SEMINAR REPORT ON SALES PROMOTION

Submitted By: Vinit Kumar BBA Vth Sem

INTRODUCTION MEANING OF SALES PROMOTION

A direct inducement that offers extra value or incentive for the product to the salesforce, distributors, or the ultimate consumer with the primary objective of creating "immediate" sales Extra Inducement Beyond Basic Offer Acceleration Tool Targeted to Different Parties

Every businessman wants to increase the sale of goods that he deals in. He can adopt several ways for that purpose. You might have heard about lakhpati bano, win a tour to Singapore,30% extra in a pack of one kg, scratch the card and win a prize etc. You might also have seen gifts like lunch box, pencil box, pen, shampoo pouch etc. offered free with some products. There are also exchange offers, like in exchange of existing model of television you can get a new model at a reduced price. You may have also observed in your neighbouring markets notices of winter sale, summer sale, trade fairs, discount upto 50% and many other schemes to attract customers to buy certain products. All these are incentives offered by manufacturers or dealers to increase the sale of their goods. These incentives may be in the form of free samples,gifts, discount coupons, demonstrations, shows, contests etc. All these measures normally motivate the customers to buy more and thus, it increases sales of the product. This approach of selling goods is known as Sales Promotion, Personal selling involves face-toface contact with specific individuals, while advertising is directed towards a

large number of potential customers. They also help in increasing sales of goods. Thus, advertising can be used as means of communication to inform potential customers about the incentives offered for sales promotion. Personal selling can as well include communication of the incentives to individual customers. But, sales promotion differs from advertising and personal selling in terms of its approach and technique. Sales promotion adopts short term, non-recurring methods to boost up sales in different ways.

These offers are not available to the customers throughout the year. During festivals, end of the seasons, year ending and some other occasions these schemesare generally found in the market.

Thus, sales promotion consists of all activities other than advertising and personal selling that help to increase sales of a particular commodity.

Objectives of Sales Promotion

You have learnt that the main objective of sales promotion is to increase sales. However, there are also some other objectives of sales promotion. The objectives are:

i. To introduce new products ii. To attract new customers and retain the existing ones iii. To maintain sales of seasonal products iv.To meet the challenge of competition Let us learn about these objectives in details.

(i) To introduce new products: Have you ever heard about distribution of free samples? Perhaps you know that many companies distribute free samples while introducing new products. The consumers after using these free samples may develop a taste for it and buy the products later for consumption.

(ii) To attract new customers and retain the existing ones: Sales promotion measures help to attract or create new customers for the products. While moving in the market, customers are generally attracted towards the product that offers discount, gift, prize, etc on buying. These are some of the tools used to encourage the customers to buy the goods. Thus, it helps to retain the existing customers, and at the same time it also attracts some new customers to buy the product.

(iii) To maintain sales of seasonal products: There are some products like air conditioner,fan, refrigerator, cooler, winter clothes, room heater, sunscreen lotion, glycerin soap etc., which are used only in particular seasons. To maintain the sale of these types of products normally the manufactures and dealers give off-season discount. For example, you can buy air conditioner in winter at a reduced price. Similarly you may get discount on winter clothes during summer. (iv) To meet the challenge of competition: Todays business faces competition all the time. New products frequently come to the market and at the same time improvement also takes place. So sales promotion measures have become essential to retain the market share of the seller or producer in the product-market.

Selecting sales promotion method(s)

Various tools/methods of sales promotions have been mentioned earlier for consumer promotion, trade promotion and business and sales force promotion. The choice of these tools/methods depends on: Type of market/customers Objectives of sales promotion (see the earlier point) The nature of market competition Appropriateness of the methods/tools Cost effectiveness of methods/tools Developing sales promotion campaign Following factor need to be thought of and developed:

Quantum of the incentives to be offered (considering its possible and expected benefits Duration of sales promotion program Deciding the lead time of sales promotion preparation and sell-in duration (theduration within which the targeted sales will be accomplished)

 Timing of promotion campaign Terms and conditions of participation by the prospective/existing customers Mode of distribution of incentives Budget for the entire sales promotion plan Sales promotion effectiveness evaluation

Evaluation of effectiveness of sales promotion can be done using: Sales data analysis: customer behavior- pre-promotion and post promotion, number of switches from the competitors, profile analysis of customers who participated, boost insales etc. Customer surveys: to gather the feedback about their assessment/reaction of the sales promotion program

Construct experiments: around quantum of incentives, duration of incentives andincentive distribution mix/channels etc Sales promotion is one level or type of marketing aimed either at the consumer or at the distribution channel (in the form of sales-incentives). It is used to introduce new product, clear out inventories, attract traffic, and to lift sales temporarily. It is more closely associated with the marketing of products than of services. TheAmericanMarketing Association(AMA), in its Web-based "Dictionary of Marketing Terms,"defines sales promotion as "media and non media marketing pressure applied for a predetermined, limited period of time in order to stimulate trial, increase consumer demand, or improve product availability." Business pundits and academic students of business have developed almost fancifully

sophisticated views of sales promotion. In down-to-earth terms it is a way of lifting sales temporarily by appealing to economic motives and impulse-buying behavior. The chief tools of sales promotion are discounts ("sales"), distribution of samples and coupons, the holding of sweepstakes and contests, special store displays, and offering premiums and rebates.All of these techniques require some kind of communication. Thus sales promotionand advertising are difficult to

distinguish.The need for promotion arises from the intensity of competition. Sellers mustsomehow attract customers' attention. In the open markets of old (and farmersmarkets of today), sellers did and do this by shouting, joking with customers, andsometimes by holding up a squealing piglet for everyone to see. Priya Raghubirandhis coauthors, writing in California Management Review, identify "three faces" of consumer promotions: these are information, economic incentive, and emotional appeal. Information may take the form of advertising the availability of something,incentives are offered in the form of discounts, and emotional appeals are made by displays and, of course, by the low price itself.Precisely because sales promotions must provide

Incentives whether to the distribution channel, the company's own sales people, or to the consumer they cost money by definition and must produce additional volume to pay for the expenditures. A grand sale that clears out the inventory but, with added advertising costs factored in, reduces margin too is a failure. Sales promotions therefore mus be carefully calibrated to achieve the purpose. Holding promotions too frequently will habituate customers to buy only when promotions are in effect. Avoidingpromotions altogether will let competitors draw customers away. Alas, businessnever fails but to challenge the participant'

GROWTH OF SALES PROMOTION

Craig

Endicott and Kenneth Wylie, writing for

Advertising Age in the

magazine's62nd annual Agency Report, indicate a continued shift of revenues in advertising from traditional to new forms of media. They label the new forms as "marketing services" and comment as follows: "Marketing services identified as all forms of interactive, sales promotion and direct marketing in this report grew 11.3% to $7.66billion in revenue in theU.S.[in 2005]; traditional advertising and its media component advanced to $12.02 billion, a 5.1% advance that was slightly stronger than last year." The growth of sales promotion, a significant portion of total marketing services expenditures, is no doubt in part due to the proliferation of media channels by cable, the availability of the Internet to channel direct marketing messages, and simply the fact that advertising has become so ubiquitous it has become less effective: people tune (or mute) it out.

CONSUMER PROMOTIONS

Consumer sales promotions are steered toward the ultimate product users typically individual shoppers in the local market but the same techniques can be used to promote products sold by one business to another, such as computer systems,cleaning supplies, and machinery. In contrast, trade sales promotions target resellers wholesalers and retailers who carry the marketer's product. Following are some of the key techniques used in consumer-oriented sales promotions. Methods of sales promotion

There are many consumer sales promotional techniques available, summarised in thetable below: Price promotions or Price Deals Price promotions are also commonly known as price discountingThese offer either (1) a discount to the normal selling price of a product, or (2) more of theproduct at the normal price Increased sales gained from price promotions are at the expense of a loss in profit so these promotions must be used with care. A producer must also guard against the possible negative effect of discounting on a brands reputation A consumer price deal saves the buyer money when a product is purchased. The main types of price deals include discounts, bonus pack deals, refunds or rebates, and coupons. Price deals are usually intended to encourage trial use of a new product or line extension, to recruit new buyers for a mature product, or to convince existing customers to increase their purchases, accelerate their use, or purchase multiple units. Price deals work most effectively when price is the consumer's foremost criterion or when brand loyalty is low. Buyers may learn about price discounts either at the point of sale or through advertising. At the point of sale, price reductions may be posted on the package, on signs near the product, or in storefront windows. Many types of advertisements can be used to notify consumers of upcoming discounts, including fliers and news paperand television ads.

Price discounts are especially common in the food industry, where local supermarkets run weekly specials. Price discounts may be initiated by the manufacturer, the retailer, or the distributor. For instance, a manufacturer may "pre-price" a product and then convince the retailer to participate in this short-

term discount through extra incentives. For price reduction strategies to be effective, they must have the support of all distributors in the channel. Existing customers perceive discounts as rewards and often respond by buying in larger quantities. Price discounts alone, however, usually do not induce first-time buyers. Another type of price deal is the bonus pack or banded pack. When a bonus pack is offered, an extra amount of the product is free when a standard size of the product is bought at the regular price. This technique is routinely used in the marketing of cleaning products, food, and health and beauty aids to introduce a new or larger size. A bonus pack rewards present users but may have little appeal to users of competitive brands. A banded pack offer is when two or more units of a product are sold at a reduction of the regular single-unit price. Sometimes the products are physically banded together, such as in toothbrush and toothpaste offers.

Tools of Sales Promotion

To increase the sale of any product manufactures or producers adopt different measures like sample, gift, bonus, and many more. These are known as tools or techniques or methods of sales promotion. Let us know more about some of the commonly used tools of sales promotion.

Free samples:

You might have received free samples of shampoo, washing powder, coffee powder, etc. while purchasing various items from the market. Sometimes these free samples are also distributed by the shopkeeper even without purhasing any item from his shop.

These are distributed to attract consumers to try out a new product and thereby create new customers. Some businessmen distribute samples among selected persons in order to popularize the product. For example, in the case of medicine free samples are distributed among physicians, in the case of textbooks, specimen copies are distributed among teachers.

(ii) Premium or Bonus offer:

A milk shaker along with Nescafe, mug with Bournvita, toothbrush with 500 grams of toothpaste, 30% extra in a pack of one kg. are the examples of premium or bonus given free with the purchase of a product. They are effective in inducing consumers to buy a particular product. This is also useful for encouraging and rewarding existingcustomers.

(iii) Exchange schemes: It refers to offering exchange of old product for a new product at a price less than the original price of the product. This is useful for drawing attention to product improvement. Bring your old mixer-cum-juicer and exchange it for a new one just by paying Rs.500 or exchange your black and white television with a colour television are various popular examples of exchange scheme.

(iv) Price-off offer: Under this offer, products are sold at a price lower than the original price. Rs. 2 off on purchase of a lifebouy soap, Rs. 15 off on a pack of 250 grams of Taj Mahal tea, Rs. 1000 off on cooler etc. are some of the common schemes. This type of scheme is designed to boost up sales in off-season and sometimes while introducing a new product in the market.

(v) Coupons:

Sometimes, coupons are issued by manufacturers either in the packet of a product or through an advertisement printed in the newspaper or magazine or through mail. These coupons can be presented to the retailer while buying the product. The holder of the coupon gets the product at a discount. For example, you might have come across coupons like, show this and get Rs. 15 off on purchase of 5 kg. of Annapurna Atta. The reduced price under this scheme attracts the attention of the prospective customers towards new or improved products.

(vi) Fairs and Exhibitions:

Fairs and exhibitions may be organised at local, regional, national or international level to introduce new products, demonstrate the products and to explain special features and usefulness of the products. Goods are displayed and demonstrated and their sale is also conducted at a reasonable discount. International Trade Fair in New Delhi at Pragati Maidan, which is held from 14th to 27th November every

year, is a well known example of Fairs and Exhibitions as a tool of sales promotion.

(vii) Trading stamps:

In case of some specific products trading stamps are distributed among the customers according to the value of their purchase. The customers are required to collect these stamps of sufficient value within a particular period in order to avail of some benefits. This tool induces customers to buy that product more frequently to collect the stamps of required value.

(viii) Scratch and win offer: To induce the customer to buy a particular product scratch and win scheme is also offered. Under this scheme a customer scratch a specific marked area on the package of the product and gets the benefit according to the message written there. In this way customers may get some item free as mentioned on the marked area or may avail of price-off, or sometimes visit different places on special tour arranged by the manufacturers.

(ix) Money Back offer:

Under this scheme customers are given assurance that full value of the product will be returned to them if they are not satisfied after using the product. This creates confidence among the customers with regard to the quality of the product. This technique is particularly useful while introducing new products in the market.

Importance of Sales Promotion

The business world today is a world of competition. A business cannot survive if its products do not sell in the market. Thus, all marketing activities are undertaken to increase sales. Producers may spend a lot on advertising and personal selling. Still the product may not sell. So incentives need to be offered to attract customers to buy the product. Thus, sales promotion is important to increase the sale of any product. Let us discuss the importance of sales promotion from the point of view of manufacturers and consumers.

From the point of view of manufacturers

Sales promotion is important for manufacturers because

i. it helps to increase sales in a competitive market and thus, increases profits;

ii. it helps to introduce new products in the market by drawing the attention of potential customers;

iii. when a new product is introduced or there is a change of fashion or taste of consumers, existing stocks can be quickly disposed off;

iv. it stabilizes sales volume by keeping its customers with them. In the age of competition it is quite much possible that a customer may change his/her mind and try other brands. Various incentives under sales promotion schemes help to retain the customers.

From the point of view of consumers

Sales promotion is important for consumers because

i. the consumer gets the product at a cheaper rate;

ii. it gives financial benefit to the customers by way of providing prizes and sending them to visit different places;

iii. the consumer gets all information about the quality, features and uses of different products;

iv. certain schemes like money back offer creates confidence in the mind of customers about the quality of goods; and

v. it helps to raise the standard of living of people. By exchanging their old items they can use latest items available in the market. Use of such goods improves their image in society.

Why the Shift to Sales Promotion? Retailer Power Declining Brand Loyalty Increased Promotion Sensitivity Fragmentation of Consumer Market Brand Proliferation Short-Term Focus Increased Accountability Competition Clutter Splintering of Mass Media

Sales Promotion Strategy

Sales are the lifeblood of a business, without sales there would be no business in the first place; therefore it is very important that if a business wants to succeed, it should have a sales promotion strategy in mind. The primary objective of a sales promotion is to improve a companys sales by predicting and modifying your target customers purchasing behavior and patterns. Sales promotion is very important as it not only helps to boost sales but it also helps a business to draw new customers while at the same time retaining older ones. There are a variety of sales promotional strategies that a business can use to increase their sales, however it is important that we first understand what a sales promotion strategy actually is and why it is so important. A sales promotion strategy is an activity that is designed to help boost the sales of a product or service. This can be done through an advertising campaign, public relation activities, a free sampling campaign, a free gift campaign, a trading stamps campaign, through demonstrations and exhibitions, through prize giving competitions, through temporary price cuts, and through door-to-door sales, telemarketing, personal sales letters, and emails. The importance of a sales promotion strategy cannot be underestimated. This is because a sales promotion strategy is important to a business boosting its sales.

When developing a sales promotion strategy for your business, it is important that you keep the following points in mind.

Consumer attitudes and buying patterns

Your brand strategy Your competitive strategy Your advertising strategy Other external factors that can influence products availability and pricing.

There are three types of sales promotion strategies:

A push strategy A pull strategy or A combination of the two

Push Strategy: A push sales promotion strategy involves pushing distributors and retailers to sell your products and services to the consumer by offering various kinds of promotions and personal selling efforts. What happens here is that a company promotes their product/services to a reseller who in turn promotes it to another reseller or to the consumer. The basic objective of this strategy is to persuade retailers, wholesalers and distributors to carry your brand, give it shelf space, promote it by advertising, and ultimately push it forward to the consumer. Typical push sales promotion strategies include; buy-back guarantees, free trials, contests, discounts, and specialty advertising items. Pull Strategy: A pull sales promotion strategy focuses more on the co nsumer instead of the reseller or distributor. This strategy involves getting the consumer to pull or purchase the product/services directly from the company itself. This strategy

targets its marketing efforts directly on the consumers with the hope that it will stimulate interest and demand for the product. This pull strategy is often used when distributors are reluctant to carry or distribute a product. Typical pull sales promotion strategies include; samples, coupons, cash refunds or rebates, loyalty programs and rewards, contests, sweepstakes, games, and point-of-purchase displays. Combination of Two Strategies: A combination sales promotion strategy is just that; it is a combination of a push and a pull strategy. It focuses both on the distributor as well as the consumers, targeting both parties directly. It offers consumer incentives side by side with dealer discounts. The Short term Impact of Promotions: Lets have look at the impact of promotions on purchase behavior during the promotional period i.e. the week or the month when the promotion was being run. The majority of the empirical studies have focused on the impact of promotions in the short term. The key findings across the studies are discussed below.

Temporary price reductions (price off) substantially increase sales:

There is ample evidence to show that promotions lead to dramatic increases in sales of promoted brand in the short term. Studies have consistently reported high sales effects and high price elasticity of brands which are on promotion. The economic rationale for the promotional response is clear temporary price cuts increase the value of the product to the consumer and it leads to immediate action.

Sales boost can be quantified on the basis of brand switching, primary demand expansion and consumer stockpiling during a promotion.

Sales Promotion leads to brand substitution with the product category: The sales bump during the promotional period into sales due to brand switching, purchase time acceleration and stockpiling. Studies on brand switching have shown that brand switching effects within a category are asymmetric such that promotions on higher quality brands impacts weaker brands disproportionately. During a promotion, higher quality brands induce a large number of consumers to switch to them as compared to lower quality brands. One explanation advanced for this finding by researchers is that large share brands have higher brand equity and attract switchers more than low share brands.

Sales Promotion leads to purchase acceleration/stockpiling effects: In response to a promotion, consumers may buy more quantity of the product category or buy at an earlier time than usual (purchase acceleration effect). If consumers buy extra quantity during a promotion or earlier than normal, then they are not in the market to buy products once the promotion is over. Thus purchase acceleration is demonstrated through A lengthening of inter purchase times after a promotion. Purchase acceleration was more likely to be exhibited in increased purchase quantity than in shortened inter purchase times. Results showed that consumers mostly made up for the large quantity purchased by waiting longer until purchasing again. Results indicated that heavy users tended to accelerate purchases more than light users. There was negligible difference in the acceleration propensities of high versus low income groups.

Sales Promotion leads to primary demand expansion for a category: While it was traditionally assumed that consumption rates remain fixed during and after a promotion, but from this project I came to know that promotions also have a primary demand expansion effect. When a primary demand expansion occurs, promotion induced increase in purchase quantities does not significantly extend the time till the next purchase in the category occurs, thus indicating that there has been an increase in consumption promotions induced consumers to buy more and consume faster. It is found that promotion induced inventory temporarily increased consumption rates within the category e.g. in categories such as bacon, salted snacks, soft drinks and yogurt exhibited primary demand expansions as a result of promotion while bathroom tissue, coffee, detergent and paper towels exhibited stockpiling only.

Sales Promotions affect sales in complementary and competitive categories: From this project it is found that promotion not only increases sales of main product but it also lead to increase in sales of complementary categories. Found strong cross relationships between products of the promoted product category indicating brand substitution behavior. They stated that retail price promotions work as a form of implicit price bundling whereby the consumer surplus is transferred from the promoted item to non promoted items. Also found that retail price promotions create significant complementary and substitution effects within the store.

The Long term Impact of Promotions:

Strategies are builds to reap the benefits for longer period of time; same is true in sales promotion strategies. Let us see impact of promotions effort and study the impact over a longer time period e.g. 4-6 months or even a few years after a sales promotion campaign.

The result showed that consumer promotions for leading brands of established packaged products had no after-effects on the brands sales or repeat buying loyalty. The extra sales of a brand while promoted came virtually all from the brands existing long-term customer base for which the experience of buying the promoted brand was nothing new.

It is found that although the short term effects of promotions are strong; these promotions rarely exhibit long term effects. It is observed that each sales component generally lacked a permanent effect and the effect of promotion was short lived and increase in promotions affected consumers stockpiling decisions in the long run. They found that the combined short and long-term elasticity of promotions was zero. The stockpiling induced by a promotion was essentially offset by reduced demand in the long term. Thus increased sales were more a result of sales borrowed from the future than increased consumption

CONCLUSION

The study reflects that the use of sales promotion undeniably has increased over the years in India. Future holds lot of promise for such schemes across wider range of product-markets. Sales Promotion has ceased to be major differentiator at least in the metros, with almost all companies offering similar freebies and gifts. As a result now marketers have to find out some innovative ways of sales promotion to differentiate from competitors. Currently Price off and Bye one get one free offers are very effective to attract the consumers towards the products. We have noted that these kind of promotional tools are useful for short term increase in sales and to induce first trial. These types of promotional schemes should be consistent and changed from time to time depending upon season and competitors schemes. With the Increasing number of supermarket, the branded packaged goods work as silent sales person. So in such stores, sales promotion plays a more effective role in stimulating consumers demands. One of the very important facts we came to know from this project is that sale of goods which contain large quantity and having big packaging e.g. detergent are stagnating because consumer prefer to buy small pack goods, the reasons are: small pack goods reduce risk of bad quality, It had low cost or say price, and last but important factor i.e. mentality to purchase just to try first. Sales of small pack goods are quite high, but from the companys point of view small pack goods is less profitable compare to large pack goods. So here marketer tries to increase sales of large pack goods by using sales promotion tactics like price off and percentage extra.