Sales Promotion

Sales Promotion

Sales Promotion Objectives

Sales promotion objectives vary widely.
Sellers may use consumer promotions to increase short-term sales or help build long-term market share.
Objectives for trade promotions include getting retailers to carry new items and more inventory, getting them to advertise the product and give more shelf space, and getting them to buy ahead.
For sales promotion, objectives include getting more sales force support for current or new products or getting salespeople to sign up new accounts.
In general, sales promotion should focus on consumer relationship building.

Sales Promotion

Sales Promotion Tools

Sales promotions are announced both, by manufacturers and retailers. The manufacturer announced promotions might be directed at consumers, resellers, or both. Manufacturers may also announce sales promotion for its sales force. Sales promotions may also originate from retailers aimed at consumers. The retailer-originated promotions’ main objective is to increase store traffic rather than sell any specific brand. The manufacturer announced consumer promotions constitute “pull” strategy and retailer promotions are based on “push” strategy. Sales promotions are more effective when combined with advertising and “pull-push” strategies are used at the same time.

Consumer Sales Promotions

Sales promotions directed at end-users are called Consumer Sales Promotion. Usually, consumer promotions are either “same for less” or “more for the same” type and may get translated into a straight price cut or added value. ‘Interest promotions’ may or may not require the purchase of anything such as free samples, free premiums, contests, and sweepstakes. The objective of such promotions is to stimulate consumer interest in products, services, activities, and special events.
“Consumer franchise-building” promotions are those which reinforce consumer brand preference and include a product-related selling message, such as in the case of free premiums, free samples, coupons and patronage awards. “Non-franchise building” promotions include price discounts, price-packs, premiums not related to the purchased product, contests and sweepstakes, and ad refund offers. Some commonly used consumer promotions are briefly discussed:
Price Discount (also called cents-off): The customers pay a certain amount less than the regular price of the product or service if purchased within a specified period. This can yield short-term sales increase, can serve as an incentive to try a new product, and can also help product sales during off-season.
Bonus-Pack: An additional quantity of the purchased product is offered free with standard pack. The producer may develop special larger-sized pack containing more product quantity but the price is proportionately low. A variation of this offer is “buy two, take one free.” These offers are generally limited to low-bulk items or ready-to-wear dresses, and sometimes footwear. There are stray cases when a buyer would get a 14-inch TV free with the purchase of a 21-inch TV.
Samples: It is an offer of some amount of product or service free or at a very nominal price. One major concern of the marketer is to put the product in the consumer’s hand, which often is the key to success in many product categories and some services. The main objective of sampling is to induce initial product trial and let the consumer have the first-hand experience with the product or service. Sampling is probably the most successful approach when the product is new, is not a market leader to induce trial.
Premiums: A premium (gift) is a reward given to the consumer for performing a particular act, generally purchasing a product or service. The premium may be free or available to the consumer by paying a price well below the regular market price. Getting a printer free with the purchase of a computer, or getting a Swiss knife well below the market price when the consumer purchases a microwave oven, are typical examples of premium.
Refund or Rebate (the terms are used interchangeably): Rebate offer, refers to some amount of money repaid to customers sometime after the purchase when a customer submits the specified proof-of-purchase to a manufacturer. The manufacturer “refunds” part of the price paid by the customer via mail.
Frequent-User Reward: These are incentives to reward those, who frequently purchase the product or service, such as frequent-flier incentives to air passengers. The purpose is to encourage repeat purchases or repeated visits to a particular retail store. Locality grocery or general stores use this approach on an ongoing basis for their regular customers to encourage store loyalty. Usually, such programs cover a fairly long period to offer customers ample opportunity to respond favorably.
Coupons: Coupons can be viewed as certificates offered by manufacturers or retailers that entitle the owner to some stated savings or claim on the specified thing. Coupons bear a date of expiry and cannot be redeemed after that date. A coupon is a versatile tool and can be used to accomplish many different sales promotion objectives.
Consumer Contests, Sweepstakes, and Games: These promotions often generate considerable interest, excitement, and enthusiasm among consumers. Individuals compete based on their analytical or creative abilities. The participants can win cash, jewelry, trips, or some merchandise. A panel of judges examines the contest entries and the best one or more entries are declared as winners. In sweepstakes, participating consumers’ names are put in a draw. A game offers something to consumers such as missing numbers or letters to complete a certain numbered digit or product or brand name. A consumer who does it within the promotion period wins the prize.
Exchange or Buy-Back Offers: Some consumer durables once bought are not replaced for a very long time in India. To encourage such consumers to replace their old products with a new one, companies or their authorized dealers offer buy-back or exchange offers. The manufacturer or the dealer pays some reasonable amount for the old product and sells a new one. Often this new product is offered on convenient interest-free installments.
Point-of-Purchase Displays: In-store presentations and exhibitions of products along with relevant information fall under this category. The message is clearly “come and get it, we have it.” There is a saying in Hindi “Jo Dikhta Hai Woh Bikta Hai,” (whatever is displayed, gets sold). Producers often supply such displays to retailers. Retailers like to use POP materials if they are attractive, informative, and capable of having an impact. Effective displays stimulate customer interest, increase store traffic, and often encourage unplanned purchases.

Trade Sales Promotions

Trade promotions are directed at re sellers (distributors, dealers, wholesalers, and retailers). Trade sales promotions are part of “push” strategy of producers. The objectives of trade sales promotions are different from consumer promotions. Producers realize the importance of retailer support. They are in the final contact in the distribution chain and can influence customers in more ways. Consumers sometimes seek retailer’s suggestions before making a purchase and retailers in many cases can influence the product choice. The main objectives of trade promotions include:
Build strong relations with channel members.
To stimulate in-store merchandising support, such as arranging displays, shelf space, feature advertising etc.
Gain distribution of new products.
Gain support for existing brands.
Manipulate levels of inventory held by wholesalers and retailers.
Trade Allowances: The purpose of trade allowances is to offer financial incentives to resellers in order to motivate them to make a purchase. A trade allowance can be offered in a variety of ways:
Buying Allowances: A producer pays a reseller some fixed amount or money or discount for purchasing a certain minimum quantity of product within the specified period of time. The payment may be given in the form of a cheque from the producer or a discounted invoice.
Free Goods: Reseller is required to buy a certain number of product cases and for each case purchased, a certain amount of free quantity of the same product is offered. For example, the offer might be, “One pack containing one dozen of product free on purchase of 12 packs”.
Slotting Allowances (also called stocking, or introductory allowance): This is the money paid to retailers to stock new products. William L. Wilkie, Debra M. Desrochers, and Gregory T. Gundlach found that retailers justify this by pointing out the costs they incur by stocking so many new products every year and to cover risks associated with new products. Many firms are uncomfortable with this type of allowance.
Buy-Back Allowance: Producers sometimes offer retailers the opportunity to re-stock. This promotion immediately follows another type of deal and offers incentives for new purchases. After the first promotion, if the inventory levels with retailers are very low or almost depleted, producers may offer this second incentive to build inventory level to normal with retailers.
Advertising Allowances: The manufacturer pays the dealer or retailer a certain amount of agreed upon money to advertise the producer’s product. This amount can be a fixed rupee amount or a percentage of gross purchase during a specified time period.
Display Allowance: This is a direct payment of money or free goods to the retailer for each item purchased if the party agrees to set up a POP display, or running an in-store promotional program as specified by the marketer. The marketer requires the retailer to sign an agreement specifying the activity to be performed before the allowance is given.
Contests and Incentives: Manufacturers sometimes use trade contests and special incentives to stimulate greater support and selling effort from dealers and salespeople and achieve sales targets, and other objectives. The prizes might include items such as TV, stereo, and trip to exotic places etc. Sometimes these contests and incentives are offered to salespeople of the distributors, dealers, wholesalers, or retailers. These rewards involve cash payment to sales people to especially sell the producer’s product. This type of cash payment is called push money or SPIFF.
Cooperative Advertising: The manufacturer agrees to share a certain amount of media costs with the dealer for advertising his products. This deal is usually based on product quantity purchased. The dealer must show proof that the ads were released then only the payment is made. Most of these ads appear in newspapers.
Dealer Loader: A dealer loader is a premium that a marketer gives to retailers for buying a specified quantity of a product. A dealer loader may be a premium to retailers for just buying the specified product quantity or the condition may be to display it for the duration of promotion and afterward the item is given to retailers as premium.
Training Programme: Manufacturers impart training about their own brands to the sales staff of wholesaler or retailer at their (wholesaler’s or retailer’s) location. Michele Marchetti and Andy Cohen reported that Microsoft launched a training program “Helping Clients Succeed” aimed at value-added resellers. The three-day workshop was designed to help resellers, better understand Microsoft Software.

Internet Sales Promotions

The number of companies using Internet promotions is increasing. Contests and sweepstakes are among the most commonly used to motivate people to visit marketers’ Internet sites. America Online frequently conducts prize promotions to attract users to its advertisers’ areas. The prizes may range between substantial sums of money to daily prizes including merchandise decorated with the online service’s logo. In India, some popular Internet promotion sites are Hungama.com and Contest2win where companies such as Pepsi, Cadbury, Sony, and Levis frequently run online contests and offer exciting prizes. This trend is gradually catching up in our country with an increased availability of Broadband Internet and more and more households acquiring computers.

Promotions that Blur the Line

Some promotions such as specialty advertising, event marketing, and sponsorship are activities that blur the line between advertising, sales promotion, and public relations.
Specialty Advertising: Promotional Products Association International has now given a new definition to this term:
“A medium of advertising, sales promotion, and motivational communication employing imprinted, useful, or decorative products called advertising specialties, a subject of promotional products.
Unlike premiums, with which they are sometimes confused (called advertising specialties), these articles are always distributed free – recipients don’t have to earn the specialty by making a purchase or contribution.”
Specialty advertising is often viewed both a means of advertising and sales promotion. According to Promotional Products Association International, the increased use of specialty advertising makes it the fastest growing of promotional methods. These items normally have a promotional message printed on them.
It is used to reinforce the name of an existing company, product, service, or brand. Specialty advertising is used in creating awareness, as reminders, to thank customers for patronage, introduce new products, and often support other forms of product promotions. Advertising specialty items include ballpoint pens, pen stands, calendars, key rings, matchboxes, T-shirts, caps, coffee mugs, glasses, bags, and numerous other items with advertiser’s name or brand name printed on them.
Event Marketing and Sponsorship: It has become quite a popular promotional approach and is often considered as a part of sales promotions, especially if a product is sold through the event. However, the objectives and decisions concerning such events are often the responsibility of public relations manager. Event marketing refers to a promotion where a marketer or brand is linked to an event or an activity based on a theme, and aimed at creating some experiences by associating a brand personality with a certain lifestyle. Companies often associate their product with a sporting event, festival, music concert, or fair. Marketers sometimes create their own events to celebrate milestones, such as 50th anniversary, or new-product-introduction event where they organize some contest and winners get a pack of new product. An event sponsor develops sponsorship relations with an event and extends financial support to obtain in return the rights to display brand name, company logo, or advertising message and to be identified as a financial supporter of the event.

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