June 10, 2014

Sales Promotion

Definition


Sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker and/or greater purchase of particular products/services by consumers or the trade.

Advertising offers a reason to buy. Sales promotion offers an incentive to buy. Sales promotion tools for consumer promotion include cash refund offers, prices off, prizes, patronage rewards etc. Sales promotion tools for trade promotion include prices off, advertising and display allowances and free goods based on sales. Sales promotion tools aimed at salesmen of the company are contests, incentives for sales in fixed periods, trips to tourist locations etc.

Rapid Growth of Sales Promotion


In comparison to growth in advertising sales promotion has grown more rapidly and in many consumer packaged goods company it now accounts for 65% to 75% of the total budget (Kotler, 1997).

Purposes of Sales Promotion


Free sample stimulates consumer trial and some of the consumers may feel good and start purchasing. A free advisory in any activity may help some persons and they may come to the advisory firm in future. Incentive to buy increase the rates of use by occasional users and attract new triers. Incentives could be used as rewards to loyal customers also.

Incentive type promotions are used to attract new buyers or triers, to reward loyal customers, and to increase the repurchase rates of occasional users.

Trade allowance help in getting retailer shelf space for small companies.

Farris and Quelch in their Sloan Management Review article "In Defense of Price Promotion" (Fall 1987, pp. 63-69) argued that price promotion provides number of benefits that are important for manufacturers.  They enable manufacturers to adjust    to short-term variations in supply and demand through price mechanism. During tight supply times, they allow manufacturers test how high a list price they can charge, because later on they can always discount it. They provide consumers an occasion to switch from their current brand or product category and thus find out the attributes and benefits of other options available in the market. They help the manufacturers to offer different prices to different segments of the target market. They also help making consumers feel smart by searching and taking advantage of special price and discount offers.

But, there is risk in putting a well-known brand leader on promotion more than 30% of the time.

Major Decisions in Sales Promotions


Setting the objectives

Selecting the tools

Developing the sales promotion program

Pretesting the program

Implementing and controlling the program

Evaluating the Results of the program



Main Consumer Promotion Tools -  Kotler (13 Edition)


1. Samples
2. Coupons
3. Cash Refund Offers
4. Price Packs(cents off deals)
5. Premiums (gifts)
6. Frequency programs
7. Prizes (contests, sweepstakes, games)
8. Patronage awards
9. Free Trials
10. Product warranties
11. Tie-in Promotions
12. Cross Promotions
13. Point-of-Purchase Display and Demonstrations

Decisions in Creating Sales Promotions


The marketers first have to decide the size of the incentive. A certain minimum is necessary to motivate a person to act and buy. The marketing manager has to decide the target people for the incentive. The frequency of promotions can be another issue. According to a research, the optimal frequency is three weeks in a quarter and the optimal duration for the promotion is one purchase cycle. The vehicle through which the incentive is offered is also to be decided. The total promotion budget needs to be decided and it has to be related to the objectives of the promotion.

Pretests can help in determining the appropriate incentive size and presentation method.

The promotion programs are evaluated on awareness by the target people, their response to the promotion and the subsequent consuming behavior.



Sales Promotion Methods - A Listing


Advertising Specialties
Cash refund offer
2. Contests
3. Coupons
4. Game
Novelty
Patronage reward
Point of Purchase Promotion

(Source: http://businessperspectives.org/journals_free/im/2008/im_en_2008_1_Fam.pdf)

References


Philip Kotler, Marketing Management (Basic text for revision articles)

Kotler, Philip (1997), Marketing Management, Ninth Edition, p.662.

Related Knols


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Sales promotion - Creative ways

Article originally posted in
http://knol.google.com/k/narayana-rao/sales-promotion/2utb2lsm2k7a/ 144

Updated 10 June 2014, 2 Dec 2011

2 comments:

  1. Because the majority of brand choice decisions are made inside the store, yet consumers evaluate only a fraction of the products available, improved attention through in-store marketing activity should strongly influence consumer behavior at the point of purchase.




    In store Marketing

    ReplyDelete
  2. Recommended as revision article for 10 June 2014

    ReplyDelete