What is Sales Promotion?

Sales Promotion is a marketing discipline that utilizes a variety of incentives techniques to structure sales related programs targeted to consumers/trade/ and or sales level, that generate a specific measurable action or response for a product/ service.

Sales promotion means and includes all the activities that are performed by a producer, a dealer or a businessman to increase his sales. The main purpose of sales promotion activities is to encourage and persuade consumers to buy a particular product.

Sales Promotion Definition

The term sales promotion has been defined by many eminent authors. Some of the important sales promotion definition are as follows:

Philip Kotler defines it as “Sales Promotion encompasses all the tools in the marketing mix whose major role is persuasive communication“.

According to Mason and Rath – “Sales Promotion consists of those activities that are designed to bring a company‘s goods or services to the favourable attention of consumers“. 

“Sales promotion comprises that range of techniques used to attain sales/marketing objectives in a cost-effective manner adding value to a product or service either to intermediate or end users, normally but not exclusively within a definite time period”. – Institute of Sales Promotion, U.K.

Those marketing activities, other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine – American Marketing Association

Objectives of Sales Promotion

Objectives of sales promotion are explained below:

1. 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.

2. Building Product Awareness

This medium is effective in exposing customers to products for the first time and can serve as key promotional components. To build the product awareness sales promotion techniques own advantage of capturing customer information while exposing promotion.

3. Creating Interest

Marketers realise that sales promotions are very potent in creating interest in a product. An appealing sales promotion can significantly increase customer traffic to retail outlets in the retail industry. One more way to create interest is allowing a customer to experience a product (products for free or at low cost).

4. Stimulating Demand

It can be done by lowering the cost of ownership to the customer. This helps in stimulating sales. Because building product awareness and convincing customer to purchase the product is important

5. Reinforcing the Brand

After purchasing the product, mostly for additional purchase or to promote the sales. Many companies, including airlines and retail stores, reward good or preferred customers with special promotions (e.g., email special deals and surprise price reductions at the cash register).

Types of Sales Promotion

Sales promotion can be classified based on the primary target audience to whom the promotion is directed.

1. Consumer Market Directed

Possibly the most well-known methods of sales promotion are those intended to appeal to the final consumer. Consumers are exposed to sales promotions nearly every day. Many buyers are conditioned to look for sales promotions prior to making purchase decisions.

2. Trade Market Directed

Marketers use sales promotions to target all customers, including partners, within their channel of distribution. Trade promotions are initially used to entice channel members to carry a marketer‘s products and, once products are stocked, marketers utilise promotions to strengthen the channel relationship.

3. Business to Business Market Directed

A small, but important, sub-set of sales promotions are targeted to the business-to-business market. While these promotions may not carry the glamour associated with consumer or trade promotions, B-to-B promotions are used in many industries.

Rationale of Sales Promotion

1. Short Term Results

Sales promotions such as coupons and trade allowances produce quicker, more measurable sales results. However, critics of this strategy argue that these immediate benefits come at the expense of building brand equity. They believe that an overemphasis on sales promotion may undermine a brand’s future.

2. Competitive Pressure

If competitors offer buyers price reductions, contest or other incentives, a firm may feel forced to retaliate with its own sales promotions.

3. Buyers Expectations

Once they are offered purchase incentives, consumers and channel members get used to them and soon begin expecting them.

4. Low quality of Retail Selling

Many retailers use inadequately trained sales clerks or have switched to self-service. For these outlets, sales promotion devices such as product displays and samples often are the only effective promotional tools available at the point of purchase.

Characteristics of Sales Promotion

On the basis of the above definitions, following characteristics of sales promotion may be enumerated:

• Sales promotion does not include advertising, personal selling and publicity.

• Sales promotion activities are generally performed at certain times. Thus, these are not regular activities, as display fairs and exhibitions, demonstrations, seasonal discount free-gift, etc.

• Sales promotion helps in selling and it makes advertisements and personal selling easy and effective.

• Sales promotion encourages dealers and distributors to sell the product more.

• Sales promotion encourages consumers also to buy the product.

Designing a Sales Promotion Program

Designing a sales promotion program includes the following steps:

1. Deciding Sales Promotion Objectives

Sales promotion objectives derive from broader promotion objectives, which derive from more basic marketing objectives for the product.

2. Selecting Consumer Promotion Tools

The promotion planner should take into account the type of market, sales promotion objectives, competitive conditions, and each tool’s cost-effectiveness.

3. Selecting Business and Sales Force Promotion Tools

Companies spend large amounts of money on business and sales-force promotion tools to gather business leads, impress and reward customers, and motivate the sales force to greater effort. They typically develop budgets for tools that remain fairly constant from year to year.

4. Selecting Trade Promotion Tools

Manufacturers use a number of trade pro tools. Manufacturers award money to the trade

• To persuade the or wholesaler to carry the brand;

• To persuade the retailer or wholesaler to carry more than the normal amount;

• To induce retailers to promote the brand by featuring, and price reductions;

• To stimulate retailers and their sales clerks to push the product.

5. Developing a Sales Promotion Program

In planning sales promotion programs, marketers increasingly blending several media into a total campaign concept.

• In deciding to use a particular incentive, marketers must first determine the size of the incentive.

• Second, the marketing manager must establish conditions for participation. Incentives might be offered to everyone or to select groups.

• Third, the marketer must decide on the duration of the promotion.

• Fourth, the market must choose a distribution vehicle.

• Fifth, the marketing manager must establish the timing of promotion. Finally, the marketer must determine the total sales promotion budget.

6. Implementing, Controlling, and Evaluating the Programme

Although most sales promotion programs are designed on the basis of experience and we can determine whether the tools are appropriate, the incentive size optimal, and the presentation method efficient.

Marketing managers must prepare implementation and control plans that cover lead and sell- in time for each individual promotion.

Additional costs beyond the cost of specific promotion include the risk that promotions might decrease long run brand loyalty.

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. 

1. From the Point of View of Manufacturers

Sales promotion is important for manufacturers because:

• It helps to increase sales in a competitive market and thus, increases profits;

• It helps to introduce new products in the market by drawing the attention of potential customers;

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

• It stabilizes sales volume by keeping its customers with them.

2. From the Point of View of Consumers

Sales promotion is important for consumers because:

• The consumer gets the product at a cheaper rate;

• It gives financial benefit to the customers by way of providing prizes and sending them to visit different places;

• 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;

• It helps to raise the standard of living of people. By exchanging their old items they can use the latest items available in the market.

3. From the Point of View of middlemen

Sales promotion is important for middlemen because:

• It helps in selling the product; actually it supplements the work of a salesman.

• It helps in increasing the sales of the middlemen.

• It becomes very convenient for the middlemen to sell the product to the consumers for which sales promotion measures are adopted by the producers.

• It increases the goodwill of the middlemen.

• It helps in increasing the profits of a middleman.

• It offers many monetary as well as non-monetary incentives to the middlemen.

Techniques of Sales Promotion

1. Consumer Promotion Techniques

The consumer promotion campaign is a step by step procedure, the first step being to set the goals and objectives. The organizing of consumer schemes is discussed below:

a. Sample

Usually called consumer sample, free samples are given to consumers for trial to introduce a new product or to expand the market. The consumers can try the product.

b. Price-off offers

In the price promotion method, products are offered at a price lower than the normal price. The price is reduced on the product package through special printing of price. The percentage of price-off differs from product to product or service to service and it is decided by the manufacturer or supplier.

The reduction of the price does not cut into the retailers profit but is given from the manufacturer’s profit. This ensures the co-operation of retailers.

For example, 50% discount banners or sale banners at various shops and shopping malls, airlines giving different rates of discount for flying the same sector, etc.

c. Demonstrations

These are instructions given to educate the consumers about using the product. This method may be used in products like vacuum cleaner.

d. Quantity-off offers

Offering more quantity of product at no extra cost or nominal increase in the price of the larger quantity packs is known as quantity-off offer. Some examples are—three for the price of two, 25% extra, hotels offering 3 night stay at the rate/price of 2 night stay, etc.

e. Premium (gift) offers

These are temporary price reductions, which appeal to bargain instinct, e.g., instant coffee sold in carafe by one company was very successful. Towels, dinner ware, hairbrushes, key chains, artificial flowers, ball pens, toilet soaps, blades, were given as in pack premiums.

f. Exchange scheme

This technique offers to exchange the old product with new in payment of a fixed amount which is less than the original price for example, exchange of old black & white television for colour television by paying 6,000/- only (original price is 8,000/-)was offered by a particular producer of colour TV sets.

g. Trading stamps

Trading or bonus stamps are issued by retailers to customers who buy goods from there. The number of stamps given to a buyer depends upon the amount of purchases made by him.

For instance, in India Roman bonus stamps are issued at the rate of 2–1/2 per cent of the purchase amount. These stamps are given free of charge and the customers can redeem them to obtain products out of the specified list.

This technique induces customers to buy their requirements from the retailers who offer such stamps. The purpose is to increase customer loyalty.

h. Refunds

Refund is an offer to return a portion of the purchase price back to the consumers, once they provide the proof of purchase, such as receipt, etc. The refund form usually has to be mailed to the organization with receipt to get the refund. Many of the companies now provide coupons instead of refund. This ensures and enhances the chance of the consumer buying the product again.

i. Fairs and exhibitions

Trade shows, fashion shows or parades, fairs and exhibitions are important techniques/tools of sales promotion. They provide a forum for the exhibitions or demonstration of products. Free literature can be distributed to introduce the firm and its products to the public.

Fairs and exhibitions are organized usually by big firms or trade associations. At these fairs and exhibitions, business firms are allotted stalls where they display their products.

Fairs and exhibitions have wide appeal as several people visit them. Customers can be attracted through gifts, special concessions and free demonstrations of technical and speciality products. Fairs and exhibitions provide an opportunity to the visitors to observe the competing products and help to promote sales.

j. Public relations activities

These include greetings or thanks in newspapers, donating space for noble causes, offer of Privileged Citizen Card, etc. Their purpose is not to create immediate demand or to increase sales. They are designed to create a good image of the firm in the society.

2. Middlemen Promotion Techniques

The middlemen promotion techniques are as follows

a. Free display

The retailers are provided with materials from the manufacturers to advertise in their store. These can be posters, or other related materials for display. This ensures that the customers are aware of the product and in the case of some self-servicing product retailers, point of purchase (POP) advertising helps.

But the POP advertisement does not ensure the sale of product and the cost of providing the materials of display can be very high. There is provision of free display of material either at the POP or at the POS, depending on one’s view point. Display reaches consumers when they are buying and actually spending their money.

b. Retail demonstrations

These are arranged by manufacturers preparing and distributing the products as a retail sample, example, Nescafe Instant Coffee was served to consumers trying the sample on the spot of demonstration regarding the method of using the product.

c. Trade deals

These are offered to encourage retailers to give additional selling support to the product, e.g., toothpaste sold with 30% to 40% margin.

d. Buying allowance

Sellers give buying allowance of a certain amount of money for a product bought.

e. Free goods

It is offered to encourage repurchase of a product immediately after another trade deal. Seller gives free goods, e.g., one piece free with two, or two pieces free with 10, are common free deals.

f. Advertising and display allowance

These are also offered to retailers to popularize the product and brand name of the manufacturer.

g. Dealer loader

A gift for an order is a premium given to the retailer for buying certain quantities of goods or for special display done by the retailer.

3. Sales Force Promotion Techniques

a. Sales contests

Sales contests are organized by the manufacturer. In this scheme rewards are provided to salesmen who have achieved exceptional targets.

b. Sales manuals

Training materials such as manuals, visual aids, flip charts, programme, learning books are most useful to sales people. Sales manual may be long or short depending upon the type of the products manufactured and sold by the company.

The sales manuals usually contain product details, applications, manufacturing processes, prices, sales techniques, etc. Some companies also have house journals that report about the company programme, new products, research activities, new policies, awards, promotions, etc.

c. Sales meetings

Sales meetings are generally organized for sales people from one area, region or district more frequently, usually once a month, once in two months, or quarterly. These meetings bring together sales people from different territories of the nation and are considered a popular way of educating sales people. There is a varying mixture of business and pleasure.

d. Training for salesmen

Dealer and distributor training for salesmen, which may be provided to give them a better knowledge of a product and how to use it. Dealer sales promotion provides the selling devices. Sales promotion devices at the point of purchase inform, remind, and stimulate buyers to purchase products.

People who see these devices are in a buying mood and thus they can be easily persuaded to buy those products.

Advantages of Sales Promotion

1. Price discrimination

Producers can introduce price discrimination through the use of sales promotions. They can charge different prices to different consumers and trade segments depending on how sensitive each segment is to particular prices. Coupons, special sales events, clearance sales and discounts are examples to explain the phenomenon.

2. Produces immediate results

While advertising or public relation act as an investment producing sales in the long run, sales promotion works during a definite span of time. Most of the sales come during the sale promotions period itself. Very often, if the promotion is successful, one can get results within hours, days or weeks.

Sales promotion produces result by stimulating people to act to try, to buy, to buy more, or to buy more often. It can lead to trial, generate excitement, encourage repeat purchase, attract switchers, etc. It is especially helpful in situations where there is extreme pressure to increase sales, e.g., at the end of the year when there are shortfalls in budgeted sales.

3. Effect on consumer behaviour

As sales promotions are mostly announced for a short period, customers may feel a sense of urgency and stop comparing the alternatives. They are persuaded to act now rather than later.

4. Support and involvement push the product

Sales promotion techniques directed at channel members or sales force can gain channel support and involvement and help push the product. It helps in getting shelf space and merchandising benefits at the retail level, clearing off excess inventory, motivating sales people to find new contacts, etc.

5. Effect on trade behaviour

Short-term promotions present an opportunity and encourage dealers to forward buy. This forward buying ensures that retailers would not go out of stocks. As dealers have more than the normal stocks, they think it advisable to advertise in local media, arrange displays and offer attractive promotion deals to consumers.

6. Regional differences

The South is generally characterized by a greater degree of going out and people tend to drink outside the house. The Tamilian consumer in particular, is value-oriented, rational and looks up to film stars, while the Keralite is more international in his outlook.

The Bangalorean is as cosmopolitan as his Mumbai or Delhi counterpart. Such factors have to be taken into consideration while providing incentives to the customers.

Disadvantages of Sales Promotion

1. Increased price sensitivity

Consumers wait for the promotion deals to be announced and then purchase the product. This is true even for brands where brand loyalty exists. Customers wait and time their purchases to coincide with promotional offers on their preferred brands.

2. Used for short-term results

Most sales promotion is used for short-term results. Any excessive use can shift the focus on short-term marketing planning that acts only at the behavioral level.

3. Quality image may become tarnished

If the promotions in a product category have been rare, the promotions could have a negative effect about its quality image. Consumers may start suspecting that perhaps the product has not been selling well, the quality of the product is true compared to the price or the product is likely to be discontinued because it has become outdated.

4. Merchandising support from dealers is doubtful

In many cases, the dealers do not cooperate in providing the merchandising support nor do they pass on any benefit to consumers. The retailer might not be willing to give support because he does not have the place, or the product does not sell much in his shop, or may be he thinks the effort required is more than the commission/benefit derived.

5. Increasing sales promotion activities

Increasing sales promotion activities has led to clutter, leading companies to cut each other and thus eroding the bottom line.