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.
METHODS OF SALES PROMOTIONS
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
CONSUMER SALES PROMOTIONS (CSP)
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.
TRADE SALES PROMOTIONS (TSP)
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 (B2B)
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.
SALES PERSON’S PROMOTIONS
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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