Explain the Methods of Sales Promotions


Sales  Promotions  is  one of the important elements  of  the  marketing  promotion mix   or   the   integrated   marketing   communication.   In this   age   of   intense competition, where the bottom line is quick sales, marketers are beginning to rely more and more on short term tactics to win the battle for consumer’s minds and wallets.  Short  term  tactics  to accelerate sales  come  under  the category  of  sales promotions.


A formal and comprehensive definition of Sales Promotions is one given by the American  Marketing  Association-  namely  that  sales  promotions  consists  of “those  marketing  activities  other than the   personal selling,  advertising, direct marketing and public  relations, that stimulate consumer purchasing and dealer effectiveness”. Clearly, sales  promotions are a marketing activity or tool used for the  purpose  of  generating  sales,  by  targeting  either  the  final  consumer  or  the trade. The difference is that sales  promotions have specific  and sole purpose of directly trying to generate quick sales. Sales Promotions and advertising are both part of the marketing communication mix.




There are four methods involved in sales promotions

1.  Consumer sales promotions

2.  Trade sales promotions

3.  Business to business promotions

4.  Sales persons promotions



In   the   previous   section,   we   defined   sales   promotion   as   “those   marketing activities  other  than  selling, advertising  and  publicity, that stimulate  consumer purchasing  and  dealer  effectiveness”.  In this section we are  going  to  discuss promotional activities aimed at the final consumer. These activities rely on what is  known as a “pull strategy”- that is they depend on  the consumer to literally pull the  product  through  the  distribution  channels.  Before looking at  the  tools and techniques of (CSP) let us look at some of its specific goals:

a)   Encourage  trial:  Most  new products  fail because  too  few  people try  the product or because trial does not lead to repeat purchase. Especially when the concept is new, most people are hesitant to take risks. Sales promotion directed at the consumer offers a reason for trying the new offering.

b)  Encourage  brand  loyalty:  It is not enough to persuade consumers to try your  product. The real challenge lies in getting them to stay with your

brand.  As  we  saw  with  the  subscription  wars  competitors  are  always ready to come up with counter offers to woo away your customers.

c)  Increase  product  usage:  (CSP) could also aim to persuade customers  to buy a product in larger quantities.

d)  Encourage  consumption of other products  in your line:   when marketer’s product  portfolio  consists  of several related products,  (CSP) may aim  to create demand for more than one product.

e)  Reinforce advertising   efforts:   (CSP)  could  help  to  emphasize  product benefits highlighted in the advertising.

Once you have decided what you want the (CSP) to achieve, a technique has to be  chosen. A single technique, or a combination of techniques may be used. The various tools/techniques involved in the (CSP) are:

Sampling:  This consists in offering a small quantity of the product free, or at a  very low cost, in order to encourage trial. It is most commonly used by large  firms  which  produce  packaged  foods, health  and  beauty  items. Hindustan  Lever’s and P&G samples  for their detergent brands. Samples may  be  distributed  door-to-door, through  the  mail,  with  magazines  and newspapers in  the store, or anywhere where your audience is likely to be. A sample can  stimulate a higher rate of trial than any other promotional efforts. Sampling is  however  a costly  way of introducing or encouraging trial  of  a  new  product.  Sampling  will  only  be  successful  only  if  trial translates into repurchase.

Couponing:  A coupon  is a certificate good for a specific  price reduction, on a particular product, for a specific time period. It is a medium by which the  manufacturer  offers a  consumer  a  price deal. If  redeemed at a  retail store,   the   coupon  is  used  by  the  retailer  and  the  wholesaler  to  gain reimbursement   from  the  manufacturer.  Coupons   are   most   commonly used   by  manufacturers  of  packaged  foods.  Coupons  can  help  a  new product to be launched, build market share.

Money-back  offer:  In  this  case  the  marketer  offers  to  return  a  certain amount of money to the consumer if he is not satisfied with the product. This  may  take  the  form  of a  full  or  partial refund, after  the  product  is returned.  Money-back  offers help to reduce the risk involved in trying new  products.  They  also  help  to  reward  existing  customers,  encourage multiple purchases, and persuade consumers to buy now rather than later. The  disadvantage with this technique is that refunds are not available on the spot.  Consumers are normally reluctant  to  go  through  the process of filling out refund forms, sending them in and waiting for cash back.

Price   incentives:   This  is  the  use  of  a  short  term  reduction  in  price  to stimulate  demand  for  an  established  product  whose  sales  is  declining. Such  price  incentives  may  take  the  form  of  price  promotions  or  price packs.  A  price  promotion  is  a  short  term  reduction  that  is  available  to everyone who buys the product during the promotional period.


While  some  price  promotions  decrease  the  selling  price  by  a  specific amount (Rs 100 or Rs 500 off, depending on the product), others reduce it by a  certain percentage (20% or 50% off). Price  packs  are generally more effective            than   price   promotions.   A   price pack   normally   includes something extra with the regular product package. One type of price pack is the “bonus pack” which offers more of the product at the regular price. A second type of price pack is the “banded pack”. Here two or more units of   a   product   are  sold   together  at  a   lower   price   than   if   purchased separately.  The  “buy  one  get  one  free”  offers  are  examples  of  banded packs.


Premiums:  A premium is the offer of some type of mechandise or service either  free  or  at  a  greatly  reduced  price  to  induce  purchase  of  another product  or  service.  The  specific  purpose  of  a  premium  is                                                                          to   induce present  consumers  to  increase  their  use  of  brands  or  to  purchase  it  in larger  sized  packets.  It  can  also  help  to  switch  consumers  from  their present  brand to  that of the  promoters  brand  in order to  gain  trial use, with hopes of repurchase. Premiums may be distributed in a no of ways:

By  enclosing  it  in  a  product  package  known  as  a  “in-pack”premium.

By attaching it onto the package known as a “on pack” premium.

By giving it away at the point of purchase, known as a “shop or store” premium.

By offering it as a container holding a product, called a “container” premium.

By  distributing  it  through  mail  in  return  for  proof  of  purchase known as a “mall premium”.

Premiums may be classified In terms of whether they are offered free or at a reduced  price.  Premiums  offered  at  reduced  price  are  known  as  “  self liquidating”  premiums.  The  purpose  of such  a  premium is  to  cover  the manufacturers   out   of  pocket  costs.  Premiums   are   also   an   expensive technique and unless tremendous volumes are generated no company can afford to do this.


Contests  and sweepstakes:  A contest is a promotion based purely on the participants  skills  and  abilities.  It  requires  that  the  participants  apply  a skill  in creating an idea, a concept or an end product contests are usually based  on  coining  a  name  or  a  slogan  for  a  new  or  existing  product  or answer a  question related to a product. A sweepstake on the other hand is purely based on chance. Each participant has an equal chance of winning a prize  from  an  extensive  and  expensive  list  of  rewards  lucky  draws  and lottery’s are  examples of this. Both contests and sweepstakes are powerful sales promotions  devices as they have the ability to involve the customer and  build  excitement  around  the  product.  The  disadvantage  with  these techniques  is  that  it  is  difficult  to  test  them  in  a  limited  market  before using them on a national basis.


Frequency   programmes:   As  the  name  suggests  the  purpose  of  such  a promotion  is  to  increase  frequency  of  purchase.  This  is  usually  an  on- going  promotion   used   commonly   by   service   industries.   The”frequent flyer”  programme offered by the airlines is  the best example of this. The advantage  of  such  a  programme  is  that  they  build  a  long  term  brand loyalty with the customer.


Point  of  purchase  displays:  Attractive displays  of a  product  can  trigger purchases   even  if  the  purchase  was  not  originally  planned.  Point  of purchase  display  materials  such  as  special  merchandise   racks,  banners and danglers etc. can be used to effect, to encourage consumers to try new products, switch brands or make unplanned purchases.


Joint sales promotion:  Consumer sales promotions need not always be for a single  advertisers  product.  Often  two  or  more  marketers  join  together and  offer a combined promotion. The biggest advantage with this type of promotion                                      is   that   the   sharing  of   work   load   and   expenses.  The disadvantage is that the loss of control over creative,  media and budget elements.




CSP contributes only partially to the success of a product. Much also depends on the  willingness of wholesalers and retailers to carry and sell the product. This is particularly  important today  when  power has  shifted from the marketer  to  the retailer.   A   few   years   ago,   companies   with   huge   advertising   budgets   and extensive  distribution  networks   could   use  their  marketing  muscle   to   move products   onto   retail  shelves.  Today  retailers  command   terms   and   demand incentives  from  the  manufacturer  for  giving  preference  to  his  products.  Some specific objectives of TSPS are:


Encourage stock of new products.

Raise or lower inventory levels of an existing product.

Provide an incentive to sell a product.

Encourage more prominent and attractive display of a product. Offer support and training for distributors and the sales force. Strengthen relations with the trade.


Either one or a  combination  of  tools/techniques  may  be used  to achieve  the above goals:

  Trade  deals:  This  is  a  short term  arrangement  whereby  the  wholesaler  and the  retailer  agrees  to  give  a  manufacturers  product  a  special  promotional effort.  The deal could  take the form of product discounts, cash  payments or additional discounts offered by the manufacturer.

Buying  allowance:   this  could  take  the  form  of  cash  payment,  a product  discount  or additional  goods  offered  to  a  distributor  to encourage him to carry a new item that he may not ordinarily buy or  to  encourage  purchase  of  a  certain  quantity  of  an  existing product during a certain period. It is a push strategy.

Display  allowance:  this is a cash payment given in a form of a fee or a discount in exchange of a desirable shelf, location or space for a point  of  purchase  display.  It  is  generally  given  to  support  an established product.

Slotting allowance:  this is a technique generally used to promote new  products. It also  involves a cash payment or a  fee given to the retailer in exchange for a slot or position on a shop shelf.

Sales   support:  both  dealers  and  the sales  force  need  to  be  equipped  with some basic selling tools in order to push the product. Sales support could take the  form   of  training  programmes,  seminars,  product  demonstrations  and distribution of  materials  such  as brochures, videotapes  and slides  that show detailed   product   information.   Prepared   by   the   advertiser   for   dealer   or salespersons use these  materials could be presented to prospects during sales calls at (POP) or at trade shows.

 Yellow  pages advertising:    this form of advertising is much more common in the  U.S.  than  in  India.  An  ad  in  the  yellow  pages  of  a  directory  creates awareness  regarding availability of your  product.  Once  a  prospect has  seen an ad or a commercial for your product he tends to check the yellow pages to see where he can buy it.

 Specialty  advertising:      This  another  way  of  advertising  in  non-traditional media.  Pens,  calendars,  diaries  are  all  examples  of  specialty  advertising.  In contrast  to  premiums  which  are  given  only  when  purchasing  a  product, specialty   items   are   offered   free   of   charge   without   having   to   purchase something. Their purpose is to create goodwill.



Business to business is also an important method of   sales promotions. But they are used for industrial products and not much for consumer products. Therefore their   sales   promotions   techniques   may   also   differ   from   that   of   consumer products.  For  example  a  company  needs  spare  parts  as  a  major  input  or  raw material then it will have an auction where different suppliers will come and the supplier that bids  the  lowest  price  will be chosen.  Now suppose  the company wants  1,00,000  spare  parts  then  it  will  go  for  economies  of  scale  and  try  and purchase say about  80,000  spare  parts  from that particular  supplier  with  some sort of concession.



The following promotion aids are used for sales force promotions:


a)   Sales  meetings:  producers often organize annual meetings for the sales force for   giving   them   necessary   information   about   any   new   product   to   be introduced, new sales plans and techniques and the new sales programme of the producers.

b)   Contest:  sales contest for the salesman are organized from time to time by the producers. They are awarded with cash prizes and other benefits on the basis of highest sales, minimizing field expenses etc.

c)   Sales   literature   and  letters:   salesmen  are  provided  with  various  printed literatures, such as sales manuals,  folders, price lists, designs and directories of  customers  etc.  it  is  extremely  helpful  to  them  un  their  contacts   with customers.

d)  Product   demonstration   kits   and   visual   sales   aids:   salesmen   are   often provided  with  sales  kits,  containing  the  models  of  industrial  and  technical products.

e)  Premiums  bonus  and  gifts:    premiums  are  given  for  achieving  prescribed sales quotes. Bonus is paid to salesmen from the portion of profits of the firm every  year to  motivate him for better efforts. Gifts  are also  given on special occasions such as Diwali, Holi etc.


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