Unit 3

Sales Promotion
Sales promotion is a type of Pull marketing technique. If you have a product which is
new in the market or which is not receiving a lot of attention, then you can promote this
product to customers via sales promotions. You can use various techniques like giving
discounts on the product, offering 1 + 1 free schemes, etc etc.The word promotion,
originates from the Latin word ‘Promovere.’ The meaning is “to move forward” or to
push forward or to advance an idea. The aim of production is sales. Sales and promotion
are two different words and Sales Promotion is the combination of these two words.
Sales promotion increases the sales.
Sales promotion methods aim to capture the market and increase the sales volume. It is
an important instrument in marketing to lubricate the marketing efforts. Now-a-days
sales promotion is a necessary tool to boost sales. Sales promotion becomes a fashion
and luxury.
Sales promotion is one among the three pillars of promotional mix. The other two pillars
are personal selling and advertising. Sales promotion is the connecting link between
personal selling and advertising. Sales promotion is an important and specialized
function of marketing.
Definition:
According to the American Marketing Association, sales promotion is “those marketing
activities other than personal selling, advertising, and publicity that stimulate consumer
purchasing and dealer effectiveness such as display shows, expositions, demonstrations
and various non-recurrent selling efforts not in the ordinary routine”.
According to George W. Hopkins, “Sales Promotion is an organised effort applied to
the selling job to secure the greatest effectiveness for advertising and for dealer’s help.”
“Sales promotions may be defined as all the marketing and promotion activities, other
than advertising, personal selling and publicity that motivate and encourage the
consumer to purchase by means of such inducements as premiums, advertising
specialties, stamps, refunds, rebates, exhibits, displays and demonstrations.
Objectives of Sales Promotion:
Sales promotion is a vital bridge or a connecting link between personal selling and
advertising.
1. To increase sales by publicity through the media which are complementary to press
and poster advertising.
2. To disseminate information through salesmen, dealers etc., so as to ensure the product
getting into satisfactory use by the ultimate consumers.
3. To stimulate customers to make purchases at the point of purchase.
4. To prompt existing customers to buy more.
5. To introduce new products.
6. To attract new customers.
7. To meet competition from others effectively.
8. To check seasonal decline in the volume of sales.
Importance of Sales Promotion:
The importance of sales promotion has increased tremendously in the modern times.
Lakhs of rupees are being spent on sales promotional activities to attract the consumers
in our country and also in other countries of the world.
Some large companies have also begun to appoint sales promotion managers to handle
miscellaneous promotional tools. All these facts show that the importance of sales
promotion activities is increasing at a faster rate.

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Sales Promotion Strategies
There are three types of sales promotion strategies: Push, Pull, or a combination of the
two.

A push strategy involves convincing trade intermediary channel members to "push" the
product through the distribution channels to the ultimate consumer via promotions and
personal selling efforts. The company promotes the product through a reseller who in
turn promotes it to yet another reseller or the final consumer. Trade-promotion
objectives are to persuade retailers or wholesalers to carry or sell a brand, give a brand
shelf space, promote a brand in advertising, and/or push a brand to final consumers.
Typical tactics employed in push strategy are: allowances, buy-back guarantees, free
trials, contests, specialty advertising items, discounts, displays, and premiums.

A pull strategy attempts to get consumers to "pull" the product from the manufacturer
through the marketing channel. The company focuses its marketing communications
efforts on consumers in the hope that it stimulates interest and demand for the product
at the end-user level. This strategy is often employed if distributors are reluctant to
carry a product because it gets as many consumers as possible to go to retail outlets
and request the product, thus pulling it through the channel. Consumer-promotion
objectives are to entice consumers to try a new product, lure customers away from
competitors’ products, get consumers to "load up" on a mature product, hold & reward
loyal customers, and build consumer relationships. Typical tactics employed in pull
strategy are: samples, coupons, cash refunds and rebates, premiums, advertising
specialties, loyalty programs/patronage rewards, contests, sweepstakes, games, and
point-of-purchase (POP) displays.

Car dealers often provide a good example of a combination strategy. If you pay
attention to car dealers' advertising, you will often hear them speak of cash-back offers
and dealer incentives.
There are two types of Sales promotions
a) Consumer sales promotions
Any sales promotion activity that you do keeping the end consumer in mind is known
as consumer sales promotions. Example – if an E-commerce website gives 10%
discount on its products, then it wants the consumers to make the best of this deal. This
is a consumer focused promotional activity and hence can be called as consumer sales
promotions.
The objective of Consumer sales promotions might be various. A consumer might be
asked to test a sample of a completely new perfume in the market and rate it. An existing
customer might be asked to use a Scratch card so that he receives a gift.

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At the end, the result should be an action from the consumer. Either the consumer
should purchase the product right away, or he should come to know about the product
so that further awareness is created for the brand.
b) Trade Sales promotions
If your promotional activities are focused on Dealers, distributors or agents, then it is
known as trade promotions. There is a lot of competition in any field. And
in channel sales, to get the products moving and to motivate the dealer to perform better,
trade discounts are given.
Example – You are a dealer for Televisions. Now Sony comes and tells you, you will
be given 5% discount if you cross a sale of 100 televisions. Naturally, you will be very
motivated because 5% in television sales is huge. Plus selling Sony TV’s is easy
because it is already a brand. Thus, you divert all potential customers to Sony
Televisions so that you can achieve the target.
Similarly, there are other types of trade sales promotions which can be used to motivate
the dealer and distributor. More such techniques of sales promotions are discussed
below.
As the noise of competitors rises, you will find more and more companies using sales
promotions techniques. The advantage of sales promotion is that they are not too
expensive for the company when compared with ATL advertising mediums like
Television or newspaper. Hence, even small businesses use it quite effectively.
Types of Sales promotions – Sales promotion techniques.
Below are some of the most common type of sales promotion techniques used across
all industries. Some industries, like FMCG, see a lot of these techniques being
implemented simultaneously mainly because of the sheer volume of business as well as
because of the competition in FMCG. Other businesses, like Consumer durable,
furniture etc also use a combination of these sales promotion techniques.
Let us delve deeper into each of these types of sales promotions.
1) Discounts – Trade / consumer
The most common type of sales promotions is consumer discounts or trade discounts. I
don’t even need to to explain this to everyone because we are bombarded with discount
offers everyday. Be it E-commerce stores, retail stores or anything else. The reason
discount is most used is because it actually works!
If there is a 10% discount on the product for the consumer, then it is known as consumer
discount. However, if there is a 10% discount to the dealer when he is purchasing from
the company, it is known as trade discount.
In trade discounts, the dealer may or may not forward the discount to the customer. It
is not necessary that the dealer will give additional 5% discount to customers when he
is himself receiving 10% additional discount. However, many dealers know the
importance of achieving sales volumes hence they pass on discounts to customers
whenever they receive trade discounts.
2) Gifting
One of the most common ways to promote your store during festival time or when there
is a huge walk in expected is Gifting. It is also a way to increase the sales of the products
because customers have an anticipation that they might win a gift from the store.
Another popular way to use gifting is to advertise “Assured gifts”. Basically, you have
different gifts on offer like a mixer grinder or a steam iron. A customer who purchases
a set amount of products will get the “Assured gift” from you. This creates excitement
in the mind of the customer and he received something for “free”. He might visit again
and again.
3) Coupons
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Quite commonly used to motivate people to purchase when they think the price is high
or it can be incentive to buy your product above the competitors. Domino’s, Pizza
hut and McDonalds very prominently use coupons in their marketing. If you have their
coupon in hand, you get a discount of X amount on the purchase.
What the coupon does is, it instigates you to take action. If today i get a coupon saying
i will get 10% off on whatever i purchase from an XYZ store, then i will surely get off
my butt and go purchasing. I will purchase all those products anyways. But the coupon
got me purchasing from the XYZ showroom. That’s the objective of the coupon which
it has accomplished.
4) Financing
Financing is ingenious amongst the various types of sales promotions. It is a
combination of various factors. Companies which have huge resources generally act as
Financers. They allow customers to purchase a product on EMI or on different financing
options. All this happens for a minor processing fee and less interest.
As a result, the customer, who does not have complete money to buy the product, will
likely purchase the product using financing options. Such financing helps the dealer to
liquidate the product faster and also helps the customer in making purchasing decisions.
5) Sampling
It is predominantly used in the FMCG industry for perfumes, deodarants, soaps or even
eatables. Sampling is an excellent way to introduce your product in the market and at
the same time to increase the awareness of the product.
The customers who are being targeted by sampling carry a huge ** lifetime value **.
Once they get hooked onto your product, they won’t leave it that early. Hence, Sampling
might be of higher cost to the company but it is quite successful in the various types of
sales promotions.
6) Bundling
**Bundling** is when you put a combination of products on sale for the same price.
So, for example, normally a 100 dollars might buy you just a shirt. However, with
product bundling, 100 dollars might buy you a set of shirt and pants. As a result, the
consumer is much more likely to buy this bundled offer as compared to a single offer.
We see bundling strongly in retail where a shampoo might be bundled with a soap or
we can see a bundled combinations of many different items. The disadvantage of
bundling is that customer might think one of the products is of poor quality. However,
if the products are bundled together and both products are of an excellent brand, then
the bundled product will sell much higher quantities and will defeat competition in
numbers. Hence, Bundling is commonly used as a type of sales promotion.
7) Contests
There are different forms of contests which can be run to gather more customer
information or to motivate the customer to try the product or to create awareness about
the new retail place. Contests can be as simple as winning a gift through a scratch card,
or it can be an in house game in a retail showroom or it can be an online contest for
which users have to enter their information.
Due to the phenomenal rise of the internet, online contests have become very easy and
important. They also penetrate faster and reach a lot of customers.
8) Refunds & Rebates
As the name suggests, refunds are a marketing tactic when you get a partial amount
refunded to you based on an action you have taken. For example – if you bring the
parking ticket to the showroom, your parking amount will be refunded by the store.
Such refunds make the customer excited to visit a store.

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Similarly, rebate is a type of partial refund which is most popular in the United states,
though not much popular in other countries. In rebates, you fill forms while checking
out of stores. And if you have won the rebate, you will have to mail your details to the
company and the company will refund you the rebate amount in your bank or via
a paypal account.
9) Exchange offers
Exchange offers are quite commonly used all across the world and used strongly in
festive season when sales will be more and people are in a purchasing mood. In
exchange offer, you can exchange an old product for a new product. You will receive a
discount based on the valuation of your old product.
So, if you had an old washing machine at home and there was an Exchange offer in the
market, then you will receive an X amount for the washing machine which is decided
by the parent company or the retailer. This X amount will be deducted from your final
payable amount and will be reduced under the header of “Exchange offer reimbursed”.
10) Free trial
Chances are, you have come across several softwares or online programs which offer a
free trial to you before you purchase the product. Shareware programs are also a kind
of free trial programs where you can use the product for some time but later on have to
purchase the product to use it completely.
This is done so that the customer gets a chance to trial run the product before he pays
for the product in full. Programs like Adobe Photoshop, Microsoft office 365 and others
are known to give free trial programs of upto a month so that the customer can know
more about the product, he can try it and then purchase.
11) Email Marketing
Email marketing was, is and is touted to always be one of the best ways to promote your
business. It is one of the most commonly used types of sales promotions across the
world because of its ease of implementation and because of its penetration. Each and
every one of us has an email account which we access regularly. Thus, an Email is
personal to us when received in our phone and we are bound to check it out.
Chances are, email marketing bundled with an exciting and irresistible offer can really
entice the customer in purchasing your product. As a result, Email marketing is actually
widely used, be it online industry or offline.
12) Exhibitions
More commonly used in Food, Jewellery, Clothing, Chemicals and similar such
industries where sellers want to showcase the products they have to their buyers. These
buyers might be consumers or they may be industrial buyers. An exhibition generally
consists of one player who is exhibiting his goods. However, it can also be a
combination of players who are all there to showcase their wares.
13) Trade Shows
While exhibitions are targeted towards individual buyers, Trade shows are targeted
towards resellers, dealers, distributors and bulk buyers. A trade show is typically a
display point for all top companies within an industry. These companies are there to
compete and grab the maximum eyeballs of retailers, dealers and distributors. While
Exhibitions are concentrated mostly on individual buyers, trade shows are concentrated
towards bulk buyers.

14) Demonstrations
One of the most popular products to be sold through product demonstrations were
vacumm cleaners which used to be sold house to house. However, because of privacy
concerns, such type of promotional activities were stopped. Instead, now you will see
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water purifiers being promoted through demonstrations in malls, showrooms and other
places.
Demonstrations are an excellent way to create more awareness of the product and to
make customers comfortable towards a technical product. Technicality of the product
can be a barrier to purchase. By demonstrating the actual working of a product, you are
removing a barrier to purchase. Hence demonstration is a type of sales promotion
mostly used for technical type of products.
15) Continuity programs
One of the best example of continuity programs is the frequent flyer program introduced
by most airlines. These airlines give more “miles” to the customers who are flying more
and more with the airline. Because you are awarded gifts the more you fly with one
airline, you are likely to continue flying with that airline so that you receive more miles.
Another example of the continuity program is when a super market advertises that
customers who buy 5 times in this month from that super market will get a gift. This
ways, the customer will not shift anywhere else but will do shopping from that super
market. Such continuity programs not only aim at getting new customers, but they also
retain old customers effectively.
16) Quantity Discount
The more quantity of the product you buy, the more is the discount. So for example, a
single soap may cost $1 but a combined package of 5 units of soap might cost you $4,
giving you a 20% discount on the purchase. Such type of quantity discount is common
for customers.
However, the quantity discount is not applicable only to consumers. It is also applicable
in trade where a dealer or distributor might be given a discount of 5-10% if he purchases
a higher quantity of product. So, a kitchen appliance distributor might be given a
discount if he buys higher number of units in the festive season. The higher he sells and
the more aggressive he is, the better he will earn.
Sales promotion budget and techniques
In order to understand the concept of budget it’s necessary to understand that the budget
that’s taken in consideration is dependent on the organizations promotional strategy.
So first total amount of money for the promotion is determined and then the budgeting
is done for different promotional activities.
But how do you determine the amount of money involved in the promotional activities?
This is different to different business. Its more or les dependent on various factors that
play role in a products life cycle. The factors like different stages of PLC , the market
condition (of the company) , the economy in with the organization functions, the extent
of competitive activities etc. All these factors individually or together might effect the
promotion budget to a great extent. You just can’t expect the company to have huge
promotional budget in times of rescission.
There are basic five techniques that are used to determine/ allocate funds to sales
promotion.
Percentage of sales method
In most cases and by most firms this “percentage of sales method” is used to determine
the promotional budget of the company. So they more or less pull certain percentage of
the sales made in a fixed period. Remember when I say fixed it can be for say last year
or for several past years. This decision is more dependent on the current business
scenario and current working of the company. It might be that the company may
consider just last years sales figures under consideration as they may have made great
sales. (So you may take one year or an average of several this depends on many

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condition in which the org functions). And ya , this can also be a forecasted sales of the
year under certain conditions.
Unit of sales method
For Biggies that build big products like two-wheelers auto-manufactures, and other
consumer durable this is most preferred method of sales promotion – “Unit of Sales
Method” so here the base is UNITS of sales that are made. Here the figures of units
are multiplied by fixed amount of money to reach the budge amount. For example:
they might allocate $1000 per unit for sales promotions. (I did say its for Biggies so
this amount might be big ..)
Competitive parity method
Any 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
Here the amount used literally means “All you can afford” in other words all you are
left with. So you pick all that is left after all other relevant allocations have been
made. So normally this approach is used by Small fishes (small companies with small
budget) or may be by some other firms that are big when they are introducing the new
product. This approach is merely an availability oriented budget and kina
unsophisticated. Apparently, there is no realization that in a competitive market
situation, sales promotion mainframe sales in many ways.
Objective end task method
As I said the promotional budget is determined by the overall promotional strategy of
the organization hence objective end task methods is the one which is strategy driven.
This is even the most popular technique to decide on sales promotions budget. So what
do we do? We (Marketing Managers) start by making a thorough study i.e.
understanding the market, the product, the offerings, the most crucial competition and
consumer behavior in order to set the ultimate promotion objectives. Remember these
objectives may relate to reach short term sales objectives .Remember this is sales
promotions that are ultimately derives sales and sales and sales. These objectives may
even relate to introducing a new product, stimulate trial, increasing distribution, etc.,
within a specified period of time. Now you determine how much money would be
required to fulfill each of these tasks in order to achieve the promotion objectives. If the
cost happens to be greater that money available then ether the objectives are refined or
the funds are made available the contingency reserve or by reducing the budgets of the
other promotional activities.
Evaluation of Sales Promotion
Sales promotions offer the customer extra value in return for purchases. The idea is for
customers to buy more during the sales promotion period, thereby increasing total sales.
Companies evaluate the success of their promotion based on the sales volume and the
associated costs. They check the increase in sales against a baseline and calculate
additional profit compared to what the profit would have been, had the sales promotion
not taken place. They check for additional brand awareness or a better brand profile by
performing customer surveys. Long-term, a successful sales promotion must result in
better sales.
Evaluation Methods
Sales promotions result in an upward bump in sales during the promotion period.
Because customers buy during sales promotions for reasons that may affect their

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purchases before and after the promotion, the company should evaluate the volume of
sales for the sales promotion period plus an equal period before, and at least two equal
periods after, the promotion. If the sales promotion lasts a week, the evaluation period
should be at least four weeks, including one week before and two weeks after the
promotion. This methodology catches possible dips before the promotion, if customers
are waiting for the sale, as well as any continuing increase or decrease in sales volume
after the promotion. The evaluation must also include the costs of the promotion over
the evaluation period. If the company wishes to evaluate brand awareness, it must
include a customer survey in the evaluation.
Sales
To determine the increase in sales due to the sales promotion, the company must
establish the level of sales that would have taken place without the promotion. Such a
base level must avoid the effects of any variation in sales volume during the evaluation
period. The best estimate is usually the average level of sales of the months prior to the
evaluation period, adjusted for seasonal factors obtained from previous years. The
company must compare this estimated level of sales to the actual sales that took place
over the evaluation period to get the increase resulting from the sales promotion.
Profits
Sales promotions can generate increased profits. The volume of additional sales must
be large enough to generate profits greater than the cost of the sales promotion. This
cost has several components. There are the costs of producing the promotional signs,
coupons and publicity. There are additional costs for processing the coupons, discounts
or other incentives. Finally, there are the costs of the promotion itself, such as a discount
or rebate. The company must subtract these costs from the additional profits generated
by the extra sales to get the true net additional profit that can be attributed to the sales
promotion.
Brand Awareness
Sometimes sales promotions are good public-relations vehicles, and can generate
interest and return customers. They may be able to add to consumer brand awareness at
a lower cost than other promotional means. In this case, the goal is not additional profits
but rather additional sales over the long term, as more consumers become familiar with
the advantages of the particular brand. Customer surveys to determine brand familiarity
before and after the sales promotion give an accurate evaluation of the immediate
success of the promotion. In the longer term, though, the measure of success must be
continued higher sales. Such sales increases should already appear following the sales
promotion, and a continued evaluation of the level of sales will give a good indication
of the success of the promotion as far as brand awareness is concerned.

Phases of Evaluation
The evaluation of an effective sales promotion program is generally divided into three
phases:

1. Pre-testing: Before a sales promotion is offered.

2. Concurrent testing/Monitoring and Follow Up: When the sales promotion is
operational i.e. when it is going on.
3. Post-testing: At the end of the sales promotion event.

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Pretesting

How sales promotion is to be communicated and what would be communicated to the

target groups is important and can be pre-tested. For example the pre-tested may find
out what is likely to be the perceived value and the risk. A customer considers whether
it would be wise to buy an unknown brand of sport shoes at a 45% discount. In this
offer was there a risk of buying an unfamiliar brand? The pre-test can be conducted to
assess these factors by using focus groups and consumer panels. Another approach,
ballot method, consists of kneeling a ballot paper to a list of consumers. They are
requested to evaluate different illustrated promotion is and vote for the most light and
return the ballot to the firm. A relatively expensive but more accurate method is a
portfolio test. A portfolio of sales promotion is prepared and shown to consumers in
person and the responses are noted.
To test consumers behaviour responds such as trial purchase, repeat purchase, etc.,
pretesting consists of experimenting in certain markets for individual stores in a
market. All other factors remain the same; only the sales promotion device being
tested is the variable that is manipulated.

It is often quite helpful to evaluate the responses of resellers before implementing the
promotion programme. The simplest ways to visit several important retailers and
wholesalers, discuss the programme and seek their opinion and suggestions. This may
prove to be quite favourable in case the support of resellers is considered to be of
paramount importance for promotion results.

• Concurrent testing
This testing is done when the sales promotion is in progress. Concurrent testing the
permit the promotion manager to modify the sales promotion, if needed
This type of testing is conducted in terms of sales data which can be obtained on a
weekly or monthly basis. If the promotion is a consumer contest and the consumer is
not require to purchase anything, the response to promotion can be adjudged by the
number of entries received at some interval and if need be, the contest period can be
extended. In case of a coupon distribution programme, similar approach can be
adopted by keeping track of coupons redeemed.

• Post testing

Post-testing is done after the promotion period is over. To assess the changing consumer
awareness and attitude, telephone calls, questionnaire mailed to the consumers and
personal interviews can be used. In these methods, the most expensive is the personal
interview method and the least expensive is the mail. The information sought pertains
to the promotion event. In case of samples on premiums distributed through retail stores,
intercept interviews at the Point of Sale can reveal more reliable information.

To measure the sales affect, sales figures before the promotion period can be compared
with figures at the end of promotion and one month after the promotion ends. Suppose
that the promotion objective was to increase sales by 30 percent in certain period and
the pre-promotion sales for a similar period were worth 5 million rupees. The sales
jumped to in excess of 5.6 million in the promotion period. This would show that the
objective was achieved. It is very likely that in the ensuing month after the promotion,
the sales will come down to say 3.5 million rupees. In the sales return to 5 million rupees
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on the long run, then perhaps the sales jump is because of brand features and deal prone
customers. However, if the regular sales settle at 5.5 million rupees on the long run,
then definitely the promotion prove successful in increasing the long run sales by
attracting new customers and we have also attracted customers away from other
competing brands.

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