L12 sales promotion

Sales Promotion
Prof. (Dr.) R. Bakshi
© Prof.( Dr.) R. Bakshi- No part of this ppt
presentation can be used for any other purpose apart
from classroom teaching and training. Illustrations
and screenshots are property rights of respective
companies as applicable.

Whereas advertising gives a reason
to buy, SP gives an incentive to buy
It is part of the Marketing spend of all
companies and these days SP spends in
many companies exceed that of the
adspends
© Prof.( Dr.) R. Bakshi- No part of this ppt presentation can be used for any other purpose apart
from classroom teaching and training. Illustrations and screenshots are property rights of
respective companies as applicable.

The more the product’s quality and its
advertising persuasiveness fail to meet
competition, the greater is the need for
promotion to improve the price – value
relationship

Sales Promotion Objectives
1. Increase sales volume
2. Speed up the sales of slow moving
products
3. To check the fluctuations in sales
4. Attract new customers
5. Launch new product and increase
trial
6. Encourage repeat purchase
7. Clearance of excessive inventories
8. Motivate dealers to stock and sell
more
9. Encourage dealers to participate in
display and sales contests
10. To gain advantageous shelf-space
11. To increase store traffic
12. Improve relationship with dealers
13. To block competitors’ moves
14. Motivate sales force
15. To supplement advertising and
personal selling efforts
16. Deflect customers’ attention from
price
© Prof.( Dr.) R. Bakshi- No part of this ppt presentation can be
used for any other purpose apart from classroom teaching and
training. Illustrations and screenshots are property rights of

How Promotions Affect Sales
1. Brand switching
a. Aggressive switching – promotions encourage buying
another brand than the last purchase.
b. Defensive switching – promotion helps in retention.
2. Repeat buying
3. Purchasing more, or accelerating timing
4. Increasing category expansion and consumption.
© Prof.( Dr.) R. Bakshi- No part of this ppt presentation
can be used for any other purpose apart from classroom
teaching and training. Illustrations and screenshots are
property rights of respective companies as applicable.

SP is a push strategy
Since it is at the last point where the
consumer is often at the point of
buying, the additional incentive
makes a last ditch effort to convert
the customer on to the incentivised
brand

Factors Influencing Sales Promotion
Growth
1. Increasing competition
2. Customers have become more price-sensitive
3. Immediate positive impact on sales
4. Products have become more standardised
5. Consumer acceptance of promotional offers
6. Expectations of price decrease can be countered by sales promotions
7. Advertising has become more expensive and less effective
8. Trade has become more powerful
9. Effect on sales volume and profits
10. Impulse purchase increases
11. Introduces an element of interest
12. Excess stocks

Why? Internal reasons
• Top management is more
conducive to spending on
promotions
• Line managers under
greater pressure to
achieve targets
• Justification of
expenditure is easy

Why? External reasons
• Increase in number of
brands
• Consumer is more price
savvy
• Greater pressure from
trade to liquidate stocks
• Add effectiveness
declining owing to rising
costs, media clutter and
legal constraints

Definitions of Sales Promotion
“In a specific sense, sales promotion includes those sales activities that
supplement both personal selling and advertising and coordinate them
and help to make them effective, such as displays, shows and
expositions, demonstrations and other non-recurrent selling efforts not
in the ordinary routine.” (American Marketing Association)
“Sales promotion are short-term incentives to encourage purchase or
sale of a product or service” (- Roger A Strang)

Advantages of Sales Promotion
1. Can introduce price discrimination.
2. Consumers feel time-pressured and the sense of urgency may stop them
from comparing other alternatives.
3. Sales promotions have more attention getting power than advertisements.
4. Consumers feel intelligent and smart buying on promotional deals.
5. Encourage dealers to forward-buy.
6. Help in increasing retail store traffic.
7. Introduction of new products becomes easier.
8. May encourage product trials in brand switchers and few may become loyal
consumers.

Drawbacks of Sales Promotion
1. Decrease in brand loyalty.
2. Increased price-sensitivity.
3. Quality image may become tarnished.
4. Dealers forward-buy and divert stocks in non-deal areas.
5. Merchandising support from dealers is doubtful.
6. Short-term orientation.
7. Marketers find themselves in a promotional trap and there seems
to be no easy way to get out of this “prisoner’sdilemma.”

Immediate Value Offer Vs Delayed
Value Offer
Incentives are offered right at the time of purchase is an immediate value
offer, if it is offered sometimes after the purchase then it is called as
delayed value offer.
1. Immediate value offer produce a stronger impact, stimulates
customers for unplanned purchases and encourages brand switching in
low-priced products.
2. Delayed value offers produce a weaker response compared to
immediate value offers, but their effect is longer lasting. Repeat
action and longer usage experience strengthens the customer habit
and develops brand preference.
3. Delayed value offers reinforce and reward the loyalty of regular users.© Prof.( Dr.) R. Bakshi- No part of this ppt presentation

SP is of two types
1. Consumer
2. Trade / Channel

Consumer Promotion Defined
Consumer sales promotion is a marketing
technique that is used to entice customers to
purchase a product.

Consumer promotion
• Stimulate purchase
• Induce trial
• Create new users
• Increase repurchase from occasional customers
• Reward loyal customers

Forms of consumer promotion
1. Free samples
2. Free gifts (In-packs, along pack)
3. Coupons
4. Price packs
5. Price-offs
6. Sweepstakes
7. Bundling offers

Eg.

© Prof.( Dr.) R. Bakshi- No part of this ppt
presentation can be used for any other purpose
apart from classroom teaching and training.
Illustrations and screenshots are property rights
of respective companies as applicable.

Disadvantages of coupons
A. Reduced revenues
B. Mass-Cutting
C. Counterfeiting
D. Misredemptions

Fairs

Events / Roadshows

Trade Promotion Defined
A type of promotion related activity whereby a
product and/or service is pushed through a
marketing channel via the encouragement of
those channel members to buy, as well as to
promote the product and/or service to their own
group of customers

Trade promotion
• Liquidating heavy inventories
• Persuade retailers to carry stock, carry more than
usual stock, promote brand franchise

Trade Promotions
(Directed at the re-sellers)
a. Off-invoice allowance
b. Buying allowance
c. Free goods
d. Cash rebate
e. Dating
f. Trade coupons
g. Display and advertising
allowance
h. Dealer loaders
i. Dealer listing
j. Buy-back allowance
k. Bill-back allowance
l. Count and recount
allowance
m. Slotting allowance
n. Sales Contests
o. SPIFFS (also called push
money)

Dealer loder; Types
1. Merchandise allowance
2. Price deals
3. Gifts to Dealers
4. Advertising Incentives
5. Buying Allowance
6. Push Money

Manufacturer may offer an allowance in
return for the retailer’s agreement to feature
the manufacturer’s product in some way.
For example, an advertisement allowance
compensatesretailers for advertising the
product. A display allowance compensatethe
retailers for the usage of special displays.
Merchandise allowance

Price deals relate to the quantity of purchase. In
addition to regular discounts,dealers are allowed
special discount for a specified quantity of
purchase. Thus, special discount is over and
above regular discount given to dealers.
Price deals

Manufacturers sometimes announce a buy-back allowance to
encourage re-stocking by retailers. This promotion
immediately follows another type of deal offered to
resellers and offered some incentive for new purchases.
When the manufacturer realizes that after the initial deal
the inventory levels at the retail level are quite low or
depleted, such an offer helps in building the inventory level
with retailers to normal. Eg. Bread, thepalas, perishable
gds.
Buy back allowance

Here marketers allow wholesalers and retailers to deduct a set
amount from the invoice they receive for merchandise.The
incentive for the trade with this programme is that the price
reduction increases the margin (and profits) a wholesaler or
retailer realizes on the off-invoiced brand.This scheme is in
general available for many products, where if the bill amount is
above a certain amount you get a certain percentage discount.
The % varies from around 2% to 10%, from company to company
and also from time to time.
Off-Invoice Allowances

The retailer is required to arrange
the product display in a prominent
show-window or offer discount to
consumers and advertise this offer
in the local newspaper or arrange
a point-of-purchase display on the
shelf corner. The retailer earns
the incentive only after meeting
the conditions set by the
manufacturer.
Display and advertising allowance

Advertising incentive; Types
• Co-operative advertising
• Dealer listing

Buying allowance
Buying allowance is granted to those dealers who
purchase in stipulated period of time. It is very
much useful in introducing new products to
consumers. It motivates dealers to buy in huge
quantity, dealers get immediate benefit in the
form of price reduction.

Cash incentive paid by a manufacturer or
distributorsto the retailers to stock up on
aproduct and display it prominently to
stimulate its sales.
Push Money

Signage Advertising

These are the fees that a retailer
charges the manufacturers to
make available the space on the
shelf for their new products. Retail
store owners say that the number
of brands in each category is
multiplying, there is increasing
competition and margins are
decreasing, hence they have no
option but to ask for a fee to keep
the product on their shelf and use
the money to improve their shelf
design and promotion, etc.
Slotting allowance (Shelf space)

Sales Contest
A sales contestis a contestfor
dealers to encourage them to
increase their sales
performance over a period of
time.
Sales contestsrecognize good
performers. They may be in the
form of holiday trips, cash
prizes or other gifts.

Issues in trade promotions
• Lack of accurate and timely information
• Inability to plan promotions based on analytics
• Ineffective organization and partner
integration
• Lack of appropriate Key Performance
Indicators (KPI)

Promotions for Sales People of the
Company
Objectives
i. Increase sales volume
ii. Introduce new product
iii. Reduce selling costs
iv. Offset competitive
promotions
v. Improve working habits
vi. Develop new prospect lists
Tools
i. Sales contests
ii. Incentives
iii. Awards and prizes
iv. Premiums (gifts)
v. Sales meetings
vi. Trainings
vii. Sales manuals & selling
aids

Promotion at different stages of
the PLC
• Introduction – wise to use heavy promotion to
induce trials and promote brand franchise
• Growth – promotion should be limited ,if any
• Maturity – Higher promotions required since the
brand is under attack from competitors or
product quality or advertising effectiveness is
tapering off
• Decline – Heavy promotions. Used only to retain
a set of loyal customers. Prior to withdrawal of
the product, it could be used as a one time stock
clearance from the trade

Sales Promotion Planning
1. Sales promotion planning begins with situation analysis.
a. This includes brand performance analysis, political/legal aspects, competitive
situation including the promotion activities of major competitors, distribution
situation and consumer behaviour with respect to sales promotions.
b. The analysis reveals possible opportunities and problems that exist.
2. Based on marketing objectives and strategies the promotion objectives are
developed and have to be stated in clear and measurable terms.
3. Budget allocation that is usually stated as a combined total budget of
advertising and sales promotion.
4. Decide about the type of sales promotion that would be most suitable.
5. The sponsor must also ensure that their sales promotions do not violate any
legal requiremenets.

Five policy statements
concerning sales promotions
1. Sales promotion is an integral part of the marketing mix.
2. Sales promotion should be used as an offensive weapon in
the brand’s marketing arsenal, not merely as a defensive
reaction when a problem arises.
3. Sales promotion should extend and reinforce the brand’s
advertising and positioning, whenever possible.
4. Sales promotion should be developed as campaigns, not as
single, unrelated events.
5. Good sales promotions are built upon sound strategic
planning.

Sales Promotion Budget
Commonly used budgeting methods:
1. Percentage of sales method
2. Unit of sales method
3. Competitive parity method
4. All-you-can-afford method
5. Objective-and-task method
6. Theoretically optimal expenditures

Characteristics of Successful Sales
Promotions
1. Maximum effect at minimum cost
2. Motivates consumers to buy now
3. Offers what the consumers want
4. The promotion should be clear and
uncomplicated
5. Promotion should be highly visible
6. Promotion should benefit all concerned
7. Promotion must be believable and honest
8. Promotion must be legal
9. Promotion must be implemented
efficiently

Sales Promotion Evaluation
Evaluations can be done in three stages:
1. Pre-testing
2. Concurrent Testing
3. Post-testing
A. Measuring the success of sales promotion poses some difficulties because of the nature and
variety of objectives.
B. In case of sales related objectives measurements can be done with relative ease, using the
sales effect before, during and after the sales promotion.
C. Measurement becomes difficult in case of objectives of trial purchases, or change in consumer
awareness, or change in attitude towards the product, etc.
D. Marketers can use sales data, experiments and consumer surveys to evaluate the progress of
promotions and the results.
E. Finally, comparisons of measurements of each phase can be made to arrive at meaningful
results of the evaluation.

Sales Promotion Affect on Brand
Equity
1. Heavily promoted brands trend to lose market share and decrease in brand equity.
2. Consumers start suspecting the price-quality relationships in case of frequent sales
promotions.
3. Consumers develop negative evaluations about the brand.
4. ‘Think category’ products are unlikely to experience any negative effect on brand
equity due to sales promotion.
5. Brand equity gets hurt if ‘feel category’ plus ‘high-involvement’ products are subjected
to sales promotion.
6. In the ‘feel category’, other than the high-involvement product categories, consumers
develop some doubts about the price-quality relationships, but gradually they learn
that promotions do not hurt quality instead they offer value to the brand.

Final considerations
1. Don’t promote if the product is not good
2. Promotions rarely stop a declining sales curve
3. It is very easy to lose the promotional gains made if
your promotion has not been effective in retaining
new customers.
4. The objective of the promotion is to win away users
from competition and create new users.
5. Excessive promotions lead to diminishing returns and
may devalue the brand

Cont’d
1. Promotions may be used in conjunction with advertising and
other marketing communication tools
2. It should be novel and attractive
3. Ensure supply lines are good and adequate stock is available right
through the promotion
4. Cater for contingencies. Have escape routes built into the plan
5. Trade has to be handled tactfully
6. Reimburse incentives/ rewards/ gifts promptly
7. Must be within the legal boundaries

Thank You
© Prof.( Dr.) R. Bakshi-
No part of this ppt presentation can be used for any
other purpose apart from classroom teaching and
training. Illustrations and screenshots are property
rights of respective companies as applicable.

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