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DEFINITION of SALES PROMOTION Sales Promotion Is Any Type of Tool DEFINITION OF SALES PROMOTION Sales promotion is any type of tool undertaken by an organization to increase its sales and the usage or trial of a product or service. It is possible talk about different types of sales promotions. Often they are original and creative, and hence a comprehensive list of all available techniques is virtually impossible because every day a new type of promotion is introducted on the market. Sales promotions traditionally are complementary to advertising. They are used to reinforce and encourage customers to try the product and than purchase it. Sales promotion provides a range of short- term tactical measures to induce sales or particular products or services now rather than at some point in the future. In that sense, they are sales accelerators. Its aim is to provide extra value to the product or service, crating the extra impetus to purchase products that customer might not normally buy. (Hughes and Fill, 2007). According to Shimp (2000), sales promotion is used to induce the trade and/or consumers to buy a brand and to encourage the sales force to aggressively sell it. In retail, sales promotion is also used to encourage desired behavior from customers - come to store rather than a competitors, buy one brand rather than another, purchase larger quantities. Shimp (2000) is adding that effective sales promotion, from a consumer-response perspective, must make it relatively easy for consumers to obtain their reward, and the size of the reward must be sufficient to justify the consumers` efforts. This was summarized by Raghubir et.al (2004) who defined that from the customers` perspective economic effects of sales promotion can be divided into monetary and non-monetary gains or loses. Apart from economic effects of promotion, Raghubir (2005) is suggesting that promotions are also a source of information that consumers use to make judgements about products and their prices. On the top of that, third effects of sales promotion are the affective benefits which are based on the hedonic benefits of exploration, value expression and entertainment. The affective costs include regret (of missing a promotion), embarrassment, and irritation (due to the need to comply with restriction to avail of a promotion). Brassington and Pettit (1997) carried out classifications of sales promotion techniques from consumer perception: 1. Money-based promotion: • Reduced price offers - One of the most frequently employed tactics in the sales promotion repertoire of retailers is the provision of “special discounts”. Such in-store promotions take place within a store in an unannounced and unpredicted manner at the point of sale, allowing consumers to experience unexpected savings, or “windfall gains” (Ha, et.al, 2006). On the top of that, if customer experience unexpected or unanticipated saving (or gains), they are likely to spend the saved amount more easily comparing to situation, when they have been looking for saving on purpose or if they were expecting gains (Arkes et.al, 1994). - on shelf reduced price offers at the point of sale of the product. The reduction does not appear on product itself, but on leaflets advertising or on surrounding notices - on pack offer actually features on the product pack itself. The offer originates from manufacturer or it has form of joint promotion between the manufacturer and one particular retailer. • Coupons more complex money-based sales promotion. They are printed vouchers which consumers take to a retail outlet and uses to claim a set amount of money off a product. There are various forms of coupons. They can be printed within advertisements, on leaflets delivered from door to door, on inserts within magazines and newspapers, through direct mail, at the point of sale and on packs and latest popular one are e-coupons which are used for discounts while shopping online. Yeshin (2006) is adding that coupons can be designed to have different impacts on the consumer and therefore they can be further divided into coupons valid for this purchase, next purchase or multiple purchases. On the cost side, one of the major costs of a coupon program is the value of the coupons redeemed. If only consumers who would have bought the promoted brand anyway redeem coupons, then coupon redemption would always result in lower profitability. On the other hand, profitability of the couponing operation depends on both the incremental sales and the redemption rate (Leone and Srinivasan, 1996). From customer perspective, Huff and Alden (1998) propose that attitudes toward coupons are influenced by the following factors: (1) familiarity with coupons, (2) attitudes of family and friends toward using coupons, (3) fear of embarrassment or losing face when using coupons, and (4) the consumer's price consciousness. • Rebates it is also called `cash-back` scheme which involves a little more work and loyalty from the consumer. Tokens or labels to be collected from packaging, involving a number of purchasing episodes, and then mailed in to qualify for either hard cash or a substantial coupon (retailer or product specific). However, rebates are associated with greater expenditures of time and energy for redemption than free features. Therefore, retailers and marketers need to be aware of the extent to which perceptions of the time and effort are involved in redeeming different types of discounts. Consequently, the redemption effort is likely to have a negative influence on perceptions of the value (Munger and Grewal, 2001). • Hughes and Fill (2007) are adding another technique “try before you buy promotion” in which consumer has opportunity to have product for limited period of time for free. • On the top of that, Yeshin is adding “price-matching promotion” in which retailer is offering to match competitors price within certain area. This marketing tool is a signal of price beating offers and claims that store has the lowest prices what may have important implications for consumer price perceptions and behaviour. It may be more efficient for retailers to offer and advertise price-matching guarantees than to advertise specific low prices. The rationale is that a price-matching guarantee generally includes all the merchandise in a store while advertised prices include only a fraction of the stock. A price-matching guarantee thus constitutes an “umbrella pricing” tactic which is indicative of the overall price level of a store (Srivastava and Lurie, 2004). 2. Product-based promotion: • Extra product a) Extra free This technique involves offers such as `20% extra free`. To make sure, customer understand what 20 per cent looks like, the packaging, for example a can, would have band around the top of the label in a different colour from the usual packaging giving a rough idea of which part of the contents is free. However, Ong et.al (1997) suggests that consumers appear not to give bonus pack offers too much credence. Their surveys shows, that they slightly agree that the offer was hard to believe. As for pricing, consumers suspect that manufacturers do raise prices slightly in conjunction with offered bonus pack. b) BIGIF or BOGOF again, in promotion customers are offered extra free product. The BIGIF stands for Buy 1 Get 1 Free and BOGOF is written version of it - Buy one get one free. Effectively, the offer is saying `100 extra free`. As Parguel et.al (2007) stated, although the incremental cost is difficult to assess, pre-wrapped bundles are more expensive than separate-item ones,. In reality, separate-item bundles deliver value, drive volume, retain loyalty and build share, without modifying the processes at work at the manufacturer and retailer levels. c) Banded packs Yeshin define that these can be same product or assorted product and it basically means that there would be some kind of discount if more products are bough (3 for 2, 20% of if bought 2…) d) Samples The importance of product trial an direct behavioural experience with a product is recognized by marketing mangers (Ndubisi & Moi, 2005) therefore main objective of samples is to persuade people to try a product - On-pack samples can be given away with existing products - Trial sizes can be sold in retail outlets at a minimal price - Print media this allow targeting of fairly narrowly profiled audiences, what can be efficient way of distributing samples to potential buyers - Direct mail if samples are small, light and non-perishable, they can be distributed by direct mail, either to people already on a mailing list, or to those who respond to an offer made in an advertisements - Door to door popular, but expensive way of distributing samples. Effectively, samples are putting directly into people’s hands in an environment, where it is likely to be remembered and used. 3. Gift, prize or merchandise based promotion a) Self-liquidating offers invite the customers to pay a small amount of money, and usually to submit specified proofs of purchase, in return for goods that are not necessarily directly related to the main product purchase. The money paid is usually just enough to cover the cost price of the goods and a contribution to postage and handling. b) Free mail-in consumer can claim a gift, free of charge, in return for proofs of purchase and perhaps the actual cost of postage (but no handling charges or the cost of the gift itself) c) Free inside or on-pack means offering free gifts contained inside or banded on to the outside of the pack. d) Free with product is similar to an on-pack offer, except that the gift is not attached to product, but has to be claimed at the checkout. e) Customer loyalty schemes these are designed to encourage repeat buying, especially where switching is easy and generic brand loyalty is low. f) Contest and sweepstakes this allow organisation to offer very attractive and valuable incentives, such as cars, holidays or large amounts of cash to very small number of purchasers who happen to be lucky enough to win.
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