There are a number of reasons that are favourable to the growth of sales promotion:
¨ Increasing Competition
The air of change is gaining momentum after the introduction of economic liberalisation.Due to increase in competition, companies are finding it increasingly difficult to compete on quality. They are therefore resorting to more and innovativemethods of sales promotion.
To break away from the clutter, Samsung introduced the ‘phod ke dekho’ and ‘phir se phod ke dekho’ offers, which helped increase sales.
¨ Customers Have Become More Price Sensitive
This increased price sensitivity is a direct result of rampant inflation. Economic recession is likely to fuel this trend further, as consumers and dealers become more sensitive towards prices.
¨ Sales Promotions Generally Create An Immediate Positive Impact On Sales
Advertising, personal selling and other methods of promotion produce slower sales response compared to sales promotion. Sales promotions are mostly for short duration, for a specified period, leading to a sense of urgency in consumers to buy now. This creates an immediate positive impact on sales. With careful planning, it would not be difficult to measure the impact on sales volume and profit, and see the consequences of running the promotion even on weekly or daily basis.
¨ Products have become more standardized
In many product categories, there is a proliferation of brands; many of them are line extensions and me-too brands. Most brands are being perceived by consumers to be more or less similar within a given price range because of the inability of manufacturers to develop truly differentiated products. Under these circumstances, advertising messages are unable to strongly influence the consumers’ perceptions and create brand franchise. As a result of these perceptions of similarity among brands, marketers have no way but to compete on the basis of extra benefit offered through sales promotion. Competing companies struggle to capture market share by using every tool likely to bring sales success.
¨ Consumer Acceptance
As competition intensifies and promotions proliferate, consumers have learnt to earn the rewards of being smart shoppers. Over a period of time, they have also learnt that brands on promotion are not necessarily of lower quality.
Woodland has a scheme of upto 50% off on Woodland shoes and apparel.
This learning based on experience, gets transferred to other product categories as well. Consumers have learnt that promotions are being extended to many product categories where such promotions were unheard of.
¨ Expectations Of Price Decrease
With the entry of many different brands of consumer durable products in the same product category, consumers anticipate that the prices of durable goods will come down. This encourages them to postpone their purchases. To speed up the purchase in this segment of consumers, sales promotions are an effective and attractive method. Consumers evaluate the incentives associated with their purchase decision and are motivated to act now, rather than wait for the anticipated decrease in price. The marketers should ensure that the extra benefit is attractive enough to create a sense of urgency in consumers.
Samsung offers upto Rs. 8,000 off on exchanging an old refrigerator for a new Samsung refrigerator.
¨ Advertising Has Become More Expensive And Less Effective
All the advertising media have become quite expensive. Audio-visual medium, which is considered as the most effective for short-duration ads, may cost in excess of Rs. 1 lakh for a 10 second exposure during prime time. In many cases, consumers have reached a point of boredom due to excessive advertising on TV. Some consumers even consider advertising as an intrusion into their privacy, leading to zapping (surfing channels). Firms with small budgets cannot compete with big companies which spend huge sums of money on advertising. For these small budget firms, sales promotion is a more cost-effective promotion method to produce sales results.
¨ Trade Has Become More Powerful
Retailers and wholesalers have become powerful and find themselves in a position to demand extra facilities from the companies. They Channel members demand more incentives to get the desired results. Manufacturers do not seem to have any alternatives but to concede to their demands, keeping in view the competitive market conditions.
- Pepsi offers silver coins to their dealers stocking Pepsi cases during Diwali season. And the promotions offer differs across dealers.
¨ Emphasis On Sales Volumes
Towards achieving the long-term profit goals, manufacturers try to attain high sales volume. Brand managers and product managers find themselves under pressure to achieve short-term sales results for the sake of their careers. Compared to any other promotional method, sales promotion is a more effective method to generate short-term sales volume.
¨ Sales Promotions Maximise Profits
A number of economic theories conclude that a company can maximise profits by using sales promotion. Such promotions can permit price discrimination by allowing the brand to compete in 2 or more different market segments. Sales promotion may allow a premium brand to compete with a lower tier brand among price sensitive consumers. For example, a premium band of toilet soap may be on promotion in some price sensitive markets, while in the remaining markets it is sold at its normal price.
¨ Introducing An Element Of Interest
There are a number of promotions which are often called interest promotions. Some of the more popular interest promotion techniques are samples, contests, and sweepstakes, free premiums and mail-in premiums. These promotions create an element of interest and excitement, and consumers enjoy these and response enthusiastically to such contests and sweepstakes, etc.
Fevicol had recently launched a contest in which one had to choose 3 Fevicol ads which they considered the best, and then complete a slogan ‘I like Fevicol ads because…’
¨ Impulse Buying Is Increasing
The number of marginal customers is increasing. Displays at the point of purchases lead to impulse buying by consumers, more so if the items on display are not expensive. There is a popular saying in Hindi, “jo dikhta hai, voh bikta hai.”
This strategy is followed by soft drink majors like Pepsi and Coke on a large scale. They pay huge sums of money to keep their products in front so that they are visible.
These are also known as display promotions
¨ Sales Promotion Specialists Are Available
As a result of economic liberalisation, the number of management institutions has increased. This has lead to the availability of specialists, who are not only well paid but can handle this specialised work more efficiently in the current market conditions, where sales promotion has become more important.
¨ Excess Stocks
Because of increasing number of brands, it is difficult for manufacturers and dealers to anticipate future sales. This, at times, leads to excessive inventories, and the quickest way to clear that, is to go for sales promotion.
Footwear companies like Bata, Woodland, etc regularly offer around 50% discount on their products.
Latest posts by BMS Team (see all)
- Meterdown Annual Festival is back with its 7th edition – Starts today! - January 16, 2020
- Tybms sem 6 results 2019 declared on 19th June 2019 - June 19, 2019
- TYBMS Sem 6 Results 2019 Update from BMS khabri! - June 15, 2019