In this article we will discuss Sales Promotion:-
1. Concept of Sales Promotion 2. Definition of Sales Promotion 3. Meaning 4. Why Use Sales Promotion? 5. User 6. Objectives 7. Pro-Active or Reactive;
8. Options of Promotion Objectives 9. Types 10. Tools 11. Techniques 12. Sales Representative Level Promotion 13. Promotion and Promos 14. Major Decisions and Other Details.
Sales Promotion: Concept, Objectives, Types, Tools, Techniques, Advantages and Disadvantages
Sales Promotion – Concept
Many of you must be confused about promotion and sales promotion. Promotion is a comprehensive term and covers the entire gamut of advertising, publicity, public relations, personal selling and sales promotions.
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Sales promotion is thus a part of promotion, and is restricted to direct inducements on a short-term basis given to consumers or trade so as to stimulate purchases of products and services.
Luich and Ziegler define sales promotion as ‘a direct inducement which offers an extra value and incentive for the product to the sales force, distributors, or the ultimate consumers’.
Sales promotion, in other words, is a marketing activity that adds to the basic value of the product or services for a limited period of time and directly stimulates purchasing by the target audience.
The direct inducements cover a whole package of coupons, price-offs, premiums, larger quantity trading stamps, free gifts, displays, shows, expositions and demonstrations. Sales promotion serves to fill the gap between advertising and personal selling by coordination and supplementation of the efforts in these two areas.
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While advertising explains the logic behind buying, sales promotion offers us an incentive to do so.
Sales promotion operates at three levels:
(i) At the level of consumer, it is called consumer promotion, e.g., free gifts, samples, price-offs.
(ii) At the level of dealers and distribution, it is called trade promotion, e.g., free goods, display contests, dealer sales contests, push money, etc.
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(iii) At the level of salespersons, it is called sales force promotion, e.g., salesmen’s contests, bonus and sales rallies.
Sales Promotion – Definition
Sales promotion is defined by the Institute of Sales Promotion (ISP) as “comprising a range of tactical marketing techniques within a strategic marketing framework to add value to a product or service in order to achieve specific sales and marketing objectives”.
A shorter definition could be- “The practice of offering a temporary additional value to a brand in order to reach specific marketing objectives”.
Some salient points are:
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1. Temporary – What length of time would qualify for being temporary? An ongoing promotion, e.g., low prices everyday becomes a part of the brand property or normal trade practice. The whole purpose of such promotion is lost.
2. Additional value covers – money, e.g., reduced prices, free sample, extra value.
3. Goods, e.g., gift.
4. Intangible benefits, e.g., charity or personality associations.
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5. Specific marketing objectives – If these objectives are spelled out clearly, an effective solution can be conceived.
Sales Promotion – Meaning
Sales Promotion is an important instrument in marketing to lubricate the marketing efforts. Today, sales promotion is a necessity and not a luxury. It is not an expenditure, it is an investment which can pay rich dividends. It 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. Sales promotion tries to complement the other means of promotion given above.
The American Marketing Association defines sales promotion as “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.”
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In short, sales promotion is a bridge or a connecting link between advertising and personal salesmanship, the two wings of promotion. The manufacturer or wholesaler may have a good product, reasonable price, attractive package, etc.
He may have a good sales force. He has to attract prospective buyers, urge them and persuade them with the above factors to buy his product. Hence, sales promotion aims at stimulating the purchasing at the point of sale and dealers’ effectiveness at the retail channel of distribution.
Sales Promotion – Why Use Sales Promotion?
Sales promotion and publicity, when combined with advertising and personal selling programmes, really add up to more than the sum of the parts. Sales promotion is that “something extra” (2 + 2 = 5). It can arouse enthusiasm, create a buying mood or spark an immediate reaction from consumers, dealers and the firm’s salesperson.
Many sales promotion campaigns involve the use of incentives. Incentives are something of financial value added to an offer to encourage some obvious behavioural response. Sales promotion is often thought as special selling effort to accelerate sales. Point-of-purchase displays give a real payoff, sales rising by 25 to 50 per cent or even more.
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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.
Sales Promotion – Users
Sales promotion and publicity, when combined with advertising and personal selling programmes, really add up to more than the sum of the parts. Sales promotion is that “something extra” (2+2=5). It can arouse enthusiasm, create a buying mood or spark an immediate reaction from consumers, dealers and the firm’s salesperson. Many sales promotion campaigns involve the use of incentives.
Incentives are something of financial value added to an offer to encourage some obvious behavioural response. Sales promotion is often thought as special aggressive selling efforts to accelerate sales. Point-of-purchase displays give a real payoff, sales rising by 25 to 50 % or even more.
Sales Promotion – Objectives
Sales promotion has dual objectives; 1. To increase buying response by ultimate consumer, and 2. To increase selling efforts and intensity by dealers as well as by sales personnel. The result of an effective total marketing programme is sales success, which entirely depends on positive customer reaction and an intense, well organised selling effort by resellers and salespersons.
One study suggested the following reasons for undertaking actively all forms of sales promotion:
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1. Calling attention to new products and product improvements,
2. Informing buyers of new brand and new package,
3. Improving market share,
4. Increasing, usage rate by present customers,
5. Maintaining customer patronage and brand loyalty,
6. Obtaining dealer outlets,
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7. Securing additional shelf-space and added display,
8. Creating talking points for salespersons.
Sales Promotion – Pro-Active or Reactive
Sales promotion objectives could be either pro-active or reactive.
The most common objectives under pro-active category are:
1. To gain additional market share or additional revenue.
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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.
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.
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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.
Sales Promotion – Options of Promotion Objectives
In a dynamic and rapidly changing marketing environment, unfavourable conditions may appear with little or no warning. It is difficult for the management to anticipate and plan for such exigencies. However, hasty decisions regarding sales promotion objectives may sometimes produce adverse effects for the firm in the long run.
An important area that concerns sales promotion objectives is directly related to the specific promotional techniques to be used. The techniques could be those where the measurement of results is straightforward, or difficult to measure. For example, it is easy to measure the impact of discount offer on sales, but it is very difficult to measure the impact of premium on the perceived value of the promoted brand.
Perhaps, the most difficult part in managing sales promotion is to decide which particular sales promotion tools should be used for achieving the specific objectives; which of these tools can be and should be combined to produce a synergistic effect, and how can these be delivered to the target audiences, that is, consumers, resellers, or the sales force.
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Marketing objectives and strategies are related to the marketing-mix of a company, while the promotion objectives and strategies related to the promotion-mix only. What would be the role of promotion-mix depends directly on the marketing strategy, and on the marketing objectives.
Once the marketing strategy assigns promotion-mix the role of using “pull-push” in case of sales promotion and only “pull” in case of advertising, the promotion objectives have consumer as well as trade orientation, and the sales promotion strategies focus on different consumer promotions and trade deals.
Sales Promotion – Types
1. Freebies:
To stimulate a stagnant demand and to move accumulated inventories blocking high cost finance, companies offer freebies, especially in the consumer durable sector. A free automatic camera is given free with every Samsung refrigerator, a portable colour Akai TV free with a 21-inch Akai TV, etc.
IFB is offering a gas stove and a gas lighter on two of its washing machine models. If the cost of freebies is covered partly or fully in the transaction, under the MRTP Act, it becomes an unfair trade practice.
A freebie is allowed only when the company bears its cost. The Indian consumer still has suspicions about cash rebate. A mobile phone which comes as a freebie with a car is, therefore, received as value addition. A rebate of Rs. 20,000 on the car would have smacked of an inferior quality.
2. Contest Prizes:
Contest prizes are becoming attractive. There was a joint concert of Nescafe and Samsung. A large globe contained a number of 15 gm Nescafe sachets. If we guess the total number of such packets correctly and write a good slogan, we could be winning a Samsung refrigerator worth Rs.70,000.
In a recent Tata group contest, the participants had to select the ‘Pride of India’, complete a slogan, and send the entry with an empty packet of any Tata tea or coffee, and one could win a Mercedes Benz or a Tata Sumo Deluxe car.
The total sales promotional budget earmarked for this contest was Rs.1.5 crore. In a Nestle contest, Samsung refrigerators were offered as prizes. Such co-promotions create tremendous awareness for the new entrant. It is to be seen that where a contest does not contravene the MRTP Act, and does not come under the unfair trade practices.
3. Discount Sales:
Phoenix International, the Delhi-based shoe company has been offering four pair of shoes with every purchase of Rs.1,500 and two pairs with a purchase of Rs.800. It is better to offer a discount of 30% rather than pay an interest of 3% per month which works out to 18% for a six months season.
Discounting or promotion pricing has traditionally been a function of a competitive market that is in the process of evolving. India suits this definition right now. The Govt. move to levy excise duty on the maximum retail price of consumer durables may affect the discounts and promotional schemes.
4. Strategic Use of Promos:
Sales promotion was so far treated just as a tactical tool. But it has now come to be used strategically also. Marico is concentrating on hair dressers and beauty parlours to reposition Parachute hair oil as a hair-styler. Tropicana’s brand awareness was increased by a phone-in contest by Pepsi.
Brand expectations are built by Ford by asking participants to identify celebrities inside the car, and to win a foreign trip. BPL has sought to build value around the brand by offering a package of product on low monthly installments.
Opel users are invited to an evening of entertainment, extending interaction beyond purchase. Sales promos are now related to brand building, keeping additional sales volumes just incidental. Promos magnify brand value continuously. Promo can build recognition and sales in the short-term, and brand awareness in the long-term. Promos support mainline advertising.
5. Exchange Offers:
To stimulate replacement demand, a company gives a certain amount of the price of a new product in exchange of the old product. To illustrate, National offers Rs.500 off on its grinder mixer if a consumer brings his own old grinder mixer.
Similarly, Videocon offered Rs.7,000 off on its No-frost model of refrigerator against an old fridge. Akai, Daewoo, Philips, Samsung, Rayban, Van Heusen and Maruti have come out with exchange offers.
The question that needs consideration is whether exchange offers ensure loyalty. In TV market, the introduction of S-band and hyper-band sets led to the replacement of old 12-channel sets, thus giving rise to exchange offers.
In sales promotion, the following arithmetic is taken into account:
Cost of Promotion = Actual Price of the Gifts + Cost of Promoting and Promotion (Point of Purchase Material + Media ads, etc.,) < Additional Sales Revenue.
John Paul Jones in his seminal work “What’s in a brand”? Says that the sales gain would have to be large enough to compensate for the reduction in revenue necessary to fund the promotion.
We have to use sales promotion sparingly. They should be carried out in small bursts and phased out. They are to be used at the right time in the right measure. The mix between sales promotion and advertising is a matter of strategy. Promotion is tactical and short-term.
Too much of it affects the long-term brand equity. There is a risk of brand devaluation if SP is done in excess. Sales promotion has to be selectively used like steroids, because though beneficial in the short-term, there will be damage to the health of the brand in future.
Contests and freebies are resented because these distort the competition, and divert the attention of the consumer from the core product. The brand which is constantly on sales promotion is vulnerable to a better offer.
The consumers might get alienated from the superior benefit it actually offers. The consumers become addicted to promotional offers and do not consider the brand unless there is a freebie.
The constant promotion hinders a relationship between the brand and the consumer. Brand buying is just a transaction. We enter into a vicious circle. When a competitor takes a non-promotional route, the promotion led brand is vulnerable. Price-offs in off-season fridge sales does not help much to stimulate off-season sales.
Only consumers postpone their purchases till an off-season price-off is announced. Even price-off may tell upon the quality, because the manufacturer is likely to cut corners somewhere. Promotions must tie- in well with the brand’s message.
Of late, consumer durables are being sold in India on sales promotion. Mostly, either it is a price related scheme or bundling of a package. All concepts of brand management are thrown to the wind. There is no consumer empathy with the brand. It is just proving the maxim ‘there is no brand loyalty which two cents off can’t overtake’. It is like turning a brand into a commodity, and sells it on price sensitivity.
6. Below-the-Line (BTL):
Surprisingly, a wide range of below-the-line activities account for a large share of the total promotional mix all over the world. The big three advertising groups are WPP, Interpublic and Omnicom who put together, account for 43.7 per cent of global advertising and marketing services.
They experience a larger decline in revenue from advertising. Revenues from activities like direct marketing promotions, PR and research are on the rise.
This holds true even for the Indian market. In the mid-90s, promos were just some trivial giveaways. The real thrust came in 1999. The nature of promos changed. There were magazine samples, internet promos, contests and coupons in consumer durables. 25 per cent budget is dedicated to BTL.
Advertising to promotional ratio in the early 90s was 70:30, but it is just the reverse today. Such a shift has several reasons. The most prominent reason is an emphasis on quarterly results expected of senior management.
A marketing man today wants a short-term increase in sales of the current year, rather than waiting to build the brand over a period of five years, by which time he may or may not be in the organisation.
Another reason for the rise in BTL is the lead given by the market leader such as HUL who would like to battle the slowdown of their top-line. But such an approach may cause further slowdown in certain categories, e.g., pastes and soaps on promotion do not lead to category growth.
On the contrary, such promotion delays further repurchases. But food products do show category growth by such promotion, e.g., biscuits. Mass advertising has its limitations and a certain shift to direct marketing and promos is inevitable.
Promotion is not only addressed to consumers but also to dealers. Agencies of late have set up BTL divisions, but these lack depth. Clients also expect the agencies to offer them BTL without paying for these services, but just as value-add-ons. Agencies must sell a generic concept of BTL to clients. But BTL generates sales at high costs and is not sustainable. It also affects the brand equity.
But healthy promos will strengthen the brand. It is not the BTL that weakens the brand, but below-the-belt does, e.g., price promotion where two pieces are offered for the price of one. Some activities like event associations do enhance the brands. One maxim is, do promote, but not at the cost of brand equity.
In business, there is a growing realization that promos have been stretched too much. Since late 2000, there has been a conscious attempt to curtail the promo expenditure and use the funds to build the brands. Promos no longer generate excitement. Consumers have started looking for value.
Promos try to maintain their effectiveness by one-upmanship. Consumers take promos for granted. When promos are on par amongst the brands, they tend to pick the brand on the basis of offer.
Retailers have to exert more to handle promos. Besides, promos occupy shelf-space. The nature of promotional offers has changed. Instead of giving instant gratification, the consumers are made to wait to see whether they have won some coveted prize. It is an attempt to squeeze maximum out of promos. There is an effort to integrate promotion with the core brand values.
7. Salesmanship Contest:
The contest is called ‘the world’s greatest salesperson’. As we know Ogilvy, the founder of an agency went door-to- door to sell the Aga stoves in Scotland in 1930s. Advertising is salesmanship in print, but has moved too far from it. A contest is to be held by Ogilvy one Worldwide to test how well one understands people and one’s creativity.
The contest will be held on a branded channel on Youtube and will use other social media like Facebook and Twitter. The product to be sold is a common, everyday red brick. If you can sell it, probably you can sell anything. It is chosen as it is ubiquitous and will not cost much when contestants buy it for their video submissions. Indeed the contest is brickmanship!
The company made Ogilvy writes a manual for other salesmen. The present contest will earn the winner a fellowship during which the winner will help Ogilvy write a guide to selling in the 21st century.
Sales Promotion – Tools
Consumer promotions are directed towards the consumer and are strongly prevalent in the FMCG category. It requires a substantial media budget over and above the freebies. One has to communicate with the consumer through advertisements and POPs at the retail level.
Consumer level sales promotional tools are:
(i) Consumer contests with prizes
(ii) Price-off deals
(iii) Purchase price refunds
(iv) Coupons
(v) Samples
(vi) Premiums or gifts –
(a) With-pack premium
(b) Reusable container
(c) Free-in-the-mail premium
(d) Self-liquidating premium (item sold below its normal retail price)
(vii) Rewards plan on purchases
(viii) Free trials
(ix) Product warranties
(x) Cross Promotions
(xi) Point-of-purchase (POP) display and demonstrations.
Consumer promotion can be offered either by a manufacturer or a retailer. Those tools which carry a selling message from one category, e.g., free samples, coupons, gifts related to the product, form one category. The rest forms another category, e.g., price-off packs, trade allowances, etc., gifts not related to product.
Consumer promotion takes care of the strong competitive brand. Without reducing the retail price, a marketer provides consumer promotion when raw material prices are reduced. Consumer promotion helps to penetrate the market. It induces trials and generates loyalty. It can be used as a stock clearance scheme.
The basic aim is to increase consumption and usage.
The incidental aims are:
1. To make slow moving products fast moving ones.
2. To regularise sales fluctuations.
3. To overcome seasonal recession.
4. To clear unsold stocks of an old product.
5. To effect sales of a specific pack size (Vicks large size bottle) or in a specific market(s).
6. To help launch a new product (say Cello instead of Hello on telephone and get the gift, identify independent personality and get the Alphonso mangoes).
7. To meet a competitor’s strategy.
8. To build goodwill by sharing the gay spirit.
9. To improve a product’s visibility on the shelf.
10. To encourage trade to support the product.
a. Role of Coupons:
When new products are launched, the ads may carry coupons of price-offs to induce trials. There are instances where coupons of free products are inserted in for new products. In the Colgate-Pepsodent war, recently both Colgate and HLL offered coupons for a free tube of toothpaste.
Apart from inducing trials, coupons are used to retain the existing customers. Coupons are used to attract new customers. Couponing gets a boost in a competitive environment.
Couponing is used as a tool to penetrate the markets. It is also used to keep customers away from the competitive products. Direct marketing is used to send coupons to a selected list of users. In direct marketing, couponing also helps to evaluate the effectiveness of the campaign based upon the response rate. Even mass media coupons can help advertisers to know the effect by considering the redemption rate.
Couponing is used to build a relationship with the customers. It also builds a top-of-the-mind awareness. Couponing works betters for premium products because price-offs give genuine value to the customers.
Lakme uses couponing for its premium Orchid range. Couponing is useful to promote a new concept. The No. 2 brand uses couponing to challenge the market leader. Success of couponing exercise is based upon retailer cooperation.
The retailers were formerly reluctant to handle coupons because passing coupons to distributors, who in turn passed them on to the company, and receiving payments thereafter took a lot of time. Companies usually, therefore, pay additional handling charges to the retailers per coupon handled.
The retailers have also realised that coupons attract customers to their shops, who are likely to buy other commodities and brands as well. Thus, they will get the benefit of additional business.
According to John Paul Jones, couponing as a method of promotion is better than other methods. Couponing has the advantage over direct rebates in the sense that couponing does not make the ‘cheapness’ explicit.
Coupons have four advantages- (1) Regular buyers are limited to one reduced price pack, so that the subsidy to existing buyers is reduced, (2) Coupons do not dilute the brand value, (3) The customer tends to resist paying the normal price again with normal rebates. It is not so with coupons and (4) Competition retaliation is not so sharp.
b. Scheme Selection:
The scheme must be novel and innovative. It should not be easily capable. To illustrate, in-pack premium is better to promote sales of a specific pack while price-off is better to clear unsold stocks.
The schemes are all product specific. What succeeds for one product may not succeed for other products. The same holds true for markets. The time also determines the success. What has succeeded may not necessarily succeed in future too.
The company must make sure that the benefit of the scheme should reach the consumers for whom the scheme is meant. Unscrupulous traders and transportation bottlenecks may hamper the scheme. Many were aggrieved when they did not get Madonna’s audio cassette on Pepsi Drink’s Crowns.
Secondly, the premiums advertised must be readily available at retail points during the entire period of scheme. Here, proper forecasting and sourcing are important. The common problems are non-availability of premium/differing quality of premium item
c. Scheme Execution:
The target market area is to be carefully selected and should include the neighbourhood satellite markets to avoid leakage, given the fact that the tax structure is not uniform over the states.
The accountability of redemption of coupons or refunds and rebates should be properly fixed.
d. Promoting the SP Scheme:
Promotional support is a must for any SP scheme. The campaign should be directed to the consumers for whom it is meant. It should also take into confidence the trade channels. The salesforce should know its role and be motivated to do its best.
e. Follow-Up:
The market is to be assessed soon after the scheme begins. This monitoring covers brand / premium availability, brand visibility, movement of the brand at the retail outlets on day-to-day basis, competitor’s countermoves, etc.
Timely intervention in the form of reminder ads, additional deployment of sales force, additional POP material, etc., may sometimes be necessary.
Sales Promotion – Techniques
The following are some of the most commonly used sales promotional techniques:
1. Issuing Coupons:
Coupons are issued by producers of packaged goods or by retailers that could be used in retail shops that can be redeemed at discounted prices when purchasing products/services. These coupons are either advertised by producers/retailers in newspapers or distributed in weekly flyers via mail across households.
For example- Big Bazaar issues coupons for selected items in their weekly flyers that are distributed via mail or along with newspapers.
2. Free Samples:
Free samples are small and packaged portion of the (main) merchandise distributed for free. Free samples are developed for introducing new products. These samples may be distributed door-to-door (through personal selling) or retail stores.
For example- Sensodyne Toothpaste meant for relieving tooth sensitivity is a unique product introduced in India. The manufacturer of Sensodyne has been reaching out to local dentists of Mumbai who have been distributing free samples of these toothpastes to create awareness among their patients.
3. Reducing Sales Price:
This involves offering products to consumers at discounted or reduced prices by a certain percentage from the regular price of the product. This activity aims at attracting consumers to other or newer brands, seasonal and unseasonal goods. For example, a 15 to 60 percent off on clothes before some festive season in retail shops are examples of sales or sales promotion.
4. Holding Fairs and Exhibitions:
Producers of new brands or innovative products are introduced by holding fairs and exhibitions. For example- The Confederation of Indian Industry (CII) organises several business and trade fairs on specific industries. Between February 26th and 28th CII has organised the International Engineering & Technology Fair (IETF) for businesses in engineering and manufacturing industry to promote Business-2-Business (B2B) networking (CII, 2014)
5. Distribution of Gifts:
Producers may distribute gifts to consumers to increase sales of products. For example- sales up to Rs. 2,500 will be given a gift worth Rs. 500.
6. Competitions or Contests:
Producers can organise competitions or contests among salespersons to encourage them to generate more sales from new customers. Companies can offer a car or consumer durables for generating certain percentage of sales in a particular month or quarter.
7. Free Service:
Producers / retailers may promise free service to consumers for a specified period of time after sales. For example, few car retailers offer free servicing for the first 6 months if certain car components were damaged or under performed.
8. Special Rebate:
Rebate is a partial refund to someone who has paid more or extra on purchase of a specified quantity or value of goods within a specified period. Unlike price cut off or discounts, rebates are provided after the full payment of full invoice amount.
9. Full Finance @ 0%:
Under this method, the product is sold and money is received on installment basis at 0% or without interest rate. The seller determines the number of installments in which the price of the product will be recovered from the customer.
Sales Promotion – Sales Representative Level Promotion
At the level of sales representatives, SP tools are incentive programmes and sales contests of representatives.
There are motivational tools linked to sales that achieve a certain level or cross that level. These rewards can be given for individual performances and for special achievements.
Rewards may be in cash or in kind or a mix of the two. These are cost-effective motivators and improve representative’s productivity.
Some basic reasons for their extensive use are:
1. Morale boosters.
2. Increase units sold per representative.
3. Increase sales per representative.
4. Launch new products.
5. Increase sales on average per account.
6. Boost recession-period sales.
7. Upgrade existing accounts to high ticket products.
8. Revive old products.
The managerial considerations are discussed along with sales contests.
b. Sales Representative Contests:
Here, sales representatives are made to compete amongst them to motivate them to achieve higher goals and benefit the organisation. Used positively, they are a great device. But used improperly, they demoralise the representatives.
Overenthusiastic representatives may resort to dumping, overloading inventories, cheating and neglecting of customer service. It is, therefore, crucial that these contests are handled properly.
The themes could be creatively chosen. Direct themes could be obtaining new accounts or improving the market share. Novel themes – the focus is on recreation and fun linked with the current sales scenarios.
Some novel themes could be:
1. Let’s hunt for the hidden treasure (find new customers).
2. Make your customer fat (sell more to the existing customer).
3. Planting the gold (sell more profitable product mix).
4. Healthy customers, Healthy sales (more profits per customer), etc.
Themes must be measurable objectively and be relevant to the company’s sales curve. Then only they can ensure wider participation.
Everything must be specific. What constitutes a sale – whether an order, or a delivery or payment received? What constitutes a new order? What about sales returns after the contest period? Every achievement must be rated in terms of points. All these will help avoid hard and bitter feelings later.
Large sales force with a hierarchical order calls for contests for different groups, and eligibility criteria restrict the participation to each group. In a contest, individuals should not be pitted against each other. A variety of contests / a variety of prizes do help in this direction.
Sales Promotion – Promotion and Promos
Representative level promotion must have an element of excitement and also should be capable of entertaining the participants. Mostly in-house journals, circular letters, personal letters motivational letters and reminders are used to promote the contests. Later, the announcement of a few more prizes, writing of reminders, etc., generate an air of expectancy.
On the close of the contest, wide publicity is given to achievers and their photos are flashed. Personal meeting with the executives are arranged. Soon, thereafter, further activities are planned to avoid dipping sales later after the closure of the contest.
Some pitfalls which management must guard against:
1. The goals must not be unattainable.
2. Rewarding just one person is to be avoided.
3. Sales volume should not be the only goal of each contest.
4. Same prizes for each contest are to be avoided.
5. Sometimes, staffers other than sales representatives should be included in the contest.
6. Yearend contests are seen as poor planning to make-up deficiencies and hence, are better avoided.
7. Contest is not an intelligence test, and so should be absolutely clear.
8. There is no ‘fair’ or ‘just’ contest. Sales contest have goals to accomplish. Some goals are easier for accomplishment than others (e.g., territory potential may be different and hence, high potential leads to easy accomplishment of goals.)
Promos can be used anytime anywhere. Two products which are related or unrelated can be bundled together, and either product may induce a buyer to buy the product. Both products reap the benefits of the promo. We can get access to a new segment in which customers buy our product, in combination with the product they normally use.
In a bundle, one product works as an effective awareness builder and a trial inducer for the other product. Promos should be designed keeping in mind the brand objectives and consumer behaviour. This is called a construct.
Mostly, the schemes are purchase- linked. In case, they are not linked to purchase, the construct becomes complex. To reduce post-purchase dissonance, promos can be used. Hyundai extended its warranty on Santros by one year.
Promos should be integrated to products and advertising. We should pre-empt competition in using the promos. Instant gratification is what the users of FMCG brands seek from promo.
Samples should be correctly targeted, or else they go waste. Do you expect slum dwellers to use? Zip Sip brand of flavoured milk? In case of low-involvement products, we can in-pack premiums. In-pack premiums are separately given, where the retailer has to extend cooperation. Channel pilferage is very common here. In-pack premium has a constraint.
They should be small enough to fit in the package. They are generally directed at children. Binaca used to give those animal replicas. Retailers use promos to attract customers inside, and then encourage them to buy other products.
Say, a cheap ice cream cone offered at McDonald’s attracts people inside and then they can try the other items on the menu. Promo should be timed perfectly. Promos can be evaluated by comparing sale volume across 3 time periods – pre-promo, during the promo, post-promo.
We can use cost-sales ratio to evaluate a promo. Promo should not be on wrong side of law. The value of a freebie should not exceed the value of the product itself.
The product should be available without the promo during the progress of promo. The market price of the product should not be increased before the promo so as to include the cost of the gift.
A promo should remind the consumer the core values of the brand. Promos should be targeted properly to be effective. Marketers should also know the brand does not need any promo. Results of promo should be lessons in marketing.
Premium products are sold on pull factor, and a promo works on a push factor. So, generally promos are not offered on premium products. It may dilute the carefully cultivated brand equity. The details of the promo must be worked out carefully. For example, imagine a situation where the retailer has insufficient number of gifts. As soon as the promo is advertised, there should be action in the marketplace.
Promos have certain limitations. They are not as affective in promoting brand loyalty as they are in inducing product trial and brand switching. Promos can become strategic if they are supported by other elements of the marketing mix.
Promos need mainstream advertising support if they are expected to change brand perception. By themselves, they cannot build brand perception. Promos have limited reach and cannot change brand perceptions across the entire spectrum of customer universe, even if supported by the company.
Sales Promotion – Major Decisions
In using sales promotion, a company must establish the objectives, select the tools, develop the programme, pre-test the programme, implement and control it, and evaluate the results.
These steps are explained below:
1. 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. For consumers, the objectives may be to encourage purchases, building trial, etc. For retailers, objectives include inducing retailers to take up new items, encouraging higher stock levels, etc.
For the sales force, objectives include encouraging support of a new product or model, encouraging more prospecting, and stimulating off-season sales. The company can use sales promotion to achieve many objectives. However, every offer must start by being specific as to what objectives are intended to be achieved.
According to Schultz and Robinson (Sales Promotion Management, Chicago: Crain Books), the objectives should be Specific, Measurable, Clear and Concise, Practical, Affordable, and Attainable.
2. Selecting the Sales-Promotion Tools:
There are three kinds of sales promotion.
They are:
(1) Consumer Promotion- Activities intended to educate or inform the consumers and those intended to stimulate the consumers.
(2) Dealer Promotion- Activities to increase the interest and enthusiasm of dealers and distributors.
(3) Business Promotion- Through exhibitions, trade fairs and conventions.
3. Developing the Sales-Promotion Programme:
The marketer must make further decisions to define the full promotion programme. The marketer has to determine the size of the incentive, conditions for participation, duration of promotion, the distribution vehicle and timing of promotion, total sales-promotion budget and the incentive cost in order to arrive at a full programme.
4. Pre-Testing the Sales-Promotion Programme:
The programme thus developed should be pretested in order to check the effectiveness of the programme. This can be done by asking the consumers to rate or rank different possible or trial tests that can be run in limited geographical areas.
5. Implementing and Controlling the Sales-Promotion Programmes:
This involves planning, designing and modifying programme, etc. Each programme should have its individual implementation and control.
6. Evaluating the Sales-Promotion Results:
The final step is to evaluate the results of the programme in order to determine the effectiveness of the programme. The manufacturers can use three methods to measure the effectiveness of sales-promotion-
(i) To examine the sales data, before, during and after a promotion,
(ii) To examine the consumer-panel data which would reveal the kinds of people who responded to the promotion, and
(iii) To conduct experiments about incentive value, duration and distribution media.
Thus, sales-promotion is used at the time of introducing a new consumer product, to secure maximum dealer stocking, display space and attention of consumers. Sales-promotion involves a lot of expenditure. It also has difficulties. But because it pays rich dividends, sellers have accepted it as an important item in the marketing-mix.
Not only does it give profit but it also serves other purposes such as provision of information, creation of demand, repeat buyers, sales stabilisation and quick inventory turnover. The successful promotional effort has many ingredients such as personal selling, sales-promotion devices, advertising, public relations, and publicity.
Sales Promotion – Managing Trade Promotions
The distribution channel is offered sales inducements to motivate them to support a brand by providing it a more than their usual push.
Many of these schemes are dealer loaders, e.g., merchandise deals, discounts, buying and selling allowance, premium or push money and POP materials.
The trade promotions help build customer traffic at the retail outlet. They improve sales / profitability. They build-up buyer-seller relationship.
A trade promotion can be easily managed through a company scheme mailer / circular and a one-to-one presentation by the sales force to the distributor and dealers.
There are certain inherent conflicts. The parties should be clear about goals and role of one another. The manufacturer must appreciate the trader’s interest. Similarly, traders should be responsive in terms of performance.
Objectives of Trade Promotion:
(i) The trade is motivated to carry the brand.
(ii) The trade is motivated to carry a larger inventory.
(iii) The trade is motivated to use POP tools, and price reductions.
(iv) The trade is motivated to push the product.
Trade Promotional Tools:
(i) Price-offs or off-invoice or off-list.
(ii) Allowances like advertising allowance or display allowance.
(iii) Free goods on a certain quantity, push money and free speciality advertising items.
The Basis of Consideration in Trade Promotion are:
(a) The capabilities of the parties. The retailers are poor in administration of complete schemes, whereas the wholesalers are poor at generating the primary demand. The sponsors, therefore, should carry-out these tasks.
(b) The terms / schemes should discourage unscrupulous trade practices on the part of trade.
(c) Scheme should be properly communicated. Results expected must be clearly stated.
(d) Regular supplies of products / gifts during the pendency of the scheme.
(e) Booking of shelf-space of prominent dealers must be done sufficiently in advance.
(f) The gifts should be of good quality and useful.
(g) Sales Contests / Display Contests –
1. Proper selection of dealers.
2. Assistance to these dealers.
3. Communication of the team of judges, and criteria of judging.
4. Prizes and consolation prizes.
5. Target assigned must be in relation to trading area potential. Prize on zonal basis.
(h) POP material and its display need supervision. Only 15 per cent POP material that is supplied is displayed and that too for half of its useful life.
(i) Retailers who launch their own scheme can be persuaded to provide a special support to the company’s products.
(j) MRTP provisions must be respected. The discount period should not be less than 10 days. The original price and the bargain price must be stated. The quality must be specified. The maximum and minimum discount must be stated.
Sales Promotion – Advantages
1. It stimulates positive attitudes toward the product.
2. It gives extra incentive to the customer to make a purchase.
3. It gives direct inducement to take immediate action now rather than later.
4. It has flexibility and it can be used at any stage of a new product introduction.
Sales promotions are very effective:
(a) When a new brand is introduced,
(b) When we have to communicate a major improvement in our product,
(c) When we want to amplify the results of the advertising,
(d) When we want to increase the number of retail stores to sell our products, and
(e) When we decide to embark upon aggressive sale campaign.
Sales Promotion – Disadvantages
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 promotions are ineffective:
(a) When established brands have a declining market,
(b) When there are no product improvements,
(c) When there is intensive competition on consumer sales promotions.
Sales Promotion – Growing Importance
Conventionally, the glamour in promotion is stolen by advertising. Advertising expenses so far accounted for more than 60 p.c. of the total promotional budget. SP got a little share. Today, sales promotion is attracting more and more of the promotional budget. The annual expenditure for sales promotion is rising rapidly.
The product manager type organisational structure in which product managers are constantly goaded to sell more has given a boost to SP. Competitive pressure also calls for the use of SP. With more and more brands flooding the market, the pressure to occupy display space at retail outlets is more. Retailers thus demand more S.P efforts from their suppliers.
At the point of purchase, the only promotional device is SP. Advertising has reached the target audience when they were away from the store. The time for buying has arrived. Perhaps, there is no effect of advertising now.
SP tools at the point-of- purchase remind the buyer of the ad or otherwise provoke him to purchase. Those who look at SP tools in a store setting are very good prospects, or else they would not have been in-store in the first place.
Just as there is advertising clutter because of a large number of advertising messages, we also have a promotion clutter on account of a large number of promotional tools used. Marketers must be on the lookout for ways to rise above the clutter.
Sales Promotion – Evaluation
SP is to be measured by pre-testing it, monitoring it during implementation and by post-testing.
Pre-testing ascertains cost-effectiveness of various alternatives. It also assesses the most preferred terms on which to offer a scheme. Pre-testing is done by panel method, or by mail survey or by a field-study.
Monitoring during implementation collects data on the following:
1. Product movement
2. Territory wise sales
3. Outlet wise sales
4. Goals set vs. Past results
5. Competitive moves
6. Market mood
7. Problems encountered.
Post-testing is basically analytical. Here, performance is measured with respect to:
1. Redemption rate of coupons
2. Sales attained
3. Cost-effectiveness
4. Redemption of trading stamps
5. Sales turnover of special packs or self-liquidators
6. Number of entries received for the consumer contest, etc.
Post-testing is done by:
1. Market research studies
2. Observation method in the stores
3. Desk-analysis of collected data
Direct measurements, if possible, relate the figures of this period to the previous period, and find out incremental sales (rather than gross sales).
Studies on SP give us the following guidelines:
1. Short purchase cycles mean short-term effects.
2. The earliest redemptions are incremental sales.
3. Incremental sales are difficult to obtain for brands having a large market share.
4. A coupon with a sample is twice as effective as a coupon alone.
5. Hidden costs of promotion are –
(a) High level of inventory with trade.
(b) Competitors arise up their sales promotion.
(c) Discounts offered during promotion period become the baseline for future promotions.
6. SP designed to suit local market conditions is more effective.
Event management covers product launches, theme parties, promo for liquor and cigarette brands, music driven events, beauty pageants, etc. Some agencies working in this field in India are Glea Public Relations of Shri Nair, Wiz.Com (a division of Wizcraft) of Timmins, Joseph and Sarkari and Fountain-head of Murry and D’Souza and Tellis.
ABCL and Plus events also operate in this field. Agencies like Trikaya-Grey, Ad Avenues and Maa Bozell have set up separate divisions to handle events.