences among brands. For low-priced and frequently purchased products, proper sales promotion can lead to considerable brand switching. In this case, a consumer buys a product because of familiarity not brand loyalty. “Variety-Seeking Buying Behaviour” results in product categories where there are significant differences among brands but the consumer has low involvement in these products.
There is much brand switching due to variety seeking. Sales promotion can encourage increased brand switching because of premium offer or due to some contest.
What is Sales Promotion – Top 6 Activities: For Selling Goods in Imperfect Markets, Intense Competition and a Few Others
Nothing happens until something is sold. The Sale Promotion activities help in promoting the sales of the product of the company very effectively. More and more promotional activities are required to induce customers to purchase and middlemen to sell more and more items of the product. In this way, promotional activities produce demand of the product in the market.
In today’s competitive world, these activities play an important role which can be judged from the following facts:
1. For Selling Goods in Imperfect Markets:
Every market is imperfect market where the product cannot be sold easily only on the basis of price differentiation. It is promotional activities that provide information about the differences, characteristics and multitudes of the products of various competitors in the market. The customer is attracted to purchase the goods on the basis of such information. The middlemen also canvass the company’s product on the basis of such points of differentiation. Thus, Promotional activities are necessary for selling the product successfully in the market.
2. Intense Competition:
Intense competition has necessitated the promotional activities. When one manufacturer increases his promotional ‘spending and adopts aggressive promotional strategy in creating brand image, others have to follow the sign. This leads virtually a promotion war. In such a situation, improving the product through research and innovative activities, is advisable.
3. For Shortening the Distance between Producers and Consumers:
There is no direct communication between the producer and the consumer. The distance between them has so widened in present days, that mass selling is not possible without getting them acquainted with the product and its distinctive qualities. Promotional activities, therefore, are necessary to narrow down this distance.
4. Increased Standard of Living and Employment Opportunities:
Large scale production is the theme of the day and promotional activities are necessary for mass selling and large production. Sales promotion is the result of large scale production. The objective of large scale production can be achieved only through appropriate methods of large scale selling. Large scale selling is very difficult without promotional activities. In large scale, production and selling, quality of goods is improved and prices are lowered down. It, thus, improves the standard of living of them asses by providing them better quality goods at lower price.
5. Effective Sales Support:
Basic sales promotion policies supplement the efforts of direct (personal selling) and indirect selling (advertising). It is found that sales promotion activities support the salesmen’s and make their efforts more productive. These activities reduce their canvassing time and also the turndowns.
6. Increased Trade Pressures:
To shorten the distance between the producer and the consumer, a number of producers have preferred to sell the goods defect to consumers by cutting the chain of middlemen short. They have opened retail, outlets known as chain stores. Other large scale retailers such as departmental stores, super bazaar etc., have also come into existence. These retailers are successful in exerting great pressure on manufacturers to allow them discounts and other facilities. As they are large scale purchasers, and in a bid to support them due to great trade pressure, many manufacturers have resorted to sales promotion activities.
What is Sales Promotion – Programmes with Limitations
The marketing manager decides the sales promotion programme in advance. Sales promotion includes the amount of the incentive, distribution vehicle for promotion, duration and time of promotion, sales promotion budget. The manager has to pre-test the sale promotion programme.
The marketing manager has to determine the amount or incentive to be offered to consumers. A higher incentive produces a higher sales response. The incentive may be offered to anyone or to some selected salesmen. It may be offered only on certain conditions. Sales in some regions may not be allowed incentives.
The marketer should decide the methods and mode of sales promotion. The package may include prize coupons. The duration of sales promotion is decided by the management, but it is generally for a month. If the sales incentives are for a longer period, their impact may be nominal.
Therefore, the duration of sales promotion should be cautiously determined. The date of sales promotion should be during the off-season; or it may be determined to meet certain seasonal requirements. For example, the Khadi and Gramodyog Commission announce rebates on purchases of Khadi during the winter season to meet customers’ requirements of winter-clothes. The fan manufacturer grants off-season rebates to push up sales in the off-period.
The sales promotion budget should be determined before launching the programme. The cost-benefit estimate should be worked out in the light of the sales promotion objectives. The administrative cost and incentive cost should be separately determined. The administrative costs include costs of printing, mailing and the promotion deal.
Incentive costs involve rebate, discount, and reduction in prices and so on. The stages of the product life cycle and competitive expenditures on promotion are also considered while framing the sales promotion budget. The conventional percentage of the total promotion budget is taken as a guide for determining it.
A pre-test of the sales promotion programme is conducted to determine the appropriate tools, the incentive amount, and the presentation method. Alternative strategies are also pre-tested to arrive, at an appropriate sales promotion programme. Dial tests may be run on a pilot basis before the implementation of the sales promotion programme.
The sales promotion programme may call for notification to field sales personnel, a place for allocations of the promotion materials. The sales personnel and distributors should be properly motivated to distribute the promotion materials.
Limitations of Sales Promotion:
(1) Sales promotions have temporary and short life not exceeding three months. Sales promotion alone cannot build up brand loyalty.
(2) Sales promotions are only supplementary devices to supplement selling efforts of other promotion tools.
(3) They are non-recurring in their use. They have seldom reuse values.
(4) Too many sales promotions may affect adversely the brand image, suggesting its lack of popularity or overstocking by a company.
(5) Advertising agencies accord low status to sales promotions and usually employ junior staff for sales promotion so that they may be trained for more creative jobs.
Sales promotion are ineffective:
(a) When established brands have a declining market,
(b) There are no product improvements,
(c) When there is intensive competition on consumer sales promotion.
What is Sales Promotion – Advantages and Disadvantages
Advantages of Sales Promotion:
1. It facilitates easy introduction of new products and brands in the market.
2. At the recessionary phase of an economy customers become more prices sensitive. Marketers can sort out this problem with the help of promotional tools like offering gift or discount coupons, gifts, contests, sweepstakes, etc., to the customers.
3. It has the potential to change consumer behaviours to a large extent.
4. A company seeks to obtain greater co-operation from its retailers. It helps in earning the goodwill of dealers and distributors.
5. It can be used effectively with other promotional tools.
6. It can be regarded as an excellent approach to boost sales in a short period.
Disadvantages of Sales Promotion:
1. Brand image and profit can be hurt by over use of price related sales promotion tools.
2. The second criticism is that such discounts are not real, since the prices of the products are already inflated.
3. There is a feeling that such seasonal sales promotional activities are mainly intended to sell sub-standard product.
4. May have only short-term impact.
5. These activities have a short time span, so the results realised are also short-lived. As soon as these activities offering of various concessions, free gifts, etc., are withdrawn, the demand also goes down rapidly.
6. Effective sales promotions are easily copied by competitors.
What is Sales Promotion – Growing Importance of Sales Promotion
It is said “sales promotion spending is big and getting is bigger.” Spending on sales promotion is increasing, sometimes at the expenses of other promotion methods for sales reasons. Sales promotion has proved successful in increasingly competitive markets. Sales promotion can usually be implemented quickly and get results sooner than advertising. It is often designed to get action.
It also helps a Product Manager to win support from an already overworked sales force. The sales force may be especially receptive to sales promotion, including promotion in the channels; because competition is growing and middlemen respond to sales promotion. The salesmen can see that their company is willing to help them win more business.
Sales promotion aimed at final consumers or users usually is turning to increase demand or speed up the time of purchase. The sales promotion efforts are aimed at specific promotion objectives.
For example – if customers already have a favourite brand, it may be difficult to get them to try anything new. Or it may take time for them to become accustomed to a different product. A free sample tube of toothpaste might be just what it takes to get cautious consumers to try and take a new product. Such samples might be distributed house to house, by mail, at stores or attached to other products sold by the firm.
Sales promotion directed at industrial customers might use the same kinds of ideas. In addition, the sales promotion people might set up trade shows and exhibitions. Here, attractive models are often used to encourage buyers to look at a firm’s product, especially, when it is displayed near substitutes.
Sales promotion aimed at middlemen (also known as trade promotion) stresses price-related matters. The objective may be to encourage middlemen to stock new items, buy larger quantity, or buy early.
Sales promotion aimed at the company’s own sales force might try to encourage getting new customers, selling a new product, or selling the company’s whole line of products.
Service oriented firms, such as hotels, or restaurants, now use sales promotions targeted at their employees. Some, for example, give a monthly cash prize for the employee who provides the ‘best service.’ The employee’s photo is displayed to give him recognition.
The overall promotion objectives are affecting buying behaviour, but the basic promotion objectives are informing and reminding. The marketing manager has the final responsibility for combining the promotion methods into one promotion blend for marketing mix. Special factors that may affect the promotion blend are the size of the promotion budget, stage of product in its life cycle, the particular target market/customers that must be reached, the nature of competition, and the nature of the product.
Thus, promotion is an important element of any marketing mix. Most customers an intermediate customer can choose from among many products. To be successful, a producer must not only offer a good product at reasonable price, but also inform potential customer about the product and where they can buy it. The producers must tell wholesalers and retailers in the trading channel about their product and their marketing mix. These middlemen, in turn, must use promotion to reach their customers.