DAV CENTENARY COLLEGE, FARIDABAD

B.A. MARKETING-II
6TH SEMESTER
PAPER: SALES PROMOTION
PAPER CODE: MKT – 6.1
FACULTY: DR. IMRANA KHAN
TOPIC: TOOLS OF SALES PROMOTION

Tools of Sales Promotion

Various tools of sales promotion, also known as methods of sales promotion may
be divided into two parts – (i) Consumers Promotion Methods (ii) Dealer
Promotion Methods.

Consumer Promotion Methods are those which directly encourage

consumers to buy product in more and more quantity.

Dealers’ promotion methods are those which encourage dealers and

distributors to buy and resell more and more quantity of the product.
 A. Consumers Promotion Methods:

I. Coupons, Premiums and Samples:

Discount Coupons:

A discount coupon is a certificate enabling a consumer to get discount on buying a

particular product. Couponing is in effect controlled price reduction. Several types
of coupons are in use viz., (a) Coupon with a rub-off spot, (b) Instant coupons,
easily detachable to buy immediate package, and (c) Special Price Coupons.
A coupon is a certificate that fetches buyers a saving when they purchase a
specified product. Coupons are generally issued along with the product. They
entitle the holder to either a specified saving on a product or a cash refund.

Coupons are designed

 to introduce a new product

 to promote the sale of an established product
 to sell a product in large sizes
 to stimulate customers to switch brands; and
 to encourage repeat sales.
Coupons are used for consumer convenience goods. They may be distributed door
to door, by mail or they may be inserted in packages. Sometimes, coupons may be
part of magazine or newspaper advertisements.

Gift coupons

Coupons, with a stated value are kept inside the packet. Again, these have to be
collected in order to qualify for gifts, and so require repeat purchasing. A catalogue
of gifts must be made available.

Cash premium vouchers or coupons

These can be redeemed at the retail shops as a price reduction. They may be
printed in press advertisements, delivered door-to-door, or printed on packs as
money off for the next purchase.
Cross-Couponing offers and other schemes

This is a popular co-operation scheme whereby an on-pack coupon or token

enables the customer to buy another product (not necessarily made by the same
manufacturer) at a reduced price.

Coupon Redemption schemes

This is fairly a recent on-pack idea, whereby a product carries a premium coupon
entitling the customer to a discount at named store. This is liked by the store
because the discount can lead to other purchases.

Premiums:

Premium refers to goods offered either free or at low cost as an incentive to buy a
product. 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 bar of detergent
free with the purchase of four cakes of toilet soap, or getting a Swiss knife well
below the market when the consumer purchases a microwave oven, are typical
examples of premium.

Marketers choose premiums that have much appeal to the consumes, or products
that are related in some way to the products of the marketer. For example,
Kellogg’s Choices packs contained small plastic toys like different types of
dinosaur replicas or sometimes, a plastic lunch box. As the product is primarily
targeted at kids, these premiums had great appeal to them. Computer magazines
often include a compact disc with each issue

A premium may be-

 inside the package,

 outside it or

 received through mail.

Premium is generally offered for consumer goods such as soap, toothpaste, etc.
There are many varieties of premiums and are sometimes referred as –
Direct premiums and
Mail premiums

Premium may be of several kinds —

1. Direct premium,
2. reusable container free in mail premium,
3. a self liquidating premium

1. Direct Premium offers

Direct premium can be inside the pack or outside it. Direct premiums are used
to reward the customers immediately at the time of purchase, and mail premiums
require the customers to take some action, such as mailing the proof of multiple
purchases to the marketer. After the receipt of the proof, the marketer sends the
premium to the consumer.

a. In-Pack, On-Pack, and Container Premiums:

These various terms for premiums are primarily used to distinguish the difference
in methods of rewarding the consumers. Such premiums are attached either to the
product, enclosed with the product, or otherwise available with the product when
the consumer buys the product. The premiums can be used to solve a competitive
price advantage or to counter the competitor’s coupon promotion.
Depending on the consumers’ value perception of the premium, the consumers
may even be agreeable to purchase the product at a slightly high total price for the
combination of the product and the premium. When all similar products in a
certain price range are perceived as basically alike, a premium offer with the
purchase of the product is quite an effective method to gain shelf space or even
display.
Premium offers provide a point of difference, more so when the product category
is fairly crowded. These are all different approaches to offer immediate reward to
the consumer at the time of purchase. The premium is likely to offer a reason and
an incentive to buy the product.
b. Free-in-Mail Premiums

Free-in-mail premiums are unique because the promotion objectives may be quite
different. In-mail premiums do not provide an immediate reward at the time of
purchase. Consumers have to take some action to claim the premium, such as
sending the proof of a single or multiple purchases and wait for some period of
time for the delivery of the premium through mail or courier.
When consumers do not perceive any meaningful persuasive differentiation
between brands and the market is competitive, such promotions work very well.
The motivation to purchase and continue purchasing the product gets shifted to the
incentive of premium as the purchase situation is one of total low-involvement as
far as the product category is concerned. Considerable brand switching is possible
if only one proof-of-purchase is to be sent to the marketer.
Another factor that may contribute to brand switching is the attractiveness and
value of the premium as perceived by the consumers. Where multiple purchases
are involved as proof of purchase, generally the usual inter-purchase interval is
more, and consumers are more likely to stay with the brand.
If the premium is particularly attractive, there would be a number of consumers
who would want the premium in a hurry and make the required number of
purchases. This would help to load-up the consumer. Or, there may be some
flexibility in conditions, such as the consumers may have the option to send one,
two, or more proofs of purchase along with a specified sum of money to obtain the
premium quickly. Much depends on the ingenuity of promotion planner.

2. A reusable container can be reused after the product is reused. The

reusable package itself serves as a premium

3. Self-liquidating premium offers

A self liquidating premium is the extra quantity offered at the normal price.
Trading stamps are given by the seller to consumers. These are redeemable at the
stamp redemption centres.

The meaning of the expression ‘self-liquidating’ is that cost of liquidating the

premium is collected from the buyer. For example, the manufacturer of a bathing
soap, may offer a ‘soap box’ at a very nominal price if the soap is purchased. The
manufacturer may buy the soap box in very large quantities at an attractive rate and
then may make an attractive offer to the consumers to stimulate sales.

Samples:

Samples are one of the most important tools of sales promotion. Samples are
defined as offers to consumers of a small amount of a product for trial. Free
samples are given to consumers to generate their interest in the product. Samples
help consumers verify the quality of the product.

Samples are delivered at the doors of consumers. They are also sent by mail or
given to customers in the retail store itself. Sometimes, samples are attached to
another product.

Though sampling is effective, producing numerous samples of a product is quite

expensive. Moreover, distributing samples to customers also involves expenditure.
Sampling is not justified in case of

 well established product

 a product that is not superior in some way to competing products
 a product with a slow turnover
 a product with a narrow margin of profit, or
 a highly fragile, perishable or bulky product.

II. Point of Purchase Displays (POP Display):

Here, the display material of a product or brand is placed close to the point of sale
inside retail stores. Such displays act as last minute inducement to buy. POP can be
very effective if done properly i.e., using better quality POP materials instead of
cheap paper signs or ill- conceived displays. POP material is often tied in with
television or print messages to increase effectiveness. Indian companies using this
method are – Proctor and Gamble, Nestle and Parle.
 III. Other Techniques:

1. Trade Allowances and Deals.

Allowances are granted to buyers on the basis of their previous purchases. In other
words, buy back allowances are given for new purchases, based on the quantity of
goods bought previously.

2. Price Deals (Price-off, Price cut, Cents off)

This involves offering products to consumers at discounted or reduced prices by a

certain percentage from the regular price of the product. This activity aims at
attracting consumers to other or newer brands, seasonal and unseasonal goods. For
example- a 15 to 60 percent off on clothes before some festive season in retail
shops are examples of sales or sales promotion.

Goods are sold at reduced prices during slump season. Reduction in prices
stimulates sale of goods.

Price packs (cents-off deals) – Offers consumers saving off the regular price of
the product, directly cuts price on the label, or combination of two products (tooth
paste and tooth brush).

4. Free Goods or Free Gifts:

Producers may distribute a free gift along with their product as a incentive to the
consumers for purchasing the product. For example- milkshake along with
Nescafe, toothbrush along with a toothpaste.

An attractive coffee mug free with a pack of 200 gms. of Nescafe coffee.

The gift is usually attached to the product, as with a toothbrush attached to a carton
of toothpaste; Toys (carefully packed separately) may be inserted in packets of
baby food.
 5. Refunds (Rewards) and Rebates –

An offer by manufacturer to give back certain amount of money to consumer.

Cash refund offers are rebates allowed from the price of the product. It is an offer
to refund part of the purchase price of a product to consumers who send a proof of
purchase to the manufacturer.

Moreover, if the purchaser is not satisfied with the product, the whole price or part
of it will be refunded. Cash refunded offer is stated on the package.

Cash refund offers or rebates – Are like coupons except that the price reduction
occurs after the purchase rather than at the retail outlet. Consumer sends proof of
purchase and manufacturer sends the refund part of the purchase price to the
consumer.

The terms refund and rebate are used as meaning the same thing/. A refund is
repayment of total money paid for purchase, while the rebate represents repayment
of only of part of the money paid for purchase. However, both these terms are used
interchangeably in the real world of marketing.
A promotion of offering refund or rebate by a marketer is a promise to give back a
certain amount of money after the purchase. The offer may be for a product
purchase alone or in combination with other products. Refund offers seem to work
very well in guaranteeing the trial of a product or service, since there is no risk
involved for the customer because of the promise of total refund of the purchase
amount.
Gillette announced a refund offer. A customer was required to buy a pack of & 7
O’clock P II for Rs. 55.50. On returning the empty pack, the customer gets Rs.
55.50 off on Gillette Sensor excel.
A computer magazine, “Chip”, offered a refund of Rs. 350 on sending one- year
subscription, which the customer can use to purchase special issues of the
magazine.
When consumers increase purchase quantity, they carry more stocks of the product
and stay out of markets. This dampens the competition for a while.
In diverse product categories, such as exercise equipment, mixers and juicers, hair
dryers, ceiling fans, inkjet printers, and magazines, etc., refund offers are fairly
common. Some of these promotions appear in audio-visual or print media.
‘Readers Digest’ regularly makes this offer. Some of them offer a free trial period,
and in case the customer is not satisfied, there would be total refund or money and
no questions asked. The customer has to send back the product within a specified
period of time. In these situations the refund offer is being used to encourage trial
at no risk to the customer. This is a powerful method of ensure trial.
Refunds are quite effective in competitive situation where consumers perceive
little or no differentiation among brands. The refund offer may sway the decision
in favour of the promoted product. When the product is good but the brand share is
low, a refund seems to work very well. There are occasions when the company
decides to move in new geographic markets, such refund promotion may prove to
be quite effective in motivating high-risk perceivers to decide in favour of the
promoted product as the perceived risk is likely to appear as manageable.
In local-convenience stores, the shopkeepers recommend certain products of
commodity type, such as rice, flour, or cooking oil to consumers. The assurance
given to customers is that if the product is not liked after usage for any reason, total
money will be refunded or the customer will have the option to buy any other
product of choice. This type of refund policy builds store loyalty among consumers
who continue the patronage.
Refund offer is limited only by the imagination of the promotion planner and the
budget allocation. Refund offers can be used to achieve a variety of promotion
objectives, such as to guarantee trial, to reward loyal consumers, to load
consumers, to increase purchase frequency, to introduce new products, to enter
new markets, to encourage the purchase of related products, etc.

5. Sales Contests, Sweepstakes, games of chance and skills &

Lotteries

Contests are the promotion events that give consumers the chance to win
something such as cash, trips or goods. Contests are conducted to attract new
customers. They introduce new product by asking the prospects to state the reasons
for the purchase of the product.

The buyer purchases the product and submits the evidence of purchase with entry
form for contest. Entry forms are duly filled by the buyers. A panel of judges
selects the best and buyers are given prizes.
These are part of Interest promotions because such sales promotions create not
only interest but also produce excitement and enthusiasm in consumers. There
seems to be quite a bit of confusion in understanding these terms.
A contest requires the participants to perform some task. For example, the
participants may be required to write a slogan, choose a name, or create a design,
etc. To decide which entries are first second, or third, etc., an expert or a panel of
experts examines the entries and judges the winning ones.
The prizes, depending on the announced number of prizes, are declared. A contest
is based on testing the skill or ability and may not involve the proof-of-purchase
(this is called a “consideration”) to enter the contests.
A sweepstakes is a random drawing and is sometimes called a chance contest.
This too may or may not involve the purchase of any product or service.
A lottery prize is decided on the basis of chance and requires a “consideration” for
entry that may be proof-of-purchase of ticket or a product.
According to the American Association of Advertising Agencies, “A contest is
an event that invites the customer to apply skill to solve or complete a special
problem”. The same agency says. “A sweepstakes does not call for the application
of skill on the part of the consumer. Winners are determined by a drawing from all
entry forms. In other words, prizes are awarded on the basis of chance”.
Often a combination of contest and sweepstakes is employed in some promotions.
The winners are decided in two stages. The first part involves a contest in terms of
skill, or knowledge. If more correct entries are received, the second stage then
involves a draw of chance to decide the winners. A well-known television
programme in India, “Surabhi”, is an example of this type of promotion.
Anyone can send the answers to the questions on a postcard. Generally correct
entries, running in thousands, are received. Out of these correct entries, depending
on the number of prizes to be given, some are picked up on a random basis to
declare the winners.
In India, contests and sweepstakes are very popular promotional techniques and
are frequently used in diverse product categories and services. The range covers
low as well as high-involvement products.
Starting from such low-priced product as “Pan Masala” or expensive products such
as cars, and almost everything in between, including sporting events, use contests
and sweepstakes.
The same element of chance has been used in case of consumer durable product of
high-involvement category. The promotion planning shows how effective the
sweepstakes can be in increasing the sales, and block competition.

6. After sale service free of cost during certain period.

7. Exchange Offers

It refers to 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. Example—”Exchange your black and white television with a colour
television.”

8. Price Reductions on some specific occasions e.g., 20% to 30% discount on

all products of Gandhi Ashram on Gandhi Jayanti.

9. Displays, Trade Fairs, Melas and Exhibitions in different parts of country.

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. For example- ‘International Trade Fair’
held in New Delhi in November every year.

10. Trade Association Meetings, Conferences and. Conventions displaying their

wares to large audiences at relatively low cost.

11. Event Sponsorship e.g., Sponsorship of sporting events.

12. Specialised correspondence (through specialised correspondence section) with

prospects, potential customers, and established customers.
13. Demonstration at retail stores, fairs and exhibitions or (Demo) even door-
to-door. Demonstration is required when products are complex and of a technical
nature. Customers are educated as to how to make proper use of the product.
Demonstration of products induces customers to buy. Demonstrations are provided
free of cost.

14. Money Back Guarantee –

Producers guarantee that if their product does not meet certain standards,
consumers can return the product and get their money back. This develops faith
and confidence in consumers about the product.

15. Cheap Bargain –

To get another product at a very cheap rate while buying a product; e.g., A bucket
of plastic of 5 litres only at Rs.6 with every pack of ‘SURF’ of 1 kg.

16. Entertainment of Customers (when standardised product is sold in bulk lots).

17. Advertising Novelties, that is, small, interesting or personally useful items, low
cost, and eye catching can be used for sales promotion.

18. Mail-in free offers

A manufacturer offers to send an item free of cost, if a product is purchased (e.g.,

sending a pen free by mail for those who buy some stationery items). Here, no
payment is required, only proof of purchase or perhaps a token payment to cover
postage and packing is required.
Care should be taken to control demand and supply, and it is better to limit the
offer in some way in view of huge financial implications of free offer

19. Picture cards

Picture cards encourage repeat buying in order to retain them. They may be
inserted in packs, or printed as cut-outs on cartons.
20. Packing

Another important attempt of sales promotion is through attractive package. Now-

a-days customers are attracted by good and attractive packing of products. A good
package is one which is attractive and protective, tells the product story, builds
confidence, convenient to handle and above all economical.
The economy and attractiveness of packing are two important areas which the sales
promotion department should always keep in mind.

21. Advertising specialities –

They are useful articles imprinted with an advertisers name given as gifts to
consumers, e.g. pen, dairy, calendars, key etc.

22. Patronage reward –

Cash or gift, for the regular use of a particular product of the company like
privilege card membership given by the company to the regular user of the
products.

23. Free Service:

Producers/retailers may promise free service to consumers for a specified period of

time after sales. For example- few car retailers offer free servicing for the first 6
months if certain car components are damaged or are under performing.

24. Full Finance @ 0%:

Under this method, the product is sold and money is received on installment basis
at 0% or without interest rate. The seller determines the number of installments in
which the price of the product will be recovered from the customers.

25. Scratch and Win Offer:

Under this scheme, a customer scratches a specific marked area on the package of
the product and gets the benefit according to the message written therein.
Trade /Business/ Dealers’ Promotion Tools/ Methods:
Promotion for industrial customers –

Here the focus is more on the wholesalers and retailers as compared to the
consumers, i.e. roughly a ratio of 60:40 is maintained in dealing both of them.
Trade promotion can persuade the wholesaler, retailers or distributor to carry a
brand, advertise or give a shelf space to the products of a particular company.
From company’s point of view, shelf space is so important that if it is provided by
the wholesaler or retailer to a particular product or company the consumer will buy
it. Customer will buy those products or services that are highly advertised, mostly
seen etc. For that, company provides extra commission, buy back guarantee, price
offs, allowances, gifts, free goods to them.

These promotions are used for such purposes as generating business leads,
stimulating purchase, rewarding customers, and motivating sales people.
It uses many tools as used in trade promotion and consumer promotion. Its main
focus is on conventions, trade shows and sales contests.

B. Dealer Promotion Methods:

1. Booster for Dealers – For example, Telco offered 2% discount to dealers if

payments made upfront to reduce mounting inventories and boost sagging
morale of dealers.
2. Advertisement Allowances/Materials, encouraging dealers and distributors to
advertise products. Adv. materials may be Diaries, calendars, Literature, Sign
Boards, Packing Bags, Posters, etc.
3. Quantity Discounts for purchasing product in large quality.
4. Incentive to Salesmen e.g., some prize of salesmen achieve their predetermined
targets.
5. Special Commission on achieve pre-determined sales targets, Higher rate for
Higher sales.
6. Training to Salesman by producers for certain period to enable them buy larger
quantity.
7. Free Gifts to Dealers/Distribution; such gifts increase with increase in quantity
of purchases.
8. Meetings and Seminars by Producers of all dealers/ distributors where all
problems of middlemen are discussed and solutions given.
9. Convention – By this the company gets many benefits like finding new sales
leads, contacting customers, introducing new products, meeting new customers,
selling more to present customers, and educating customers with publication and
audio-visual materials.
10. Sales contest – It involves salesmen or dealers to motivate them to increase
their sales performance during a given period, with prizes going to those who did
best.
Producers can organise competitions or contests among salespersons to encourage
them to generate more sales from new customers. Companies can offer a car or
consumer durables for generating a certain percentage sales in a particular month
or quarter.