Sales Promotion
Today’s market is full of offers and discounts. Marketers use multiple promotion programs to entice customers to buy products and services. While objectives of advertising are long-term and generally of brand building, sales promotion programs often pursue a single goal i.e. to maximize sales in the short run.
Consumer promotion programs are visible to the audience because they are often advertised in the mass media. Companies also undertake trade or intermediary promotion and sales force promotion programs to increase sales. This is important because, in both direct and indirect marketing programs, sales and trade play an important role in the product and information flow process.
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Hence, without adequately promoting the product at the trade and sales force end, many consumer promotion programs will not achieve their desired objective.
Sales promotion programs are short-term programs aimed at maximizing sales in a period of time but what is most important to remember is that the sales promotion program should be designed in such a way that it does not affect the overall brand image of the firm and its product.
Many companies offer sales promotion programs more frequently. Though they are able to optimize their sales in a short run period frequent use of sales promotion leads to brand value erosion. Sales promotions are increasingly being used to accomplish an ever-expanding list of marketing objectives.
Objectives of Sales Promotions
Objectives of sales promotion are given below:
- Increase sales volume
- Speed up the sales for slow-moving products
- Check the fluctuations in sales
- Attract new customers
- Launch new product(s) and increase trial
- Encourage repeat purchase
- Clearance of excessive inventories
- Motivate dealers
- Encourage dealers to participate in display and sales contests
- Gain advantageous shelf-space
- Increase store traffic
- Improve relationships with dealers
- Block competitors’ moves
- Motivate sales force
- Supplement advertising and personal selling efforts
- Deflect customers’ attention on the price
Designing a Sales Promotion Program
Designing a sales promotion program includes the following steps:
- Deciding Sales Promotion Objectives
- Selecting Consumer Promotion Tools
- Selecting Trade Promotion Tools
- Selecting Sales Force Promotion Tools
- Developing a Sales Promotion program
- Pre-testing the Program
- Implementing and Controlling the Sales Promotion Program
- Evaluation of the Sales Promotion Program
Sales Promotions Directed at Consumers
We present herewith a selected list of consumer promotion tools:
- Prize Schemes
- Fairs and Exhibitions
- Free Samples
- Correspondence
- Catalogues
- Advertising Novelties
- Entertainment of Customers
- Sales Contest
- Price-of
- Refund
- Point-of-Purchase Material
- Coupons
- Price Packs
- Premiums
- Patronage Awards
Prize Schemes
Prize schemes are one of the most important methods of sales promotion. A prize scheme is designed for both the public and the dealers. To make the scheme effective, it should be advertised through product packages, retail store point of purchase promotions, advertising in the press, posters, and televisions.
Fairs and Exhibitions
Fairs or melas are very common in India. They play a substantial role in selling goods of different varieties to different people. District exhibitions have been arranged on an annual basis since the 1930s to promote sales of Indian products. These exhibitions attract a lot of people, especially from rural areas who find the exhibitions and fairs convenient places to make their purchases of consumer goods.
Many state governments announce relief or concession in sales tax if products are sold through fairs, meals, and exhibitions. Though the objective of visiting a fair is social in India, marketers use these fairs and melas as an opportunity to promote their products and services.
Example: Bancassurance companies usually come in touch with the target group during fairs and exhibitions which are organized in villages. At such places, it becomes easy for the marketer to get a hold of customers and educate them about the product and its usage to gain business.
Free Samples
These are used for sales promotion of consumer goods and fast-moving consumer goods in particular. Free samples are generally used to introduce a new product and as a sales, tool to attract the attention of prospective buyers.
Such sample distribution not only saves time but also eliminates the need for inspection or testing of goods by the buyer. As a promotional device, it has limitations e.g. it is very expensive to sample products. When buyers receive samples, generally they pay no attention to them. Many of the customers who receive free samples may not be the actual target buyers.
Correspondence
This is an effective device for sales promotion. Companies send letters, brochures, and other kinds of correspondence to prospective customers through correspondence. A specialized mail order and correspondence section can communicate very effectively with potential customers and established customers through its professionally written letters and documents.
Catalogues
Catalogs play a dominant role, both in advertising and sales promotion campaigns. Catalogs are largely used when a firm manufactures different types of products with distinguished sizes, shapes,s, and other features.
It is from the catalog files that one can get the information required about different products of a particular manufacturer. A catalog helps in getting orders, makes customers aware of the specifications, provides detailed product information, and solicits product sales.
Advertising Novelties
Small, interesting, and personally useful items can be used for sales promotion. To be effective, an advertising novelty should not be a high-cost item; the novelty item should be usually eye-catching and should be useful to customers.
Example: During the Diwali festival, many companies distribute products such as Diaries, coffee mugs, etc. on which their name is imprinted or engraved.
Entertainment of Customers
Entertainment is essential when a standardized product is sold in bulk costs. In such a case, the entertainment of customers acts as a primary promotional device. However, when the product is sold on a routine basis, customer entertainment is neither necessary nor justified.
Sales Contest
The main aim of sales contests is to motivate the sales personnel and increase sales and bring more profit to the company. Under this scheme, special incentives in the form of prizes or awards are offered. Some of the contest prizes are cash awards, merchandise prizes, and special honors.
Example: Winners could be requested to appear in a TV show.
Price-of
A price-off is simply a reduction in the price of the product to increase sales and is very often used in introducing a new product. A reduction in price always increases sales but the use of this technique should be carefully considered in the current market situation.
According to various researchers on sales promotion, price-offs should generally be considered for introducing new brands or existing brands with new uses; for products/brands, which are already doing better than the competing brands, and in conjunction with sales activities aimed at increasing retail distribution.
Example: In 1997, price cuts of as much as ₹4,000 to ₹5,000 on almost all product lines led to a whopping growth of 25 percent in television and refrigerator sales. Again, in 1998, Videocon announced a price reduction in color TV and refrigerator prices. The same price war continues in the Indian white goods industry and the customers are deriving value from the continuous reductions in prices.
Example: In bars, there are “happy hours”, during which the liquor is sold at a discount rate to the customers.
Refund
A refund may consist of straight cash, coupon values, or a product offered to the consumer in return for proof of purchase of a specified product or service. A refund is also an effective tool for sales promotion. It is an offer made by a manufacturer to give back a certain amount of money to a consumer.
Example: White goods companies use this technique to entice customers for making purchases. Cashback or refund becomes an attractive option when offered in form of cash.
Point-of-Purchase Material
Point-of-Purchase (POP) materials are sales promotion materials displayed at the point of sales. The POP display persuades, reminds, and gives details to the consumers about a specific brand. Many fast-moving consumer goods and personal care product category companies use this method.
Example: When the sales staff who is handling the point-of-sale transaction doesn’t carry change either he offers some candies or sometimes gives an additional pen or bookmark as a promotional item to the buyer.
Coupons
These are certificates entitling the owner of the certificate to a stated saving on the purchase of a particular item. The coupon can be with the product, attached to the product, with the advertisement, and can be sent by mail. The coupon redemption rate in India is low. Coupons are an effective tool for promoting mature products and inducing trials for new products.
Example: McDonald’s and Pizza Hut, etc. use coupons with attractive offers to encourage the customers to make repeat purchases and benefit from the offer. While their business and relationship with the customer stay intact.
Price Packs
These are special packs given by the company in which consumers are offered a saving on the regular purchase. The amount of savings is flagged off in the package of the product. They can be reduced-price packs (a pack sold at a reduced price, or branded packs (two related products banded together).
Example: Frequent flyers program introduced by many airlines is one such effort within which attractive price packs are offered to regular customers if an airline.
These are merchandise offered at a lower cost or free as an incentive to purchase a particular product. A premium is a product accompanied inside or on the package. A free in-the-mail premium is mailed to consumers when they send proof of the package. A self-liquidating premium is sold below the normal retail price to consumers who request it.
Example: A tea manufacturer sells a cup with a particular quantity of tea packets at the previous purchase price.
Patronage Awards
These are the value in cash or in other forms that are proportional to the patronage of a certain vendor or group of vendors.
Example: Banks award points on credit card purchases which can be used to get different goodies
Sales Promotions Directed at Trade Partners
Following are some of the popular trade promotion schemes used in the Indian context.
- Sales Competition
- Boosters for Dealers
- Price Offs
- Free Merchandise
- Allowances
- Tradeshows and Conventions
- Specialty Advertising
Sales Competition
In this case, the dealers are motivated to participate in the trade promotion program with a reward program linked to their performance. For dealers, sales competition is arranged, prizes are announced or special offers are made if they show substantial progress in sales.
Example: Companies such as Philips, and Orient organize events wherein they motivate their dealers to sell a certain amount of product within a defined deadline to benefit from the reward, which could be in form of cash or kind.
Boosters for Dealers
In a bid to reduce its mounting inventories and boost the sagging morale of its dealers, companies offer a two percent discount to dealers on the purchase of a truck if payment is made up-front. Also, concessions on interest rates are offered to expedite payments. These incentives are drawn up after getting feedback from the intermediaries. These kinds of programs are called boosters for dealers.
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.
Example: Big bazaar charges marketers for displaying and keeping the products on its shelf. That price is usually known as commission. Who-so-ever refuses to pay the decided or agreed upon the commission to keep their products on the shelves, those products are removed from being displayed for customer purchase.
Price Offs
If the tradesman purchases a certain number of units within an announced period, he obtains a straight price off or discount on the quantity purchased. This motivates the dealer to buy larger quantities and also support a new product. The trade is free to use this money for greater profit booking, advertising, or consumer price reduction.
Free Merchandise
These are the free goods given to intermediaries who buy a desired quantity of the product. The intermediaries are free to sell these goods or use them for personal consumption.
Example: Cosmetic companies provide intermediaries with various samples and products for use when they complete the target of selling products in the market.
Allowances
Many companies provide different kinds of trade allowances in the form of advertising allowances and display allowances. The manufacturer bears the cost of store advertising and sometimes rewards for displaying his product or brand in the store.
Tradeshows and Conventions
These are the tradeshows and conventions organized by industry associations and the government within and outside the country. Companies sponsor their dealers and other intermediaries for participating in trade shows and conventions. This serves both as a motivator and display for the company’s products and services.
Promotion Marketing Association estimates that over (US) $20 billion is spent annually by marketers to participate in trade shows.
Example: During Trade Fair which is held annually in Delhi, Pragati Maidan, numerous marketers display their products and take orders from customers, to make purchases.
Specialty Advertising
These are advertisements consisting of useful, low-cost items bearing the company’s name and address that people in the trade give to the prospects and customers.
Example: During New Year and Diwali etc. companies promote their brand by distributing novelties in form of diaries, pens, calendars, etc.
Sales Promotions Directed at Sales Force
The other key player in product and brand promotion is the sales force, which also carries the message and the product to the end consumer. Companies organize sales force promotion programs to motivate them to support the company’s offerings.
The tools used for sales force promotion include sales and contests, conferences and seminars, higher commissions and bonuses, and international tours. Many trade promotion tools are also used for sales force promotion.
In the insurance sector, there is a huge emphasis on sales staff training as the staff deals directly with customers. The thrust is upon making the sales force well-versed with the present promotional techniques, so as to enable them in making an effective sale.
