Summary Chapter 10 SALES PROMOTION Learning Objectives: Promotion Sales Promotion, Types of Sales Promotion Objectives, Strength & of Sales Promotion Major decisions in Sales Promotion Consumer Sales Promotion Dealer Promotion Business Promotion Publicity/ Public relations 1. Promotion- Promotion is a form of communication with an additional element of persuasion to accept ideas, products, services and hence, persuasive communication becomes the heart of promotion, the third element of marketing-mix. The promotion-mix includes four ingredients ie Advertising, Personal selling, Publicity, and Sales Promotion. 2. Sales Promotion is an integral part of the marketing effort. It covers those marketing activities other than advertising, publicity, and personal selling that stimulate consumer purchasing and dealer effectiveness. Such activities are displays, shows, exhibitions, demonstrations, and many other non-routine selling efforts at the point of purchase. “In a specific sense, 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 displays, shows and expositions, demonstrations and other non-recurrent selling efforts not in the ordinary routine.” In short, sales promotion is a bridge or a connecting link between advertising and personal salesmanship, the two wings of promotion. A. Why Use Sales Promotion? Sales promotion is increasingly being used to accomplish an ever- expanding list of marketing objectives. The company’s marketing objectives and strategies influence the development of sales promotion objectives and strategies. There can be a number of sales promotion objectives, depending upon the firm’s policies, marketing objectives, nature of the product and its stage in product life-cycle, level of existing and anticipated competitive activity, consumer response pattern, economic conditions, and the target group (consumers, traders, or sales force), etc. B. Types of Sales Promotion- Pro-active or Reactive Sales Promotion I. Pro-active Sales Promotion- The most common objectives under pro-active category are: 1. To gain additional market share or additional revenue. 2. To expand the target market. 3. To develop favourable consumer experience with the product. 4. To add extra value to the product and develop brand franchise. II. Reactive Sales Promotion- Reactive sales promotion objectives are developed in response to some unfavourable market situation, or where the objectives are essentially short- term, such as the following: 1. In response to competitive moves. 2. When excessive inventory piles up. 3. To generate short-term cash. 4. When the decision is to discontinue a product, or close down the business. 3. Objectives of Sales Promotion: i. Increase sales volume ii. Speed up the sales of slow-moving products iii. To check the fluctuations in sales iv. Attract consumers towards new product and increase trial v. Encourage repeat purchase vi. Clearance of excessive inventories vii. Motivate dealers viii. Encourage dealers to participate in display and sales contests ix. To gain advantageous shelf-space x. To increase store traffic xi. Improve relationship with dealers xii. To block competitors’ moves xiii. Motivate sales force xiv. To supplement advertising and personal selling efforts xv. Deflect customers’ attention from price 4. Strengths of Sales Promotion a) It stimulates positive attitudes toward the product. b) It gives extra incentive to the customer to make a purchase. c) It gives direct inducement to take immediate action now rather than later. d) It has flexibility and it can be used at any stage of a new product introduction. 5. Limitations of Sales Promotion a) Sales promotions have temporary and short-life not exceeding three months. Sales promotion alone cannot build up brand loyalty. b) Sales promotions are only supplementary devices to selling efforts of other promotion tools. c) They are non-recurring in their use. They have seldom reuse values. d) Too many sales promotions may adversely affect the brand image, suggesting its lack of popularity, or overstocking by a company. e) 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. f) Sales promotions 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. 6. Major decisions in Sales Promotion- In using sales promotion, a company must establish the below mentioned steps: a) Establishing the Sales-Promotion Objectives- Sales-promotion objectives are derived from broader promotion objectives which, in turn, come from marketing objectives. The type of objectives will vary with the target market. b) Selecting the Sales-Promotion Tools- There are three kinds of sales promotion. They are: i. Consumer Promotion: Activities intended to educate or inform the consumers and those intended to stimulate the consumers. ii. Dealer Promotion: Activities to increase the interest and enthusiasm of dealers and distributors. iii. Business Promotion: Through exhibitions, trade fairs and conventions. c) Developing the Sales-Promotion Programme- The marketer has to determine the size of the incentive, conditions for participation, duration of promotion, the distribution vehicle, timing of promotion, total sales- promotion budget and the incentive cost in order to arrive at a full programme. d) Pre-testing the Sales-Promotion Programme- The programme thus developed should be pretested to check the effectiveness of the programme. e) Implementing and Controlling the Sales-Promotion Programmes- This involves planning, designing, and modifying programme, etc. Each programme should have its individual implementation and control. f) Evaluating the Sales-Promotion Results- The final step is to evaluate the results of the programme to determine the effectiveness of the programme. 7. Consumer Sales Promotion-The consumer sales promotion involves application of the following tools: a) Samples: Samples are offers of a free amount or a trial of a product for consumers. E.g., Hindustan Levers introduced Ariel Trial Pack for its detergent powder Ariel Micro System. b) Coupons: Coupons are certificates which entitle a consumer to buy the product at reduced prices. Coupons are accepted as cash by retailers. c) Rebates: Cash refund or rebate provides a price reduction after the purchase rather than at the retail shop. d) Price Packs: Price Packs are offers to consumers as discount. E.g., ` 2 off on a Brooke Bond pack of 500 gms. e) Premiums: Premiums (or gifts) are merchandise offered at a relatively low cost or free, as an incentive to purchase a product. f) Prizes: Prizes are offers of the chance to win cash, trips or as a result of purchasing something. g) Patronage Award: These are values in cash or other forms. h) Free Trials: Free trials consist of inviting prospective purchasers to try the product without cost in the hope that they will buy the product. i) Product Warranties: Product warranties are important promotional tools in sensitive consumer markets. j) Tie-In-Promotion: They involve two or more brands or companies that team up on coupons, refunds, and contests to increase their pulling power. k) Point-of-Purchase(POP) and Demonstration: POP displays and demonstrations take place at the point ofpurchase or sale. 8. Dealer Promotion-Dealer sales promotion provides the selling devices. Sales-promotion devices at the point of purchase inform, remind, and stimulate buyers to purchase products. People who see these devices are in a buying mood and thus they can be easily persuaded to buy those products. Tell tags are informative labels affixed on the product, describing in detail the features of the product and its unique selling points. Shelf talkers are similar labels attached to the shelves close to product displays. Counter top racks, posters, mechanized signs are other point-of-purchase displays. 9. Business Promotion-Industrial goods marketing may involve provision for financing, training of users, buy-back arrangements, and even reciprocal trading. A. Joint Promotion- If two brands that already have an established equity, endorse each other, the likelihood of success even beyond regular advertising stands a good chance. Joint promotions between two brands that pose no threat to each other, yet aim at the same target audience and belong to the same usage category, stand to gain in terms of competitive edge by endorsing each other. The most notable examples here are the Surf Ultra-Videocon washing machine tie up. B. Exhibitions and Trade Fairs- An exhibition stand or stall is a form of showroom which provides a temporary market place at which buyers and sellers meet. There are various types of exhibitions, international trade fairs, national and local fairs and exhibitions. C. Indian Fashion Scene- The fashion market in the national and the international scenario is increasing at a maddening pace. With the export boom coming through in a very big way, the fashion scenario has received a further boost.The fashion show idea can be exploited intelligently in the overall promotional strategy. D. Exclusive Showrooms- Generally, the showroom idea is used as a tool of distribution. Currently, in the face of growing competition and unfair undercutting by dealers, several consumer durable companies are opening plush, exclusive showrooms, arcades,