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Sales promotion

Presentation bySempungu Godfrey

Sempungu Godfrey

Introduction Sales promotion is the process of persuading a

potential customer to buy the product. It can be partof the personal selling process.

Sales promotion is one of the four aspects ofpromotional mix. (The other three parts of thepromotional mix are advertising, personal selling,and publicity/public relations.) Media and non-mediamarketing communication are employed for a pre-determined, limited time to increase consumerdemand, stimulate market demand or improveproduct availability.

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Cont--

Sales promotion is the use of short term incentivesto encourage the purchase or sale of a product orservice.

Sales promotion is any initiative undertaken by anorganisation to promote an increase in sales, usageor trial of a product or service (i.e. initiatives thatare not covered by the other elements of themarketing communications or promotions mix).Sales promotions are varied. Often they areoriginal and creative.

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Types of sales promotion

Sales promotions can be directed at either the customer,sales staff, or distribution channel members (such asretailers).

Sales promotions targeted at the consumer are calledconsumer sales promotions.

Sales promotions targeted at retailers and wholesale arecalled trade sales promotions. Some sale promotions,particularly ones with unusual methods, are consideredgimmick by many.

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Cont--

If the promotion is targeted at business customersit is business promotions.

If it is directed at members of the sales force it issales force promotion.

In general sales promotion should be consumerrelationship building rather than creating onlyshort term sales or temporary brand switching,they should help to reinforce the products positionand build long-term relationships with consumers.

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Reasons for sales promotion

Increasing competition: The air of change isgaining momentum after the introduction ofeconomic liberalization. Due to increase incompetition, companies are finding it increasinglydifficult to compete on quality. They are thereforeresorting to more innovative methods of salespromotion. In order to have a competitiveadvantage over its competitors like mobile phonecompanies in Uganda.

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Customers Have Become More Price Sensitive:This increased price sensitivity is a direct result oframpant inflation. Economic recession is likely tofuel this trend further, as consumers and dealersbecome more sensitive towards prices. If thecustomers get branded jeans at half the actual price,then they are definitely going to make hugepurchases of Spykar Jeans because they want valuefor their money, as they are price sensitive.

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Sales Promotions Generally Create AnImmediate Positive Impact On Sales:Advertising, personal selling and other methodsof promotion produce slower sales responsecompared to sales promotion. Sales promotionsare mostly for short duration, for a specifiedperiod, leading to a sense of urgency inconsumers to buy now. This creates an immediatepositive impact on sales.

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Products have become more standardized:In manyproduct 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 bemore or less similar within a given price range becauseof the inability of manufacturers to develop trulydifferentiated products. Under these circumstances,advertising messages are unable to strongly influencethe consumers’ perceptions and create brand franchise.

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Cont--- As a result of these perceptions of similarity among

brands, marketers have no way but to compete onthe basis of extra benefit offered through salespromotion. Competing companies struggle tocapture market share by using every tool likely tobring sales success.

Consumer Acceptance: As competition intensifiesand promotions proliferate, consumers have learntto earn the rewards of being smart shoppers. Over aperiod of time, they have also learnt that brands onpromotion are not necessarily of lower quality.

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Advertising Has Become More Expensive And LessEffective: All the advertising media have become quiteexpensive. Audio-visual medium, which is considered asthe most effective for short-duration ads, may cost millions.In many cases, consumers have reached a point of boredomdue to excessive advertising on TV. Some consumers evenconsider advertising as an intrusion into their privacy,leading to zapping (surfing channels). Firms with smallbudgets cannot compete with big companies, which spendhuge sums of money on advertising. For these small budgetfirms, sales promotion is a more cost-effective promotionmethod to produce sales results.

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Trade Has Become More Powerful: Retailers andwholesalers have become powerful and findthemselves in a position to demand extra facilitiesfrom the companies. They Channel members demandmore incentives to get the desired results.Manufacturers do not seem to have any alternatives butto concede to their demands, keeping in view thecompetitive market conditions. In shopping malls likeUchumi & shoprite, decent margins have to be paid tothem in order to have shelf visibility for your brand.

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Emphasis On Sales Volumes: Towards achievingthe long-term profit goals, manufacturers try toattain high sales volume. Brand managers andproduct managers find themselves under pressureto achieve short-term sales results for the sake oftheir careers. Compared to any other promotionalmethod, sales promotion is a more effectivemethod to generate short-term sales volume.

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Sales Promotions Maximizes Profits: A numberof economic theories conclude that a companycan maximise profits by using sales promotion.Such promotions can permit price discriminationby allowing the brand to compete in 2 or moredifferent market segments. Sales promotion mayallow a premium brand to compete with a lowertier brand among price sensitive consumers. Forexample, a premium brand of toilet soap may beon promotion in some price sensitive markets,while in the remaining markets it is sold at itsnormal price.

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Impulse Buying Is Increasing: The number ofmarginal customers is increasing. Displays at thepoint of purchases lead to impulse buying byconsumers, more so if the items on display are notexpensive. Impulse Buying Is Increasing.

Sales Promotion Specialists Are Available:number of marginal customers is increasing.Displays at the point of purchases lead to impulsebuying by consumers, more so if the items ondisplay are not expensive.

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Excess stocks: Because of increasing numberof brands, it is difficult for manufacturers anddealers to anticipate future sales. This, at times,leads to excessive inventories, and the quickestway to clear that is to go for sales promotion.

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Introducing An Element Of Interest: There are anumber of promotions, which are often calledinterest promotions. Some of the more popularinterest promotion techniques are samples, contests,and sweepstakes, free premiums and mail-inpremiums. These promotions create an element ofinterest and excitement, and consumers enjoy theseand respond enthusiastically to such contests andsweepstakes, etc.

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Tools of sales promotion Buy-One-Get-One-Free (BOGOF) - which is an

example of a self-liquidating promotion. Forexample if a loaf of bread is priced at $1, and cost10 cents to manufacture, if you sell two for $1, youare still in profit - especially if there is acorresponding increase in sales. This is known as aPREMIUM sales promotion tactic.law

Customer Relationship Management (CRM)incentives such as bonus points or money offcoupons. There are many examples of CRM, frombanks to supermarkets.

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Free samples (sampling) e.g. tasting of food anddrink at sampling points in supermarkets. Forexample Red Bull (a caffeinated fizzy drink) wasgiven away to potential consumers at supermarkets, inhigh streets and at petrol stations (by a promotionsteam) and coca cola’ Burn energy drink.

Vouchers and coupons, often seen in newspapersand magazines, on packs. These are certificates thatare given to buyers. They can stimulate the sales of amature brand or promote early trial of a new brand.

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Cash refund offers or rebates, are like couponsexcept that the price reduction occurs after the purchaserather than at a retail outlet. The consumer gives theproof of purchase to the manufacturer. E.g. “Bifunilawoku shell”.

Price packs (cents off deal) offer consumers savingsoff the regular price of a product. The reduced pricesmay be marked directly by the producer on the label orpackage. The packs can be single packages sold atreduced price (such as two for the price of one) or twobanded products. E.g. toothbrush and tooth paste

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Premiums are goods offered either free or at alow cost as an incentive to buy a product, rangingfrom toys included with kids products to phonecards, compact disks e.t.c. A premium may comeinside the package (in pack), outside the package(on pack) or through the mail.

Free gifts e.g. Subway gave away a card with sixspaces for stickers with each sandwich purchase.Once the card was full the consumer was given afree sandwich.

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Advertising specialties are useful articlesimprinted with an advertiser’s name and they aregiven as gifts to consumers. They could includepens, T-shirts, caps, coffee mugs, calendars, keyrings, shopping bags e.t.c.

Patronage rewards are cash or other awardsoffered for the regular use of a certain company’sproducts or services. E.g. Airlines offer frequentflier plans, awarding points for miles traveled thatcan be turned in for free airline trips.

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Point-of-purchase (POP) or point of sale (POS)promotions include displays and demonstrationsthat take place at the point of purchase or sale.They could include signs and posters ofmanufacturers and the products that they offer.

Sponsorships that could be in various fields suchas education sports, e.t.c can be used. Companieswill sponsor programs such as health programs.E.g. MTN marathon, football leagues, Madhivanischolarship e.t.c

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Contests, sweepstakes and games give consumersthe chance to win something, such as cash, trips, orgoods, by luck or through extra effort. A contest callsfor a consumer to submit an entry, a guess, suggestionto be judged by a panel that will select the best entries.A sweepstakes calls for consumers to submit theirnames for drawing. A game presents consumers withsomething -bingo numbers, missing letters every timethey buy, which may or may not help them win aprize. A sales contest urges dealers or the sales forceto increase their efforts, with prizes going to the topperformers.

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Joint promotions between brands owned by acompany, or with another company's brands. Forexample fast food restaurants often run salespromotions where toys, relating to a specificmovie release, are given away with promotedmeals. E.g Uchumi super market and Unileverpromotions.

Loyalty cards have recently become an importantform of sales promotion. They encourage thecustomer to return to the retailer by giving themdiscounts based on the spending from a previousvisit.

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Advertising allowance that manufactures may giveretailer s for advertising their products.

Manufactures may also offer free goods to retailersand whole sellers. And these are extra cases ofmerchandise to resellers who buy buy a certainquantity.

Manufacturers may also offer push money in formof cash or gifts to dealers or their sales forces topush the manufacturers goods.

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