Sales promotion is one of the most loosely used terms in the marketing vocabulary. We define sales promotion as demand stimulating devices designed to supplement advertising and facilitate personal selling. In other words, sales promotion signifies all those activities that supplement, co-ordinate and make the efforts of personal selling and advertising more effective. It is non recurrent in nature which means it cant be used continuously.
Concept of Sales Promotion
Sales promotion consists of diverse collection of incentive tools, mostly short-term designed to stimulate quicker and / or greater purchase of a particular product by consumers or the trade. Where as advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer promotion (for example samples, coupons, prizes, cash refund, warranties, demonstrations, contest); trade promotion (for example buying allowances, free goods, merchandise allowances, co-operative advertising, advertising and display allowances, dealer sales contests); and sales-force promotion (for example bonuses, contests, sales rallies).
Sales promotion efforts are directed at final consumers and designed to motivate, persuade and remind them of the goods and receives that are offered. Sales persons adopt several techniques for sales promotion. Creative sales promotion can be very effective. It is the marketing managers responsibility to specify promotion objectives and policies.
Definitions of Sales Promotion
- According to American Marketing Association “Those marketing activities other than personal selling advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display shows and exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine.”
- W.J. Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers.
Purpose of Sales Promotion
Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, while a free management advisory service cements a long-term relationship with a retailer.
From the marketer’s perspective, sales promotion serves three essential roles it informs, persuades and reminds prospective and current customers and other selected audiences about a company and its products. The relative importance of those roles varies according to the circumstances faced by a firm.
The most useful product or brand will be a failure if no one knows it is available! Because distribution channels are often long, a product may pass through many lands between a producer and consumers. Therefore, a producer must inform middlemen as well as the ultimate consumers or business users about the product. Wholesalers, in turn must inform retailers and retailers must inform consumers. As the number of potential customers grows and the geographic dimensions of a market expand, the problems and costs of informing the market increase.
Another purpose of sales promotion is persuasion. The intense competition among different industries, puts tremendous pressure on the promotional programmes of sellers. In India, even a product designed to satisfy a basic physiological need requires strong persuasive promotion, because consumers have many alternatives to choose from. In the case of luxury product, for which sales depend on the ability to convince consumers that the products benefits exceed those of other luxuries, persuasion is even more important.
Consumers also must be reminded about a products availability and its potential to satisfy. sellers bombard the market place units hundreds of messages every day in the hope of attracting new consumers and establishing markets for new products. Given the intense competition for consumers attention, even an established firm must constantly remind people about its brand to retain a place in their minds. Much of a firm’s sales promotion may be intended simply to offset competitors marketing activity by keeping its brand in front of the market.
Objectives of Sales Promotion
The basic objectives of sales promotion are:
- To introduce new products: To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance may be offered to business to stock and sell the product.
- To attract new customers: New customers may be attracted through issue of free samples, premiums, contests and similar devices.
- To induce present customers to buy more: Present customers may be induced to buy more by knowing more about a product, its ingredients and uses.
- To help firm remain competitive: Sales promotions may be undertaken to meet competition from a firm.
- To increase sales in off season: Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product.
- To increase the inventories of business buyers: Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
Rationale of Sales Promotion
Rationale of sales promotion may be analyzed under the following points.
- Short-term results: Sales promotion such as coupons and trade allowances produce quicker, more measurable sales results. However critics of this strategy argue that these immediate benefits come at the expense of building brand equity. They believe that an over emphasize on sales promotion may under mine a brands future.
- Competitive Pressure: If competitors offer buyers price reductions, contest or other incentives, a firm may feel forced to retaliate with its own sales promotions.
- Buyers expectations: Once they are offered purchase incentives, consumers and channel members get used to them and soon begin expecting them.
- Low quality of retail selling: Many retailers use inadequately trained sales clerks or have switched to self service. For these outlets, sales promotion devices such as product displays and samples often are the only effective promotional tools available at the point of purchase.
Types of Sales Promotion
In using sales promotion, a company must fulfill the objectives of the organization. Sales promotion objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. The specific objectives set for sales promotion will vary with the type of target market.
For consumers, objectives include encouraging purchase of larger-size units, building trial among non users and attracting switches away from competitors brands. For retailers objectives include inducing retailers to carry new items and higher levels of inventory, encouraging off-season buying, encouraging, stocking of related items, off setting competitive promotions, building brand loyalty of retailers and gaining entry into new retail outlets. For sales force, objectives include encouraging support of a new product or model, encouraging more prospecting and stimulating off-season sales.
Many sales promotion tools are available to accomplish these objectives at the consumer level, and at the middle men level. For the purpose of convenience, the types of sales promotion methods may be grouped under two categories:
- Types of sales promotion directed at consumers.
- Types of sales promotion directed at dealers and distributors.
Consumer Promotion Tools
The main consumer promotion tools include samples, coupons, cash refund offers, price packs, premiums, prizes, patronage rewards, free trials, product warranties, tie-ins, and point of purchase displays and demonstrations.
- Samples: Samples are offers of a free amount or trial of a product to consumers. The sample might be delivered door to door sent in the mail, picked up in a store, found attached to another product or featured in an advertising offer. Sampling is the most effective and most expensive way to introduce a new product.
- Coupons: Coupons are certificates entitling the bearer to a stated saving on the purchase of a specific product. Coupons can be mailed, enclosed in or on other products or inserted in magazine and newspaper advertisements. Coupons can be effective in stimulating sales of a mature brand and inducing early trial of a new brand.
- Cash Refund Offers or Rebates: These are like coupons except that the price reduction occurs after the purchase rather than at the retail shop. The consumer sends a specified “proof of purchase” to the manufacturer, who in turn refunds part of the purchase price by mail. Cash refunds have been used for major products such as automobiles as well as for packaged goods.
- Price Packs: These are offers to consumers of savings off the regular price of a product, flagged on the label or package. They may take the form or a reduced-price pack which is single packages sold at a reduced price (such as two for the price of one) or a banded pack, which is two related products banded together (such as a tooth brush and tooth paste). Price packs are very effective in stimulating short term sales, even more than coupons.
- Premiums or Gifts: These are merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. Sometimes the package itself, is a reusable container may serve as a premium. A self-liquidating premium is an item sold below its normal retail price to consumers who request it.
- Prizes: These are offers of the chance to win cash, trips or merchandise as a result of purchasing something. Pepsi-cola offered the chance to win cash by matching numbers under the bottle cap with numbers announced on television. Sometimes the prize is a person, offering the winner either cash or dinner with actor Sharuk Khan.
- Patronage Awards: These are values in cash or in other forms that are proportional to ones patronage of a certain vendor or group of vendors. Most airlines offer “frequent flyer plans” providing points for miles traveled that can be turned in for free airline trips. Cooperatives pay their members dividends according to their annual patronage. Le Meridian adopted an “honored guest” plan that awards points for users of their hotels.
- Free Trials: Free trails consist of inviting prospective purchasers to try the product without cost in the hope that they will buy the product. Thus, often we see, auto dealers encourage free test drives to stimulate purchase interest.
- Product Warranties: These are an important tool, especially as consumers become more quality sensitive. When My TVS offered a two year car warranty, substantially longer than other competitors customers took notice. They inferred that My TVS quality must be good or else the company would be in deep trouble. Companies must carefully estimate the sales-generating value against the potential costs of any proposed warranty programme.
- Tie-in Promotions: These are becoming increasingly popular. In a tie in promotion two or more brands or companies team up on coupons, refunds and contests to increase their pulling power. Companies pool funds with the hope of broader exposure, while several sales forces push these promotions to retailers, giving them a better shot at extra display and ad space.
- Point-of-Purchase Displays: These take place at the point of purchase or sale. Display of visible mark or product at the entrance of the store is an example. Unfortunately many retailers do not like to handle the hundreds of displays, signs and posters they receive from manufacturers. Hindustan Lever often use this tool to promote its products in the retail market.
- Product Demonstrations: Products are being shown in action. Consumers can visit the store and see the usage of product in live action so that doubts of the consumers can be clarified in the store itself. When a new product is introduced in the market, the sales promotional tool is often used. For example ultra modern grinder mixie being used by the company to demonstrate its speciality than the other product.
Trade Promotion Tools
More sales promotion rupees are directed to the trade than to consumers. Manufacturers seek the following objectives in awarding money to the trade:
- Trade promotion can persuade the retailer or wholesaler to carry the brand.
- Trade promotion can persuade the retailer or wholesaler to carry more than it normally carries.
- Trade promotion can induce the retailers to promote the brand through featuring, display, and price reduction.
- Trade promotion can stimulate retailers and their sales clerks to push the product.
Manufacturers use several promotion tools. Some of which are mentioned below:
- Price-Off: Manufacturers may offer a price — off, which is straight discount off the list price on each case purchased during a stated period of time. The offer encourages dealers to buy a quantity or carry a new item that they might not ordinarily buy. The dealers can use the buying allowance for immediate profit or price reductions.
- Allowance: Manufacturers may offer an allowance in return for the retailers agreeing to feature the manufacturers products in some way. An advertising allowance compensates retailers for advertising the manufacturers product. A display allowance compensates them for carrying a special display of the product.
- Free Goods: Manufacturers may offer free goods, which are extra cases of merchandise to middlemen who buy a certain quantity of items
- Push Money: Manufacturers may offer push money which is cash or gifts to dealers or their sales force to push the manufacturers goods.
- Specialty Advertising Items: Manufacturers may offer free specialty advertising items to the retailers that carry the company’s name such as pens, pencil, calendars, paper weights, and memo pads.
As the number of competitive sales promotions have increased, friction has been created between the company’s sales force and its brand managers. The sales force says that the retailers will not keep products on the shelf unless they receive more trade promotion money, while the brand managers want to spend their funds on consumers.