Sales promotions are short term strategies for increasing the sales volume. According to Kotler, “sales promotions are short term incentives to encourage purchase or sale of product or services”.
Sales promotion efforts attempt to attract the attention of customers at the point of sale and enhance sales volume. Sales promotion tools are used to support the sales personnel and to back advertisement process.
Sales promotion may take any or all of the three forms – consumer promotion, trade promotion and sales force promotion. These forms of sales promotion are also known as tools or methods of sales promotion.
Some of the types of sales promotion are:- 1. Consumer Sales Promotion 2. Dealer Sales Promotion 3. Business Promotion 4. Public Relations 5. Sales Force Promotion.
Types of Sales Promotion: Consumer Sales Promotion, Dealer Promotion, Business Promotion, Publicity and Sales Force Promotion
Types of Sales Promotion – 4 Important Types: Consumer Sales Promotion, Dealer Promotion, Business Promotion and Public Relations
Type # 1. Consumer Sales Promotion:
The consumer sales promotion involves application of the following tools:
Samples are offers of a free amount or a trial of a product for 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 e.g., Hindustan Levers introduced Ariel Trial Pack for its detergent powder Ariel Micro System.
Coupons are certificates which entitle a consumer to buy the product at reduced prices. These coupons can be mailed, enclosed in other products or attached to them or inserted in magazines and newspapers. Coupons are accepted as cash by retailers.
Cash refund or rebate provides a price reduction after the purchase rather than at the retail shop. The consumer sends a specified ‘proof of purchase’ to the manufacturer, who ‘refunds’ part of the purchase price by mail. It is a good device for creating new user and to strengthen the brand loyalty.
iv. Price Packs:
Price Packs (also called cents-off deals) are offers to consumers as discount e.g., Rs.2 off on a Brooke Bond pack of 500 gms. Price Packs are very effective in stimulating short- term sales, even more than coupons. The price pack may be in the form of a reduced price pack (20 per cent extra Five-star at the same price) or a banded pack (tooth brush and tooth paste together).
Premiums (or gifts) are merchandise offered at a relatively low cost or free, as an incentive to purchase a particular product. Reusable jars, key chains, containers.
vi. Prizes (Contests, Sweepstakes, Games):
Prizes are offers of the chance to win cash, trips or merchandise as a result of purchasing something. A contestant calls for consumers Co., submit an entry — a jingle, estimate, suggestion to be examined by a panel of judges who will select the best entries. In sweepstakes, the customers submit their names which will be included in a drawing of prize winners. A game presents consumers with some puzzle or missing letters. All of these tend to gain more attention than coupons and premiums.
vii. Patronage Award (Trading Stamps):
These are values in cash or other forms. Such awards are given to those customers who shop only at a particular place. i.e., when the customers are loyal to a particular shop. Then they are treated as patrons.
viii. Free Trials:
Free trials consist of inviting prospective purchasers to try the product without cost in the hope that they will buy the product.
ix. Product Warranties:
Product warranties are important promotional tools in sensitive consumer markets.
They involve two or more brands or companies that team up on coupons, refunds and contests to increase their pulling power.
xi. Point-of-Purchase and Demonstration:
POP displays and demonstrations take place at the point of purchase or sale.
The advent of Star, Zee and Metro (Satellite TV) Channels has thrown open to business concerns the possibilities of brand promotion via the countless quizzes and contests now being telecast at a small percentage of normal promotional cost. With quizzes and contests on television gaining increasing popularity, many companies are gifting their own products in an attempt at gaining mileage for their brands.
Sponsor companies on the television are adopting the quiz and contest route as a profitable means of establishing brand equity over a period of time. In programmes like Philips Top
Ten, Bournvita, Close-up Antakshari, Bajaj Ke Tarane and Lux Kya Scene Hai, brand equity has been used as a format. These programmes have gained considerable popularity and they will be remembered for a long time. T.V. has gained substantial audience in India.
The basic strategy in contests is to provide an extra-incentive to the consumer for buying a product. Full exploitation of contests at retail level must be planned. Retailers must be briefed about the contest and enough merchandise should be available to satisfy all customer demands. A well-planned quiz contest has to be unique, interesting to the buyer, related to the product being sold, and tied in with sales in some way.
Contests are used to reach short-term sales goals. If properly designed, they can achieve other objectives as well. In fact, they are even used as versatile ways to hit non-sales related targets. As markets evolve, contests will be used for winning the upper hand, by emphasising a particular aspect of a product, coping with competitive pressures or increasing recall.
But competitions, like any form of sales-promotion, have their limitations. They cannot, for instance, sell an inadequate product or one with a poor distribution network overnight or work miracles.
Currently the companies are caught up in the contest/quiz fever. Viewers are not complaining either. Marketers should make the most of the quiz and contest opportunity before the magic fades. And then they may latch on to some new fever, for there is never an end to new opportunities.
Sales promotion activities are conducted to stimulate consumer-purchasing and dealer-effectiveness.
i. There is a provision of free display material either at the point of purchase (POP) or point of sale (POS), depending on one’s viewpoint. Display reaches consumers when they are buying and actually spending their money.
ii. Retail demonstrators are supplied by manufacturers for preparing and distributing the product as a retail sample, e.g., Nescafe instant coffee to consumers for trying the sample on the spot or demonstration regarding the method of using the product.
iii. Trade deals are offered to encourage retailers to give additional selling support to the product, e.g., toothpaste sold with 30 per cent to 40 per cent margin.
iv. Seller gives buying allowance of a certain amount of money for a product bought.
v. Buy-back allowance is given to encourage repurchase of a product immediately after another trade deal. A buy-back is a resale opportunity.
vi. Seller gives free goods, e.g., one free with 11, or 2 free with 10 are common free deals.
vii. Advertising and display allowance may be given.
viii. Sales contests for salesmen are held.
ix. Dealer loader (a gift for an order) is a premium given to the retailer for buying certain quantities of goods or premium for special display done by a retailer.
x. Dealer and distributor training for salesmen, which may be provided to give them a better knowledge of a product and how to use it.
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, mechanised signs are other point-of-purchase displays.
Each form of sales promotion is used to encourage quick movement of products along the channel of distribution and enhancing the tempo of sales campaign. It also creates extra incentive or gives extra value to the channel of distribution itself, e.g., retailers. Hence, sales promotion offers a direct inducement which gives an extra value or incentive to the distributors, their sales force and the ultimate consumer.
Sales promotion plays a major role in consumer goods promotion and it is used in a limited way in the case of Industrial Goods. Industrial goods marketing may involve provision for financing, training of users, buy-back arrangements and even reciprocal trading. POP materials are used for items that are sold through industrial distributors who maintain show rooms.
The major use of exhibits are in conventions, exhibitions and trade fairs. Speciality gifts such as key chains, calendars, coffee mugs, pens with messages, logos, can be handed over to industrial customers which will serve as a reminder of the company.
Some years ago, in an unusual print ad, Mafatlal Fabrics endorsed Procter & Gamble’s new detergent product, Ariel. Not that it was only Ariel that stood to gain from this approach, Mafatlal too, gained mileage through the ad. This was, perhaps, the first noticeable instance of joint promotion on the part of two brands that hoped to gain in visibility.
Joint promotions as a marketing device has finally come into its own. The reasons for this are manifold. Rising advertising rates in the various media makes brand visibility an expensive affair. Also, with the clutter of parallel products in the market and messaging on the media, attempts at establishing brand equity has become a more complex exercise. The days of distinct USPs are by now in the past.
If two brands that already have an established equity, endorse each other, the likelihood of success even beyond regular advertising stands a good chance. The Godrej-Titan promotional tie-up that was carried out in November 1993, is a case in point. The sales of the Godrej refrigerators trebled.
However, in a similar exercise, when an alarm clock made by a small- scale manufacturer was offered free with the Godrej refrigerator, the increase in sales was just 20 per cent.
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 (a detergent and washing machine for example), 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, and car dealer Autoriders India Limited’s cooperative marketing venture with financial institutions, spare parts dealers and insurance companies. Moreover, even though the target segment is the same, the participants are not in direct competition with each other.
Cost sharing on joint promotions is an attractive benefit for advertisers and promoters, specially in the face of escalating advertising costs. Marketers in the joint-promotions game claim that such strategies can reduce media spend by as much as 70 per cent.
Proponents of Joint-promotions claim that this is the second most important marketing platform after advertising, and is one method of achieving a direct face-off with the consumer. Fears that such cooperative marketing efforts might dilute the brand’s identity are discounted on the grounds that, in fact, they serve to provide incremental enhancement for the brand.
Among the most recent and unique joint-promotion platforms has been a promotional tool itself- the Snuggy Club of Diapers India Limited with a strength of 3,000 members who are mothers of children up to three-year-olds, the Club was recently used for the launch of a number of children’s products by Wipro, Johnson & Johnson, Milton (the Funny Bunny range) and Leo Mattel.
Joint-promotions may yet be at a nascent stage. Fast becoming an important marketing tool, it is bound to see a lot more innovation and sophistication in the near future, as the need for closer interaction with the consumer increases. Joint promotion, i.e., joining hands for visibility offers also mutual increase in brand loyalty.
An exhibition stand or stall is a form of showroom, but it is a very distinctive form of showroom. It 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 (usually sponsored by a chamber of commerce or trade association).
We may have indoor or outdoor public exhibitions and fairs and shows, e.g., agricultural and industrial machinery and equipment, cottage industries and handicrafts, fashion shows and parades, domestic electric appliances, office machines and appliances, etc.
An article shown at an exhibition at least makes a good impression without creating actual demand. A man is greatly impressed with a computer, time-clock or simple appliance. He makes up his mind to buy one sooner or later. Usually, people are in a buying mood when they visit an exhibition.
A successful stand in an exhibition or a trade fair gives three services to the owner:
i. It provides entirely new business which cannot be secured by any other method.
ii. Buyers unwilling to meet salesmen or visit the shop or show-room will, on their own account, do a lot of purchases at these fairs or exhibitions. These buyers are usually resellers.
iii. Competitors vie with each other for getting maximum business. The conservative buyer can compare the competitive lines displayed in close distance to one another. They need not disclose their identity. They welcome criticism of their regular suppliers only at such exhibitions. Thus, at exhibitions constructive and conservative buyers (resellers) can be easily handled and captured by rival sellers.
In many trades, exhibitions are held annually at the same period of the year. These exhibitions attract a large number of buyers every day. These annual exhibitions become the basis of many sales campaigns. Buyers purchase all their requirements, e.g., utensils, furnishings, appliances, clothing, fittings, at these exhibitions.
The fashion industry has Rs.20,000 crore internal market and Rs.3,000 crore export market. About 50,000 jobs are generated each year in the fashion field. Stagnation in this field seems a distant fear as the fashion market is growing at a tremendous rate. Hence, fashion shows and exhibitions are becoming very popular as means of promotion.
It is said that if the world is ‘sound’ then fashion is the ‘melody’; if the world is ‘sky’, then the fashion is the ‘rainbow.’ Fashion usually means the ‘current style’. Life would be drab without fashion.
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. Looking at the number of boutiques and studios springing up in the country, one can sense the potential of the fashion business. A number of multinationals have entered and continue to enter into the Indian fashion business.
The fashion show idea can be exploited intelligently in the overall promotional strategy. A series of glamorous fashion shows are held in the metro cities like Mumbai, Delhi, Kolkata, on a massive scale. Currently, they are also organised on the television, the best medium of advertisement to reach the target audience. TV now commands a viewership over 25 crores for a prime-time flash in the national hook-up.
Generally, the showroom idea is used as a tool of distribution. Currently, in the face of growing competition and unfair undercutting by dealers, a number of consumer durable companies are opening plush, exclusive showrooms, arcades and galleries as powerful means of sales-promotion to boost their sales. Exclusivity plays the role of Unique Selling Proposition (USP) to increase the sales.
Onida has set up a number of Arcades in cities. Samsung has exclusive Galleries. Ceat has Ceat Shoppes. Raymond and Vimal textiles have a large number of ultramodern showrooms all over India. Nokia has preferred dealers with show room facilities. Asian Paints have started exclusive Colour Matching Centres known as Colour World.
A very great advantage the exclusive showrooms offer to a company is the ability to impress the consumer with the whole range of its products, at a time when all companies are going in for diversifications and range expansions.
Of course, the showrooms are only additional means of sales-promotion/distribution. The distributor/dealer network systems have not been done away with completely. One cannot deny the importance of dealers. A prospect about to invest more than Rs.15,000 will obviously want to look at other brands in the market before making up his mind. The showroom idea is also to encourage customers to go back to dealers stocking the brands.
The future of such showrooms, particularly for T.V., DVDs, Washing Machines, costly textiles, seems to be bright at the moment. Some companies have franchise-owned showrooms with identical colour schemes, furnishings, flooring and identical services.
Sponsorship consists of giving money or other support to a beneficiary in order to make the activities financially viable or to gain some advertising, public relations or marketing advantage. The support could consist of money, trophies or other items in kind. The beneficiary could be an individual or an organisation.
Normally, sponsorship is an investment to gain some advantage in the market place. Along with sponsorship, advertising in the form of boards, banners can be displayed in the sports stadium, cricket field etc. Nokia, Coca-Cola, Pepsi, Hero Honda, Micromax are closely associated with cricket matches.
It is also called marketing public relations. Publicity is not paid for by the organisation. Publicity comes from news reporters, columnists and journalist. It comes to the receiver as the truth rather than as a commercial. Public relations and publicity taken together become the fourth major ingredient of promotion-mix. These activities are, however, not controllable by the firm. Every firm tries to create a good public relations so as to give good publicity.
Defective products, unfair trade practices, anti-social activities often result in unfavourable publicity, consumer ill-will, bad product image, increased consumer protests, Government regulations and so on. The firm, having a poor public image, will have lower sales and lower profits. Reducing the impact of bad news is as important as creating good publicity.
Under the social marketing concept, publicity and public relations are assuming unique importance in the firm’s promotion-mix. Consumerism is altering consumer attitudes not only towards products, but also towards the firm and dealers selling the products of the firm.
Public relations have now become an important marketing function. The total process of building goodwill towards a business enterprise and securing a bright public image of the company is called public relations. It creates a favourable atmosphere for conducting business. There are four groups of public- (1) customers, (2) shareholders, (3) employees, and (4) the community.
The marketers should have the best possible relations with these groups. Public relations complement advertising by creating product and service credibility. Effective marketing communication is not possible without establishing and maintaining mutual understanding between the company and its customers.
The lubricant making the wheel of marketing run smoothly is public relations. Bright image is created and maintained only by public relations. Liberal aid in all social welfare projects enhances the public image of the marketer.
Types of Sales Promotion – 2 Major Types: Consumer Sales Promotion and Dealer Sales Promotion
There are two types of sales promotion:
1. Consumer Sales Promotion – these are activities intended to educate and stimulate consumers, and
2. Dealer or Distribution Sales Promotion – These activities are aimed to increase the interest and enthusiasm of dealers and distributors.
i. Sampling – This is usually called consumer sampling. Free samples are given to consumers to try the product. For example- free shampoo sachets are distributed when a new brand is introduced.
ii. Demonstration – To educate consumers about how to use a product, For example- free cooking classes to demonstrate how to use a microwave.
iii. Coupon – A coupon is a certificate that reduces prices; for example coupons published in national dailies for Pizza Hut’s Pizzas.
iv. Money Refund Orders – Here the full purchase price is refunded. This method is used for introducing new products. Refund offers create additional interest and also increases sales.
v. Premium Offers or Gifts – These are merchandise offered at a relatively lower price for free, as an incentive to purchase a particular product. For example- a plastic bucket is free with three one kg packets of Henko washing powder.
vi. Price off – Offering a lesser price than the retail price.
vii. Fashion Shows – Quite popular for men’s and women’s exclusive clothing and fashion jewellery.
viii. Contests – These are meant for consumers, in order to stimulate consumer interest in the product. For example- Camlin conducts All India Painting Competition.
ix. Trading Stamps – These are given for purchasing in a particular shop. For example- Food World.
x. Tie in Promotions – Two or more brands or companies team-two words providing coupons, refunds and discounts to increase their pulling power. For example- buy one FILMFARE, get a packet of RASNA free.
xi. Product Warranties – The promise to replace an item in case of any complaints. This is popular for consumer durables.
xii. Free Trials – Inviting prospective buyers to try a product without cost, in the hope that they will buy the product. For example- test driving allowed for cars.
xiii. Patronage Rewards – These are values in cash or in other forms, proportional to one’s patronage to a certain vendor. For example- most airlines offer frequent flyer free airline trips.
These devices are:
i. Free Display- The free display of material, at the point of purchase (Popular Point of Sale (POS)). This reaches consumers when they are buying and actually spending their money.
ii. Retail Demonstration – In the premises of the wholesaler or retailer, the product sales personnel conduct special demonstrations of the product For example- car dealers.
iii. Trade Discount – The discount offered to retailers or wholesalers. For example- retail book dealers are entitled to a 33.33% trade discount.
iv. Dealer Contests – This is an indirect way of increasing sales. It is conducted by the manufacturer, at a wholesaler or retailer level.
v. Special Displays – The producer, in collaboration with dealers, may put up special shows of the product at fairs and exhibitions. Sometimes, producers may compensate dealers for the space given for the display of the product.
vi. Advertisement Materials – Advertisement materials prepared by the company, such as store signs, banners, shelf signs, boards, etc. are distributed to sub-dealers for display purposes. Its examples are Pepsi and Coke.
vii. Special Allowance – Manufacturers may offer special allowances (usually mentioned as a percentage), in return for the retailer agreeing to feature their product in some way. This is done in the case of new products.
viii. Gifts- Manufacturers may offer free gifts to dealers, or to their sales force to push the manufacturer’s goods.
ix. Special Allowance – An extra discount is given if the retailer buys a certain quantity For example- retail book dealer is entitled to a 30% discount normally, but if he buys 50 books at a time, the publisher may give a 35% discount.
Types of Sales Promotion – Consumer Promotion, Trade Promotion and Sales Force Promotion
Sales promotion may take any or all of the three forms – consumer promotion, trade promotion and sales force promotion. These forms of sales promotion are also known as tools or methods of sales promotion.
i. Consumer Promotion:
Consumer promotion includes samples, coupons, money-refund offers, prices-off, premiums, contests, demonstrations and trading stamps. These tools are well utilised by marketing management. Samples are free distribution of a product for the purpose of obtaining consumer acceptance.
This may be done on a door-to-door basis, via demonstrations, or by mail. It is useful for promoting new products. Coupons offer a discount on new purchases of a product. They are certificates entitling the bearer to a discount on the purchase of a specific product. Money-refund offers are granted to cash purchasers.
Sometimes, customers are given the product at a price below the normal rate. Premiums are merchandise offered at relatively low prices. Free-in-the mail premium is an item mailed to the consumers. A self-liquidating premium is an item sold below normal price.
Firms may offer contests to attract customers by offering substantial cash or merchandise price cuts. Demonstrations are made to inform the public or consumers in the target market about the attributes and utilities of the product, leading stamps are a special type of premium received by customers, which can be redeemed for merchandise through stamp redemption.
Trade promotion encourages buyers to buy a larger quantity of the product. It is also known as buying allowance because it is an offer of some discount on each item of purchase above a minimum quantity. Hade promotion may take the form of free goods, merchandise allowances, co-operative advertising, dealer sales contests, and push money.
Free goods are offered to public and dealers after the purchase of certain items. They boost the sales of a commodity by offering some additional commodities free of cost. For example, a bar of soap is sold by offering a match box free of cost; the sale of a coffee jar of 500 gms is accompanied by a free steel cup, and so on.
Merchandise allowance is offered to compensate dealers for disposing of the manufacturer’s products. Advertising allowance compensates dealers for advertising the product. Sales competitions are arranged, prizes are announced or special offers are made on the sale of new products. Push money is offered to the purchaser or agents to increase the sale of a product.
Salesmen are motivated to sell products by offering bonuses, contests and sales rallies. They are offered a bonus if the sale increases above the minimum level. Sales contests are organised as an effective measure of sales promotion. The main purpose of sales contests is to increase the sales through retailers or sales persons.
An off-season sale can be motivated by such contests. When the volume of sales is declining, it creates a sense of security and stability. It is also useful in getting repeat orders from present and past customers. The contest prizes may be cash awards, merchandise prizes, travel and special honours.
Merchandise prizes are more effective than the cash awards because more contestants are attracted to participate in the contest. Young energetic sales personnel are tempted by travel awards, particularly when their spouses are offered this award to visit an exotic land. Sales rallies encourage open participation by retailers and salesmen. They are publicly honoured at the winning positions. Sales rallies should be designed in such a way as to ensure that every participant has a fair chance of winning the award.
Types of Sales Promotion – 3 Important Types: Consumers Sales Promotion, Dealers Sales Promotion and Sales Force Promotion
Sales promotion can be divided as follows:
1. Consumers sales promotion
2. Dealers promotion and
Type # 1. Consumers Sales Promotion:
Sales promotion aimed at consumers is called ‘consumers sales promotion’. It aims at stimulating consumers. The main consumers promotion tools include samples, coupons, demonstration, contests, cash refund offer, premium, etc.
Samples are defined as offers to consumers of a small amount of a product for trial. Free samples are given to consumers to generate their interest in the product. Samples help consumers variety and the quality of the product.
Samples are delivered at the doors of consumers verity the quality of the product. They are also sent by mail or given to customers in the retail store itself. Sometimes, samples are attached to another product.
Though sampling is effective, producing numerous samples of a product is quite expensive. Moreover, distributing samples to customers also involves expenditure. Samples is not justified in case of- (a) well established product (b) a product that is not superior in some way to competing products (c) a product with a slow turnover (d) a product with a margin of profit, or (e) a highly fragile, perishable or bulky product.
A coupon is a certificate that fetches buyers a saving when they purchase a specified product. Coupons are generally issued along with the product. Or a cash refund. Coupons are designed- (a) to introduce a new product (b) to promote the sale of an established product, (c) to sell a product in large sizes (d) to stimulate customers to switch brands; and (e) to encourage repeat sales.
Coupons are used for consumer’s convenience goods. They may be distributed door to door, by mail or they may be inserting in package. Sometimes, coupons may be part of magazine or newspaper advertisement.
Demonstration is required when products are complex and of a technical nature. Customers are educated as to how to make proper use of the product. Demonstration of products induces customers to buy. Demonstrations are provided free of cost.
Contests are the promotion events that give consumers the chance to win something such as cash, trips or other goods. Contests are conducted to attract new customers. They introduce new product by asking the product to state the reasons for the purchase of the product.
The buyer purchases the product and submits the evidence of purchase with entry form for contest. Entry forms are duly filled by the buyers. A panel of judges selects the best buyers and finally they are given prizes.
Cash refund offers are rebates allowed from the price of the product. It is an offer to refund part of the purchase price of a product to consumers who send a proof of purchase to the manufacturer. Moreover, if the purchaser is not satisfied with the product, the whole price or part of it will be refunded. Cash refunded offer is stated on the package.
Premium refers to goods offered either free or at low cost as an incentive to buy a product. A premium may be inside the package, outside it or received through mail. The reusable package itself serves as a premium. Premium is generally offered for consumers as good as such as shop, toothpaste, etc. Premium may be of several kinds—direct premium, reusable container, free in mail premium, a self-liquidating premium, trading stamps, etc.
Direct premium can be inside the pack or outside it. A reusable container can be reused after the product is reused. Free in mail premium means a premium item will be sent by mail to consumers who present proof of purchase to the manufacture.
A self-liquidating premium is the extra quantity offered at the normal price. Trading stamps are given by the seller to consumers. There are redeemable at the stamp redemption centers.
vii. Price off Offer:
Goods are sold at reduced prices during slump season. Reduction in prices stimulates sale of goods.
viii. Consumers Sweepstakes:
A sweepstakes calls for consumers to submit their names for a draw. Names of consumers are included in a list of prize winning contest. The lots are draw and the winners get prizes.
ix. Buy Back Allowances:
Allowance are granted to buyers on the basis of their previous purchase. In other words, buy back allowances are given for new purchases, based on the quantity of goods bought previously.
Dealer sales promotion or trade promotion is employed when products are sold through the retailers or wholesalers. Trade promotion can persuade retailers or wholesalers to carry a brand, allocate shelf space, promote it in advertising and push it to consumers. Dealer sales promotion tools include buying allowance, merchandise allowance, price deals, premium, cooperative advertising, sales contests, point purchase, etc.
i. Buying Allowance- Buying allowance is granted to those dealers who purchase in stipulated period of item. It is very much useful in introducing new products to consumers. It motivates dealers to buying allowance, merchandise allowance, price deals, premium, cooperative advertising, sales contest, point of purchase, etc.
ii. Merchandise Allowance- Manufacturer may offer an allowance in return for the retailer’s agreement to feature the manufactures product in some way. For example, an advertisement allowance compensates them for using special displays.
iii. Price Deals- Price deals relate to the quantity of purchase. In addition to regular discounts, dealers are allowed special discount for a specified quantity of purchase. Thus, special discount is over and above regular discount given to dealers.
iv. Push Money or Premium- Premium is a product usually offered free or at less than its usual price. Premium encourages resellers to buy a certain quantity. Manufactures may also offer push money. It is cash or gifts given to dealers to push a particular manufacture’s goods.
v. Cooperative Advertising- Dealers are given an allowance to advertise the manufacturer’s product. Dealers claim such allowance by producing to the manufactures the proof of advertisement.
vi. Dealers’ Sales Contests- A sales contest is a contest for dealers for motivating them to increase their sales performers. They may be in the form of holiday trips, cash prizes or other gifts. Some companies award points for performance to achievers.
vii. Point of Purchase- Point of purchase display as a salesman. It calls the attention of the customers to the product with the hope of initiating buying action. This device is known by several names such as dealer aids, dealer displays, merchandising and point of sales materials.
Sales force promotion aims at the sales force. It stimulates them to work hard.
The tools for sales force promotion include:
(i) Bonus to sales force
(ii) Sales force contest and
(iii) Salesmen meeting and conferences.
(i) Bonus- The manufacturers sets a sales force attains the target, bonus is given to them. So, bonus scheme encourages salesmen to reach sales target.
(ii) Sales Force Contest- Sales contests are conducted in order to step up the selling efforts of sales force. Prizes are given to salesmen who win in such contests by effecting maximum sales.
(iii) Salesmen’s Meet and Conferences- Meetings are conducted for salesmen in order to broaden their knowledge and fine tune their skill. Meetings and conference certainly quip salesmen with the latest developments in the industry, etc.
Sales promotion, thus, stimulates quick movement of goods along the channel of distribution.
Types of Sales Promotion – Consumer Sales Promotion, Trade Sales Promotion, Sales Force and Sales Promotion
1. Consumer Sales Promotion:
Sales promotions directed at the end-users whether by the manufacturer or the retailer are called consumer sales promotions. Manufacture originated sales promotion belongs to “Pull strategy” and the retailer initiated sales promotion is of “Push-Strategy”.
In general, consumer promotions can be “same for less” or “more for the same” which is translated into “price-out” or “added-value”. Some consumers sales promotions with offer of free samples or coupons contain some selling message that reinforces the brand or product.
Sales promotion for consumers are more effective when considered with advertising and point- of purchase display.
2. Trade Sales Promotion:
Trade sales promotions are directed at resellers. The terms trade includes distributors, dealers, wholesalers and retailers who are involved in distributing the company’s products. Trade sales promotion are part of “Push strategy” of manufacturers. Out of a total sales promotion budget, a higher portion is spent on trade sales promotion by the manufacturers.
Trade Sales Promotions objectives are different from consumers sales promotions. Retailers can influence consumers in many ways and retailers’ supports in marketing displays, feature advertising and taking direct initiative in offering products to consumers directly increasing sales.
Some important trade promotions are cash rebate, Trade coupons, display and advertising allowance and sales contests etc., which depend on the type of products’ and the appropriateness of the method chosen.
3. Sales Force and Sales Promotion:
Sales promotion activities directed at the sales people are referred to as sales force sales promotions. This technique is used to motivate sales people to put in more efforts to increase sales, increase distribution, promote new products, enhance prospective customers and build up morale and enthusiasm.
Sales force-sales promotion methods include sales meetings, training programmes, sales presentations, film-shows and prize distribution etc.
The objectives generally achieved by this method are – Increase in sales, launching a new product are offset competitive promotions etc.
The in-company house journals also does sales force sales promotion activities by reporting about company programmes, new products, research-activities, policies and promotions etc. and sales persons receive these journals on a regular basis and are motivated to some extent.
Types of Sales Promotion – Consumer Sales Promotion, Trade Sales Promotion and Business-to-Business Sales Promotion
Sales promotion can be classified based on the primary target audience to whom the promotion is directed.
1. Consumer Market Directed:
Possibly the most well-known methods of sales promotion are those intended to appeal to the final consumer. Consumers are exposed to sales promotions nearly every day, and as discussed later, many buyers are conditioned to look for sales promotions prior to making purchase decisions.
2. Trade Market Directed:
Marketers use sales promotions to target all customers including partners within their channel of distribution. Trade promotions are initially used to entice channel members to carry a marketer’s products and, once products are stocked, marketers utilize promotions to strengthen the channel relationship.
3. Business-to-Business Market Directed:
A small, but important, sub-set of sales promotions are targeted to the business-to-business market. While these promotions may not carry the glamour associated with consumer or trade promotions, B-to-B promotions are used in many industries.
Consumer sales promotions encompass a variety of short-term promotional techniques designed to induce customers to respond in some way. The most popular consumer sales promotions are directly associated with product purchasing.
These promotions are intended to enhance the value of a product purchase by either reducing the overall cost of the product (i.e., get same product but for less money) or by adding more benefit to the regular purchase price (i.e., get more for the money).
While tying a promotion to an immediate purchase is a major use of consumer sales promotion, it is not the only one. Promotion techniques can be used to achieve other objectives such as – building brand loyalty or creating product awareness. Consequently, a marketer’s promotional toolbox contains a large variety of consumer promotions.
There are following 11 types of consumer sales promotions:
iii. Promotional Pricing
v. Loyalty Programs
vi. Sampling and Free Trials
vii. Free Product
ix. Contests and Sweepstakes
xi. Personal Appearances.
Most consumers are quite familiar with this form of sales promotion, which offers purchasers price savings or other incentives when the coupon is redeemed at the time of purchase. Coupons are short-term in nature since most (but not all) carry an expiration date after which the value may not be received.
Also, coupons require consumer involvement in order for value to be realized. In most cases involvement consists of the consumer making an effort to obtain the coupon (e.g., clip from newspaper) and then presenting it at the time of purchase.
Coupons are used widely by marketers across many retail industries and reach consumers in a number of different delivery formats including:
a. Free-Standing Inserts (FSI):
Here coupon placement occurs loosely (i.e., inserted) within media, such as – newspapers and direct mail, and may or may not require the customer to cut away from other material in order to use.
These consist of coupons placed within or on other products. Often a marketer will use this method to promote one product by placing the coupon inside another major selling product. For example, a pharmaceutical company may imprint a coupon for a cough remedy on the box of a pain medication.
Also, this delivery approach is used when two marketers have struck a cross promotion arrangement where each agrees to undertake certain marketing activity for the other.
A delivery method that is common in many food stores is to present coupons to a customer at the conclusion of the purchasing process. These coupons, which are often printed on the spot, are intended to be used for a future purchase and not for the current purchase which triggered the printing.
d. Product Display:
Some coupons are nearly impossible for customers to miss as they are located in close proximity to the product. In some instances coupons may be contained within a coupon dispenser fastened to the shelf holding the product while in other cases coupons may be attached to a special display where customers can remove them (e.g., tear off).
Several specialized websites, such as HotCoupons.com, and even some manufacturer’s sites, allow customers to print out coupons. These coupons are often the same ones appearing in other media, such as – newspapers or direct mail. In other cases, coupons may be sent via email, though to be effective the customer’s email program must be able to receive HTML email (and not text only) in order to maintain required design elements (e.g., bar code).
The Internet is also seeing the emergence of new non-printable coupons redeemable through website purchases. These electronic coupons are redeemed when the customer enters a designated coupon code during the purchase process.
Rebates, like coupons, offer value to purchasers typically by lowering the customer’s final cost for acquiring the product. While rebates share some similarities with coupons, they differ in several keys aspects.
First, rebates are generally handed or offered (e.g., accessible on the Internet) to customers after a purchase is made and cannot be used to obtain immediate savings in the way coupons are used. (So called “instant rebates”, where customers receive price reductions at the time of purchase, have elements of both coupons and rebates, but for our purposes we will classify these as coupons due to the timing of the reward to the customer.)
Second, rebates often request the purchaser to submit personal data in order to obtain the rebate. For instance, customer identification, including name, address and contact information, is generally required to obtain a rebate. Also, the marketer may ask those seeking a rebate to provide additional data such as – indicating the reason for making the purchase.
Third, unlike coupons that always offer value when used in a purchase (assuming it is accepted by the retailer), receiving a rebate only guarantees value if the customer takes actions. Marketers know that not all customers will respond to a rebate. Some will misplace or forget to submit the rebate while others may submit after a required deadline. Marketers factor in the non-redemption rate as they attempt to calculate the cost of the rebate promotion.
Finally, rebates tend to be used as a value enhancement in higher priced products compared to coupons. For instance, rebates are a popular promotion for automobiles and computer software where large amounts of money may be returned to the customer.
One of the most powerful sales promotion techniques is the short-term price reduction or, as known in some areas, “on sale” pricing. Lowering a product’s selling price can have an immediate impact on demand, though marketers must exercise caution since the frequent use of this technique can lead customers to anticipate the reduction and, consequently, withhold purchase until the price reduction occurs again.
Trade-in promotions allow consumers to obtain lower prices by exchanging something the customer possess, such as an older product that the new purchase will replace. While the idea of gaining price breaks for trading in another product is most frequently seen with automobile sales, such promotions are used in other industries, such as – computers and golf equipment, where the customer’s exchanged product can be resold by the marketer in order to extract value.
Promotions that offer customers a reward, such as price discounts and free products, for frequent purchasing or other activity are called loyalty programs. These promotions have been around for many years but grew rapidly in popularity when introduced in the airline industry as part of frequent-flyer programs.
Loyalty programs are also found in numerous other industries, including grocery, pizza purchasing and online book purchases, where they may also be known as club card programs since members often must use a verification card as evidence of enrollment in the program.
Many loyalty programs have become ingrained as part of the value offered by a marketer. That is, a retailer or marketing organization may offer loyalty programs as general business practice.
Under this condition loyalty program does not qualify as a sales promotion since it does not fit the requirement of offering a short-term value (i.e., it is always offered). However, within a general business practice loyalty program a sales promotion can be offered, such as -special short-term offer that lowers the number of points needed to acquire a free product.
Enticing members of a target market to try a product is often easy when the trial comes at little or no cost to the customer. The use of samples and free trials may be the oldest of all sales promotion techniques dating back to when society advanced from a culture of self-subsistence to a culture of trade.
Sampling and free trials give customers the opportunity to experience products, often in small quantities or for a short duration, without purchasing the product. Today, these methods are used in almost all industries and are especially useful for getting customers to try a product for the first time.
Some promotional methods offer free products but with the condition that a purchase be made. The free product may be in the form of additional quantities of the same purchased product (e.g., buy one, get one free) or specialty packages (e.g., value pack) that offer more quantity for the same price as regular packaging.
Another form of sales promotion involving free merchandise is premium or “give-away” items. Premiums differ from samples and free product in that these often do not consist of the actual product, though there is often some connection. For example, a cell phone manufacturer may offer access to free downloadable ring tones for those purchasing a cell phone.
Consumers are often attracted to promotions where the potential value obtained is very high. In these promotions only a few lucky consumers receive the value offered in the promotion. Two types of promotions that offer high value are contests and sweepstakes.
Contests are special promotions awarding value to winners based on skills they demonstrate compared to others. For instance, a baking company may offer free vacations to winners of a baking contest. Contest award winners are often determined by a panel of judges.
Sweepstakes or drawings are not skill based but rather based on luck. Winners are determined by random selection. In some cases the chances of winning may be higher for those who make a purchase if entry into the sweepstake occurs automatically when a purchase is made. But in most cases, anyone is free to enter without the requirement to make a purchase.
A sub-set of both contests and sweepstakes are games, which come in a variety of formats such as scratch-off cards and collection of game pieces. Unlike contests and sweepstakes, which may not require purchase, to participate in a game customers may be required to make a purchase. In the United States and other countries, where eligibility is based on purchase, games may be subjected to rigid legal controls and may actually fall under that category of lotteries, which are tightly controlled.
Many products benefit from customers being shown how products are used through a demonstration. Whether the demonstration is experienced in-person or via video form, such as over the Internet, this promotional technique can produce highly effective results. Unfortunately, demonstrations are very expensive to produce.
Costs involved in demonstrations include paying for the expense of the demonstrator, which can be high if the demonstrator is well-known (e.g., nationally known chef), and also paying for the space where the demonstration is given.
An in-person appearance by someone of interest to the target market, such as – an author, sports figure or celebrity, is another form of sales promotion capable of generating customer traffic to a physical location. However, as with demonstrations, personal appearance promotion can be expensive since the marketer normally must pay a fee for the person to appeal.
Promotion Decisions, certain promotions can help “push” a product through the channel by encouraging channel members to purchase and also promote the product to their customers. For instance, a trade promotion aimed at retailers may encourage retailers to instruct their employees to promote a marketer’s brand over competitors’ offerings.
With thousands of products competing for limited shelf space, spending on trade promotion is nearly equal that spent on consumer promotions.
Many sales promotions aimed at building relationships with channel partners follow similar designs as those directed to consumers including promotional pricing, contests and free product. In addition to these, several other promotional approaches are specifically designed to appeal to trade partners.
These approaches include:
i. Point-of-Purchase Displays
ii. Advertising Support Programs
iii. Short Term Allowances
iv. Sales Incentives or Push Money
v. Promotional Products
vi. Trade Shows
viii. Meetings and Seminars
ix. Suitable Credit Policy.
Below is a description of each approach:
i. Point-of-Purchase Displays:
Point of Purchase (POP) displays is specially designed materials intended for placement in retail stores. These displays allow products to be prominently presented, often in high traffic areas, and thereby increase the probability the product will stand out. POP displays come in many styles, though the most popular are ones allowing a product to stand alone, such as in the middle of a store aisle or sit at the end of an aisle (i.e., end-cap) where it will be exposed to heavy customer traffic.
For channel partners, POP displays can result in significant sales increases compared to sales levels in a normal shelf position. Also, many marketers will lower the per-unit cost of products in the POP display as an incentive for retailers to agree to include the display in their stores.
ii. Advertising Support Programs:
In addition to offering promotional support in the form of physical displays, marketers can attract channel members’ interest by offering financial assistance in the form of advertising money. These funds are often directed to retailers who then include the company’s products in their advertising.
In certain cases the marketer will offer to pay the entire cost of advertising, but more often, the marketer offers partial support known as co-op advertising funds.
iii. Short Term Trade Allowances:
This promotion offers channel partners-price breaks for agreeing to stock the product. In most cases the allowance is not only given as encouragement to purchase the product but also as an inducement to promote the product in other ways such as by offering attractive shelf space or store location, highlighting the product in company-produced advertising or website display, or by agreeing to have the retailer’s sales personnel “talk-up” the product to customers.
Allowances can be in the form of price reductions (e.g. off-invoice promotion) and buy- back guarantees if the product does not sell in certain period of time.
iv. Sales Incentives or Push Money:
Since sales promotions are intended to stimulate activity that leads to meeting promotional objectives, it makes sense that these can also apply to those in the organization who also affect sales.
Thus, sales promotions are commonplace among an organization’s sales force and customer service staff where they are used as incentives to help sell more of the marketer’s product. Sometimes called push money, these promotions typically offer employees cash or prizes, such as – trips, for those that meet sales requirements.
v. Promotional Products:
Among the most widely used methods of sales promotions is the promotional product; products labeled with the brand or company name that serve as reminders of the actual product. For instance, companies–often hand out free calendars, coffee cups and pens that contain the product logo.
vi. Trade Shows:
One final type of trade promotion is the industry trade show (e.g. exhibitions, conventions). Trade shows are organized events that bring both industry buyers and sellers together in one central location. Spending on trade shows is one of the highest of all sales promotions. In fact, the Promotion Marketing Association estimates that over (US) $20 billion is spent annually by marketers to participate in trade shows.
Marketers are attracted to trade shows since these offer the opportunity to reach a large number of potential buyers in one convenient setting. At these events most sellers attempt to capture the attention of buyers by setting up a display area to present their product offerings and meet with potential customers. These displays can range from a single table covering a small area to erecting specially built display booths that dominate the trade show floor.
Under this method, producers train their selling force so that they may make more and more sales of product easily and smoothly.
viii. Meetings and Seminars:
Under this method, producers organize meetings and seminars and invite dealers and distributors to attend such meetings and seminars. At these meetings and seminars, all the problems of middlemen are discussed and solved.
ix. Suitable Credit Policy:
Under this method, producers allow credit to their dealers and distributors for a certain period. This enables them to purchase the goods in large quantities.
The use of sales promotion is not limited to consumer products marketing. In business-to- business markets sales promotions are also used as a means of moving customers to action. However, the promotional choices available to the B-to-B marketer are not as extensive as those found in the consumer or trade markets.
For example, most B-to-B marketers do not use coupons as a vehicle for sales promotion with the exception of companies that sell to both consumer and business customers (e.g., products sold through office supply retailers).
Rather, the techniques more likely to be utilized include:
ii. Free product
iv. Promotional products
v. Trade shows
Detail for the same is given below:
i. Price Reduction – Under this method, the producers or dealers announce heavy reduction in the prices of the product. That is, to offer value to purchasers typically by lowering the customer’s final cost for acquiring the product
ii. Free Product – Under this method, the producer announces that a free product will be given to the businessman on the purchase of a specified quantity, e.g., buy one, and get one free: which is an example of a self- liquidating promotion. For example if a Kg of raw material is priced at Rs. 100, and cost Rs. 25 to manufacture, if you sell two for Rs. 100, you are still in profit – especially if there is a corresponding increase in sales. This is known as a PREMIUM sales promotion tactic.
iii. Trade-In – Trade-in promotions allow consumers to obtain lower prices by exchanging something the customer possess. It is very helpful technique in B2B promotion.
iv. Promotional Products – Among the most widely used methods of sales promotions is the promotional product; products labeled with the brand or company name that serve as reminders of the actual product.
v. Trade Shows – One final type of trade promotion is the industry trade show (a.k.a. exhibitions, conventions). Trade shows are organized events that bring both industry buyers and sellers together in one central location.
Of the promotions listed, trade shows are by far the most widely used sales promotion for B-to-B marketers.