Module 6. Elements of marketing mix – IV. promotion

Lesson 22

SALES PROMOTION

22.1 Introduction

According to American Marketing Association, sales promotion includes those sales activities that supplement both personal selling and advertising and co–ordinate them and help to make them effective such as display, show and expositions, demonstrations and other non recurrent selling effort not in the ordinary routing.

Sales promotion has various other definitions, as below:

· Sales promotions are short term incentives to encourage purchase or sale of a product or a service.

· Sales promotions are temporary incentives targeted at the trade (called trade promotions) or at end consumers (consumer promotions). While sales promotions generally aim to change purchase behavior, they very in whether they attempt to persuade trade customers or end consumers to buy a product for the first time, to buy more, to buy earlier or to buy more often.

· Sales promotion consists of a diverse collection of incentive tools mostly short term designed to stimulate quicker and / or greater purchase of particular products. Service by consumers or the trade.

From the above definitions it can be said that sales promotion refers to many kinds of incentives and techniques directed towards consumers and traders with the objective to produce immediate or short term sales effects. Sales promotion provides a direct inducement to purchase by giving something extra over and above what is built into the product at its normal price.

22.2 Objectives of Sales Promotion

Sales promotions are used with either proactive or reactive objectives.

Following are the proactive sale promotion objectives:

1. To obtain more sales revenue or increase market share.

2. To increase the size of target market.

3. To ensure and build good experience of consumers with the product.

4. To deliver extra value from the product and build brand franchise.

Reactive sales promotion objectives are formulated when unfavorable market conditions crop up due to competition or more inventories etc.

Important sales promotion objectives are as under:

1. To lead to higher sales

2. Achieve sales of slow moving product at faster rate

3. Smoother out fluctuations in sales

4. Add new customers

5. Encourage repeat purchase

6. Reduce stocked product inventories

7. Motivate dealers to stock the products

8. To obtain better shelf space

9. To encourage dealers to take part in display and sales competitions.

10. To make better relationship with dealers.

11. To counter competitor moves.

12. To motivate sales personnel

13. To add to other promotional efforts like advertising and personnel selling

14. To divert consumers attention from price.

22.3 Advantages of Sales Promotion

Sales promotions prove advantageous to manufacturers, traders and consumers for manufacturers it is possible to use variable price strategy for different consumers and trade people based upon their price sensitivity by using sales promotion. Such sales promotion techniques include coupons, special sales events, discounts, clearance sale etc. Sales promotion techniques are offered for short time duration. This necessitates consumers to make purchase without comparison with other products. This necessitates dealers to make a forward buy ensuring fall stock with retailers. With higher stock with dealers, they make use of advertisements in local media leading to more customers and increasing stock traffic. Sales promotion techniques motivate consumers to buy products of new brands and upon satisfaction become loyal users and indulge in repeat buying.

22.4 Disadvantages of Sales Promotion

Sales promotion techniques motivate consumers to purchase products of new brands. This specifically applies to low priced, less differentiated low involvement products. With brand switching phenomena all the efforts and money put by the company to build brand image get reduced. It causes delay in purchase due to increased price sensitivity. Consumers wait for announcement of various promotional schemes. It gives wrong inference about poor quality of product. In this competitive world, companies are compelled to announce sales promotion schemes. Forward buying by dealers leads to diversion of stocks in non deal areas. They then resort to selling more stock items in non deal areas at prices less then list price thus impairing company's price discrimination policy. Sales promotion schemes have short term orientation which impairs the long term policy of company.

22.4.1 Classification of sales promotion techniques

Based upon the segment to when it is targeted, sales promotions are classified into consumers, trade and sales people sales promotion schemes.

Table 22.1 Classification of sales promotion schemes

Consumer sales promotion Techniques	Trade sales promotion techniques	Sales people sales promotion techniques
Price discount (Rupees off deals) Rebates (Refunds) Price pack deal (bonus back) Coupons Continuity programme Contest and sweepstakes Sample Pop display Premiums Free service camp Free Trials Exchange offer Product Warranties Low interest Financing	Off invoice allowance Free goods Buying allowance Dating Cash rebates Display and advertising allowance Trade Coupons Buy back allowance Dealer listing Count and recount allowance Bill back allowance Dealers loaders Slotting allowance Sales contest	Sales Contest Incentives Awards and Prizes Premium (gifts) Sales Meetings Training Sales Manuals

Table 22.2 Important sales promotion techniques

Sales Promotion	Description	Objectives	Relevant Example
Quantity Deals	Without increasing the price or with minimum increase in price, more quantity is offered of the same product	To lengthen consumption period, induce consumers to buy larger quantity packs, transfer larger quantity from company to market	Washing powder ‘ Wheel’ manufacturer provide 10% extra on same price.
Price Deal	Offer the product at less then normal list price during deal period only	To motivate consumers to purchase a new product, encourage quick sales, counter competitors policy.	Some of the big electronic goods stores sell some branded electronic goods at less than normal list price.
Coupons	It is a certificate that give right to consumers to get stated saving or get some specified thing free on part payment	To encourage product trial reward loyal consumers promote longer usage, give new product, in the market, solicit enquiries	‘Big Bazar’ provide coupons on exchange of old cloths in buying new garments.
Discounts	Special discounts (other than normal cash discounts to trade)	To push more stock for sale, to obtain immediate or early cash revenue from trade	‘Dove’ shampoo manufacturer provides ‘conditioner’ with it as free for increasing its sale.
Trading Stamps	This are attached with the purchase item. When this stamps are accumulated in specified numbers, they are exchanged for product or services	To develop consumer loyalty to reward consumers, to effect repeat buying, to keep away competitors.	Marvel yellow tea-Bowl (Plastic Container) on giving coupons.
Refund or rebate offers	It involves providing some money back to the consumer which consumer has paid on submitting proof of purchase of the said product	To motivate primary users to try a product, encourage brand switching, encouraging dealers to stock more arrange displays at retailer’s store.	RCM (Right Concept Marketing) or Amway give some cash in return on its product after sometime.
Package Premium	A gift product is packed inside the package of the product	Good method to supply samples of a new or related product to stimulate trials.	Arun ice-cream (In Tamil Naidu) offer toys inside the ice-scream packs.
Premium	A Premium (gift) is a reward provided to consumer for a specific action (Generally purchasing a product). These are given at low cost or as free. The main product and premium product may or may not be related in use.	To encourage purchase of a product/ service, develop loyalty, promote products in off season encourage consumers to try a new product.	Dell offer USB, head phones or holiday trips on purchasing laptop, PCs etc.
Banded Premium	Premium article is banded to the package of the product with suitable material like rubber band, tape, adhesive etc.	Good method to supply samples of a new or related product to stimulate trials	Haldiram offers Biscuit packets attached with its Namkeen packs.
Over the counter Premium	A bulky premium which cannot be packed inside or banded to the promoted product is given to the consumer over the counter.	To effect reduction in inventory at trade level. To counter competition.	Bournvita provide Badminton racket.
Container Premium	Product is supplied in a attractive and reusable container.	Act as a long time reminder at consumers home.	Surf excel packet is provided in plastic bucket that can be used for various purposes.
Self liquidating premium	Consumer is asked to pay a specified amount to claim and offset part or full cost of the premium of scheme administration cost.	To strengthen brand image, motivate retailers to organize displays, given as a reward to present user, increase consumption, act as a regular and pleasant reminder.
Free in mail premium	On sending proof of purchase or doing repeat purchases, the premium article will be sent to consumers home through mail.	To ensure consumers to remain brand loyal, lead to more usage, improves attracting power of advertisements.
Sampling	Free sample given to the consumer.	To stimulate initial product trial and allow the consumers have experience. If the consumer is satisfied chances of purchases increase.	Amul when it launched ‘Bindas’ chocolate it was given to students of a particular school as free sample for testing.
Consumer contests, sweepstakes	Competition is arranged for consumers based upon their general knowledge, skills, creativity. In sweepstakes reward is obtained based upon chance or luck.	To generate interest or excitement in customers, create brand awareness, encourage brand purchase increases customers visit at retailers, encourage purchase of more than one product from the store, receive consumer feedback, Attract new consumers.	Airtel conduct quiz by sending questions as SMS to consumer and giving talktime, prizes etc.
Dealer sales contests	Competition is arranged among dealers with respect to sales performance and winners are given trophy shield, holiday tour package etc.	To build dealer loyalty, encourage dealers to sell more.	Uninor gives holiday tour package to dealer which sale the maximum sim card.
Push money	Amount given to sales people to push additionally a particular product or product line.	To motivate sales people to sell more.	‘Pure it’ water purifier gives additional money to sales person.
Dealer Gifts	Providing gifts to dealer for their personal use.	To build better relations with dealers and obtain dealer co-operation on consumer schemes.	LG (life’s Goods) provide gift to its dealer i.e. bikes, Television for their personal uses.
Demonstration	Arranging product demonstration to make consumers aware about new products, its benefits and performance.	To satisfy consumers, encourage dealers, increase store traffic, strengthen advertising and personnel selling moves.	Honda CB twister, when it was launched demonstration was given on mini trucks specifying its performance.
Merchandise deals (11 for 10)	On purchase of a specific quantity of product, one more unit of the same product or another product of same manufacturer is given	To move inventory, show case other products of the same manufacturer, motivate dealers to sell more and earn more.	Dettol soap: Buy 3 get 1 free.
Trade allowance	Temporary reductions in price or paying back the expenses incurred by dealers partially or fully.	Application of push strategy.	Home Shop 18 provide products at reasonable price.
Buying allowance	Price reduction is given on purchase of a specified quantity of product	To stock more products with dealers.	Godrej No. 1 shop offers a pack of 4 shops at low price.
Buy back allowance	On purchase of additional unit over and above the agreed deal by the traders secondary incentive in the firm of money is given to such traders.	To increase sale of promoted product.	Amway incentivized the traders to cross the target.
Merchandise or display allowance	Allowance provided to trade for organizing desired display and merchandising effort.	To generate enthusiasm among, traders so as to promote company's product.	Marutisuzaki provide allowance to traders for advertising.
Count and recount	Based upon sales of a specified number of units, specific amount of money is given.	Provide reward to dealers to sell the stocks at faster rate.	LIC (Life insurance Corporation Limited) Provide specific amount of money to agents on sale of its insurance policy.
Trade fair and exhibition	Demonstration of costly industrial items.	Consumers and prospective buyers visit such fairs and purchase is made.	Auto expo in Pragati Maidan New Delhi, wherein auto manufacturers demonstrates their new launches (new cars).
Co-operative advertising and promotion allowance	Manufacturers and dealers jointly share advertising and promotion expenses at agreed terms.	Encourage dealers to advertise manufacturers’ goods in local media.