SALES PROMOTION

Definition:
According to American Marketing Association, ―Those marketing activities, other than personal
selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness,
such as displays, show and exhibitions, demonstration and various non-recurrent selling efforts
not in an ordinary routine.‖
According to W.J. Stanton, ―Sales promotion defined as demand stimulating devices to
supplement advertising and facilitate personal selling.‖
1.Importance of Sales Promotion
Sales promotion acts as a bridge between advertising and personal selling. Due to the diversity of
the market, the importance of sales promotion has increased tremendously. Sales promotion
helps to remove the consumer‘s dissatisfaction about a particular product and manufacturer. It
creates a brand image in the mind of the consumers and the users. Sales promotional devices are
the only promotional devices available at the point of purchase. The sales promotional devices at
the point of purchase stimulate the customers to make purchase promptly on the spot.
The importance of sales promotion in business organization can be briefly shown below:
Spreads information:
The first function sales promotion is to spread the important information about the availability,
characteristics and uses of a particular product. Spreading the information about the product
helps to do the marketing activities easily. It is important to provide the information about the
product in the market.
Stimulates demand:
Sales promotion helps in stimulating the demand for the product in the market. Sales promotion
activities are designed to create interest in new products and to persuade people to buy them.
Customer satisfaction:
Sales promotion helps in satisfying the consumers. In the promotion of selling activities, the new
product is available in the market. The consumer has the desire to have a new product. If they
consume the new product, they will get satisfied in it. The new product in the market provides
satisfaction to the customer.
Stabilization of sales volume:
Sales promotion helps to stabilize the sales volume. It is an important purpose of sales promotion
to help in establishing sales volume by reassuring the customers about the quality and price of
the product. It is possible that a customer using a particular brand may buy another because
another brand is promoted in an effective manner.
Performance appraisal or marketing control:
Sales promotion helps in the marketing control too. It is important to have market control about
the performance of the situation of the market. Performance in the market helps to raise the
condition of the market which is approved by the customer.
2.Scope of Sales Promotion:
The scope of sales promotion can be visualized in the following manner:
Exposure:
The important objective is simply to expose an adequate number of target consumers to it.
Managers must choose promotional media that will reach adequate number of target co-planning
for exposure, marketers should take the following steps:
i) Define target consumers.
ii) Determine their numbers.
iii) Choose the promotion media.
iv) Determine the promotion budget needed to acquire the number of exposures.
Attention:
The term attention refers to the state of focusing one‘s mind upon something. Marketers are
faced with the need to take steps to make their promotion stand-out and something to attract
consumer attention.
Comprehension / Understand:
To understand or to receive communicated knowledge. The objective is achieved when
consumers interpret the message in the manner intended by the marketer. Consumers often fail to
understand promotional message when the messages are poorly designed or simply not able to
create interest.
Attitude Change:
It involves readiness to respond in a particular way. When a message promises a reward, it will
change the attitude of the customer. For example a strong cleaning powder or a detergent will
increase the chances of attitudinal change.
Behavior / Action:
Including behavior or action is especially important in personal selling and sales promotion.
Many managers encourage consumers to:
i) Buy the brand for the first time
ii) Continue to buy the brand
iii) Buy more of the brand
iv) Motivate the friends to buy the brand
v) Visit a retail store
vi) See a demonstration of the brand
vii) Try-out the brand
3. Need and Objectives of Sales Promotion
The main objective of sales promotion is to bring about a change in the demand pattern of
products and services. Basically, sales promotion has three specific objectives. First, it is meant
to provide important marketing information to the potential buyers.
The second objective is to convince and influence the potential buyers through persuasive
measures. Thirdly, sales promotion is meant to act as a powerful tool of competition. The
specific objectives of sales promotion are as follows:
To introduce new products or services:
Sales promotion is often used to motivate prospective consumers to try new products and
services. Dealers are also induced to introduce new products and services in the market. Usually,
free samples are provided through dealers during such introduction. Similarly, discounts in cash
or goods may also be offered to dealers to stock new products or deal with new services. Free
samples, trade discounts, cash discounts are basically sales promotion measures.
To attract new customers:
Sales promotion measures also play an important role in attracting new customers for an
organization. Usually, new customers are those persons that are won away from other firms.
Samples, gifts, prizes, etc. are used to encourage consumers to try a new brand or shift their
patronage to new dealers.
To induce existing customers to buy more:
Sales promotion devices are most often used to induce the existing customers of a firm to buy
more. Product development, offering three products at the cost of two, discount coupons, are
some of the sales promotion devices used by firms to motivate the existing buyers to buy more of
a specific product.
Helps the firm to remain competitive:
Most of the companies undertake sales promotion activities in order to remain in the competitive
market. Therefore, in the modern competitive world no firm can escape the responsibility of
undertaking sales promotion activities.
To increase sales in off-seasons:
Many products like air-coolers, fans, refrigerators, air-conditioners, cold drinks, room heaters,
etc. have seasonal demand. Manufacturers and dealers dealing with such type of goods make
every effort to maintain a stable demand throughout the year.
In other words, firms try to encourage the purchase of such goods in off-seasons also. That is the
main reason behind discounts and off-season price reductions of such items in the market during
slack seasons.
To add to the stock of the dealers:
Dealers like wholesalers and retailers usually deal with a variety of goods. Their selling activity
becomes easier when the manufacturer supplements their efforts by sales promotion measures.
When a product or service is well supported by sales promotion, dealers are automatically
induced to have more of such items.
To increase Loyalty
Loyalty to a product or service is much more subjective and personal in nature than repeat
purchase. Loyalty keeps the product moving even when the company is facing problems in terms
of price, distribution etc.
1. Long term collectors‘ promotion where a wide range of merchandise branded with product or
service can be collected.
2. Factory visits or exhibition stall visits which bring old and regular customers into direct
contact with the company‘s product or services as well as company‘s officials.
3. Mailing letters to few regular customers inviting them for product show.
To Widen Usage
Very often it would be seen that one product is widely used in one sector and not so in other
sectors. The trend could be changed by educating consumers about the other uses of products. A
detailed list of objectives is given for the benefit of the students.
In spite of the several objectives of sales promotion, there are three objectives which are
fundamental, viz., informing, persuading and reminding. These objectives are attained through
effective communication.
Informing
Informing refers to educating the consumers about the product, its features and uses. Free
samples may be distributed to leading consumers who may be a source of advertisement for
other prospective consumers.
Persuading
Salesmen persuade consumers to buy their products. They develop or reinforce a favorable set of
attitudes and influence their buying behavior. They supply comparative information on various
products so that consumers may be willing to purchase the products promoted by them.
Reminding
Reminding leads the firms to reinforce the previously satisfactory behavior of the customer. It
provides suitable knowledge for recollection. Reminding the consumers of their past satisfaction
will persuade them to stay with the product and prevent them from shifting to competitors.
4. Consumer Promotion:
Sales promotion aimed at consumers is called ‗consumer sales promotion‗. It aims at stimulating
consumers. The main consumer promotion tools include samples, coupons, demonstration,
contests; cash refund offer, premium, etc.
Types of Consumer Sales Promotion tools
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

perishable or bulky product.

product in large sizes

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.
Demonstration / Presentation
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.
Contests
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.
Cash refund offer
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.
Premium
Premium refers to goods offered either free or at low cost as an incentive to buy a product. A
premium may be inside the package, outside it or received through mail. The reusable package
itself serves as a premium.
Premium is generally offered for consumer goods such as soap, toothpaste, etc. Premium may be
of several kinds — direct premium, reusable container free in mail premium, a self liquidating
premium, trading stamps, etc.
Direct premium can be inside the pack or outside it. A reusable container can be reused after the
product is reused. Free in mail premium means a premium item will be sent by mail to
consumers who present proof of purchase to the manufacturer.
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 centers.
‘Price off’ offer
Goods are sold at reduced prices during slump season. Reduction in prices stimulates sale of
goods.
Consumer sweepstakes
A sweepstakes calls for consumers to submit their names for a draw. Names of consumers are
included in a list of prize winning contest. The lots are drawn and the winners get prizes.
Buy back allowances
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.
5. Channel Promotion / Trade Promotion:
If the promotional activities are directed at trade partners or channel members, like distributors,
wholesalers or retailers, it is known as trade promotion. The basic purpose of trade promotion is
to build ‗push‘ in the channels so that they sell the manufacturers products with great
enthusiasm. It is carried out by the manufacturers by providing various incentives to trade
partners to make them work for the success of their brands.
Methods of Trade Promotion
The method of trade promotion can be briefly shown below:
Dealer premiums:
Dealer premium is one of the methods for trade promotion. In some cases, certain premiums are
offered to the retailers. Certain units of the products are given free to the retailers for keeping
large stocks of goods. In addition to dealer premiums, the other sales promotion activities may
also be undertaken.
Advertising material:
Advertising of products also helps in the promotion of trade. It is usual practice with many
producers of goods to supply adverting material to their dealers, e.g. sign boards, banners, etc.
seen mostly for Pepsi, coke, etc.
Store demonstration:
Store demonstration also helps in the promotion of trade. Under it, sales personnel of the
manufacturer carry out a special demonstration of their products for the benefit of dealers and
consumers. Both dealers and consumers are involved in it. It helps to increase the trading
activities in a rapid way.
Special displays:
Special displays about the products also help in the promotion of trade activities. During trade
fairs or exhibitions, special displays and shows of the company‘s products may be arranged to
popularize them.
Special discounts:
Special discounts on the products also help in the promotion of trade system. During the
promotion campaign, a manufacturer may offer special discounts on purchase made by the
retailers. Special discounts increase the profit margin of the dealer who gets encouragement to
push up the sales of the product.
Push money:
Push money also helps in the trade promotion. The dealers may be given a specific amount of
money to push the sales of the manufacturer‘s products. A cash reward is given for pushing the
product among the buyers when there is tough competition in the market.
6. Timing of Sales Promotion:
Sales promotions are a great way for your organization to incentivize potential customers to
purchase. However, if you choose to invest in a sales promotion without fully understanding the
elements that determine its success, your business runs the risk of losing more than just a few
clients. Here are five essential elements of a successful sales promotion, and how you can use
these elements to transform your organization.
When done correctly, sales promotions can transform a business. Take digital coupons for
example: According to a survey by Mobile Commerce Daily, approximately 96% of mobile-
device users will use smart devices to search for digital coupons in 2015. Online coupons also
have 10 times the redemption rate of conventional coupons.
With digital coupons, customers can enjoy discounts and special offers without dealing with the
excess of conventional paper mailers. Consumers can easily locate and redeem offers from
hundreds of sites on an as-needed basis, eliminating the need for bulky ‗coupon folders‘ or
coupon-stuffed wallets and purses. Digital coupons are a great example of sales promotions that
generate significant return for little investment, with 44.5% of businesses expected to be
investing in digital coupons for marketing purposes by 2016.
Marketing Pressure
Sales promotion methods that make use of digital coupons are generally successful for a reason.
According to the American Marketing Association, a sales promotion is defined 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 quality." While this definition
covers the broad details of sales promotion, the truth is that sales promotion is all
about incentives. In essence, sales promotion gives potential customers an additional reason (or
reasons) to consider doing business with you and your company.
The idea behind this is that once customers are willing to take that first leap of faith and try your
product—whether through limited trial periods, discounts, special offers, free shipping, branded
gifts, loyalty programs, or the aforementioned digital coupons—they‘ll be satisfied enough with
the results to be willing to invest further. Sales promotions allow businesses of all shapes and
sizes to get a foot in the door, with the common end goal of boosting short-term and long-term
sales numbers.
What Makes Sales Promotions Work?
That said, not all sales promotion is successful. For whatever reason, some promotions fail to
capture the interest of prospective clients. While this may occasionally be the result of a
mediocre product or service, more often than not the cause of this failure can be attributed to the
campaign itself. To effectively motivate customers into doing business with your organization,
your sales promotion strategy should include five elements:
A Target Audience
Over the course of a lifetime, loyal customers spend upwards of 10 times the amount spent by
average customers. The difficulty of any marketing effort lies in locating individuals who will
eventually develop into brand advocates. Many marketers believe that by casting a large enough
net, they‘ll be able to locate those individuals simply by virtue of percentages. After all, if
enough prospects are contacted, a percentage of those prospects is bound to journey through the
sales funnel and become paying customers, and a smaller percentage of those customers will
become loyal customers.
The problem with this mentality is that it‘s remarkably inefficient, with only a small fraction of
prospects and leads ―paying off‖ to offset the initial investment. By predetermining a target
audience, businesses can put their own finite marketing resources to better use. Through this
process, businesses can target those most likely to become loyal customers without wasting any
resources on those who aren‘t.
The same can be said for sales promotion campaigns. In order to understand the best target
audience for your promotion, you first need to understand more about the customers you already
have. Send out a simple survey or questionnaire (or have one built directly into your site) that
allows customers to share demographic data. Offer an incentive up front in order to get
customers to take the time to share personal information.
Once you‘ve a clearer idea of what kinds of people use your product or service, identify exactly
what kinds of problems your product or service is designed to solve. With these two factors in
mind, you should focus your sales promotion toward those who are most likely to be genuinely
interested.
Measurable Goals
There‘s no denying the importance of setting goals. In fact, in a study performed by the Harvard
MBA program, those who made and recorded clear goals went on to earn on average 10 times
the amount of those who didn‘t. When designing a sales promotion campaign, your goals need to
be more specific than ‗increasing sales.‘
So, what's your strategy? Ask yourself what the most important objective of your promotion
should be. Are you hoping to draw in new customers, or are you more inclined to focus on
customer retention? Do you want your customers to purchase more frequently, or would you like
for them to increase the average amount that they spend on a purchase? Are you attempting to
increase the business that your organization gets during slower seasons or times of the day? Are
you interested in regaining the attention of former customers who have taken their business
elsewhere?
Determine exactly what you would like to accomplish with your sales promotion, and when
possible, translate that goal into a specific number. This will allow you to chart your failure or
success as the campaign progresses, and to identify aspects of your campaign that need to be
amended or further developed.
Limited Availability
Behavioral psychologists have found that human beings tend to assign greater value to things
they perceive as being scarce. In a classic study performed in 1975, researchers had participants
assign perceived value to identical cookies located in two identical jars. The only difference
between the two jars was that one held 10 cookies, while the other held only two. The study
discovered that while there was no apparent difference between the cookies or the jars,
participants assigned greater value to the jar of two cookies.
When something seems limited, we naturally assign it greater value. We tend to want things we
can‘t have or that we fear that we won‘t be able to have in the near future. At base, we‘re animals
that have a keen sense of regret, and we hate missed opportunities. The best marketers have
learned how to take advantage of this very human phenomenon by offering limited-time deals. A
sales promotion—such as a free gift with purchase—may seem like an attractive incentive for
motivating sales, but unless that promotion is only available for a limited time or in limited
quantities, then a large majority of customers will not be interested. On the other hand, if those
customers are faced with the possibility of missing the promotion if they don‘t act quickly,
they‘ll be far more likely to commit.
Sufficient Promotion
Your promotion is an effort to draw customer attention to your organization‘s product or service.
But what about drawing attention to the promotion itself? In order for a promotion to be
effective, it needs to be seen and understood by the same target audience identified back in point
number-one. The question becomes, how does one promote a promotion?
The answer is that promotions can be promoted much like any other product or service. In-store
signage, employee word-of-mouth, social media, your business‘ website, email contact, flyers,
paper mailers, articles in local publications, press releases, commercials and telephone contact
may all be effective in letting your customers and prospective customers know about your sales
promotion. Visibility is key, but be sure to account for the marketing cost of promoting your
promotion (otherwise, you might end up spending more money on advertising than you‘ll make
back through increased sales). For this reason, it may be most beneficial to focus your
promotional strategies on less-expensive—though still tightly focused—channels. For example,
emails to interested parties have a very high rate of return, with 44% of email recipients making
at least one annual purchase based on a promotional email.
Value
When all is said and done, the customer is interested in just one thing from your organization:
value. If your sales promotion doesn‘t offer your prospective clients real value, then all of the
limited-time offers and targeted marketing in the world isn‘t going to make your sales promotion
a success.
Ask yourself what kind of offer your potential customers will find most interesting, and then
determine whether or not you can afford to give it to them. If you can, then you may have found
the perfect sales promotion. If you can‘t, then scale it back until you come to a compromise that
will be interesting to your target audience, while still remaining cost effective for your
organization
A Word of Warning
An effective sales promotion requires careful planning and budgeting, and is not something that
should be undertaken casually. Businesses that have overreached with their sales promotions
have been known to suffer significant losses due to the disparity between increased sales and the
cost of the promotions themselves. To this end, it may be better to err on the side of caution.
Before you invest a significant portion of your budget towards a grandiose promotion, first test
the waters with smaller, more cost-effective promotions. You‘ll get a better feel for how your
potential customers might respond, and you won‘t risk the future of your company to do so.
Whether you decide to offer digital coupons, give special gifts with every purchase, or invest in
any other promotional campaign, be sure to take your time to do it right. Remember: A
successful promotional campaign is one in which everyone benefits. If either you or your
customers are coming away from the experience feeling unsatisfied, then you need to revisit and
reevaluate how you are incorporating these five elements into your promotional strategy.
7. Measurement of Impact of Sales Promotion:

and/or other print media, with or without discounting the item.

in targeted customers for a defined

to capture which promotion the item was purchased under at the point of sale?
Here are 5 techniques that any small or middle market company can deploy:
1. Compare the sales and gross margins for the promoted item or customer prior to the
promotional period, during the promotional period, and after the promotional period. The best
way to do this is to compute the average sales per day for each of these timeframes. Did your
average sales per day increase during the promotional period? When comparing the sales per day
prior to the promotional period, to the sales per day after the promotional period, did it look like
the promotion just pulled in future sales you would have otherwise received at normal margins?
Or did the promotion give you a true sales and margin "lift‖?
2. Compare the overall average order size and the lines per order during the promotion periods to
those same metrics during non-promotion periods. Did the promotion increase your average
order size or add to your lines per order? Compare these metrics against those of your industry, if
available. Do they compare favorably?
3. Compare the total sales per day of all items during promotional periods (including the items
not promoted), to the total sales per day of all items during non-promotional periods. Does it
appear that the promotions impacted your total sales, due to the added buzz that the promotional
activity provided in the marketplace? (Note to consider seasonality, if applicable.)
4. Compare the results for the various promotions against each other. Rank which promotions
provided the best sales and gross margin lift for your company. Compare the results against those
in prior years to see if the trends are favorable, or if certain promotional activities are getting
stale. Pull or revamp those promotions that are becoming less effective.
5. If possible, compare the added gross margins generated by each promotion, to the underlying
incremental cost of each promotion, to determine the overall net profit generated by each
program. Did the promotion have a net positive impact on earnings?
The above assessments are simple, yet effective indicators of the effectiveness of your
promotional activities. However, many small and middle market companies do not perform such
assessments due to the laborious effort needed to pull and compile the data. Today‘s business
intelligence solutions can make the underlying data needed to complete such an assessment more
readily available. For example, these assessments are pre-built and come ready to use in Grand
Metrics BI, and make the process as easy as a click of the mouse.
I encourage you to assess the effectiveness of your company‘s sales promotion activities – you
may be surprised by your findings! Regular fine-tuning of such activities is certain to enhance
your company's profitability.
8.Sales Promotion Budgeting:
The allocation of monetary resources to sales promotion is determined by the promotional
strategy of the firm.
In most cases, first the total amount of money for promotion is determined then it is budgeted for
different activities. Before deciding the money allocated to sales promotion, the management
should evaluate relevant factors such as type of product, its stage in PLC, the market situation,
level of competitive activity, etc. All these factors, alone or in combination, can significantly
affect the promotional budget. There are five important techniques that are commonly used to
allocate funds to sales promotion.
Percentage of sales method
The percentage of sales method to allocate the funds is probably most popular among companies.
In this approach, the budget is determined by taking a fixed percentage of sales. The sales figure
taken could pertain to the previous year, or the average of several past years. This percentage
could also be based on the forecasted sales of the year under consideration.
Unit of sales method
This method is commonly used by companies dealing in high-priced products, generally
consumer durable goods such as four and two wheeler auto-manufacturers, refrigerators,
washing machines, microwave ovens, entertainment electronics and many other items.
Instead of rupee value of sales, as in the previous method, the base is the physical volume of
either the past or anticipated sales. This figure of units is then multiplied by a fixed amount
ofmoney to reach the budget amount. For example, the manufacturer might allocate Rs. 2000/-
per unit for sales promotion.
Competitive parity method
Many marketers match or base their sales promotion budget to that of the major competitors. The
logic attributed to this method is that the collective minds of the companies in the industry
probably generate promotion budget that are close to optimal and any departure from the
industry norms may lead to promotion war.
All you can afford method
In using this approach to budget allocation, the amount that is leftover after all other relevant
allocations have been made, is earmarked for sales promotion. This approach is used, generally,
by companies with small budget, or by some other companies, large as well as small, when they
are introducing a new product. It is merely an availability oriented budget and quite
unsophisticated. Apparently, there is no realization that in a competitive market situation, sales
promotion mainframe sales in many ways.
Objective and task method
As mentioned earlier, the promotion budget is determined by the overall promotional strategy.
Objective end task method approach is the one which is driven by strategy. This is also the most
popular technique to decide the sales promotion budget. The promotion manager starts by
making a thorough study of the market, the product, competition and consumer behaviour in
order to set up appropriate promotion objectives. These objectives may relate to increasing short-
term sales, introducing a new product, stimulate trial, increasing distribution, etc., within a
specified period of time. Next step is to determine how much money would be necessary to
accomplish each task involved in achieving the objectives. If the costs happen to be more than
the money available, then either the promotion objectives adjusted or more funds are made
available from the contingency reserve or by reducing the budgets of the other promotional
activities.