Sales promotion

Sales promotion includes several communications activities that attempt to provide added value
or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate
immediate sales. These efforts can attempt to stimulate product interest, trial, or purchase.
Examples of devices used in sales promotion include coupons, samples, premiums, point-ofpurchase (POP) displays, contests, rebates, and sweepstakes.
Sales promotion is needed to attract new customers, to hold present customers, to counteract
competition, and to take advantage of opportunities that are revealed by market research. It is
made up of activities, both outside and inside activities, to enhance company sales. Outside sales
promotion activities include advertising, publicity, public relations activities, and special sales
events. Inside sales promotion activities includes window displays, product and promotional
material display and promotional programs such as premium awards and contests.
Sale promotions often come in the form of discounts. Discounts impact the way consumers think
and behave when shopping. The type of savings and its location can affect the way consumers
view a product and affect their purchase decision. The two most common discounts are price
discounts (on sale items) and bonus packs (bulk items). Price discounts are the reduction of
an original sale by a certain percentage while bonus packs are deals in which the consumer
receives more for the original price. Many companies present different forms of discounts in
advertisements, hoping to convince consumers to buy their products.

What is sales promotion?

Sales promotion is any initiative undertaken by an organisation to promote an increase in sales,
usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of
the marketing communications or promotions mix). Sales promotions are varied.
(A) Free gifts e.g. Subway gave away a card with six spaces for stickers with each sandwich
purchase. Once the card was full the consumer was given a free sandwich.
(B) Discounted prices e.g. Budget airline such as EasyJet and Ryanair, e-mail their customers
with the latest low-price deals once new flights are released, or additional destinations are
announced.

(C) Joint promotions between brands owned by a company, or with another companys brands.
For example fast food restaurants often run sales promotions where toys, relating to a specific
movie release, are given away with promoted meals.
(D) Free samples (aka. sampling) e.g. tasting of food and drink at sampling points in
supermarkets. For example Red Bull (a caffeinated fizzy drink) was given away to potential
consumers at supermarkets, in high streets and at petrol stations (by a promotions team).
(E) Vouchers and coupons, often seen in newspapers and magazines, on packs.
(F) Competitions and prize draws, in newspapers, magazines, on the TV and radio, on The
Internet, and on packs.
(G) Buy-One-Get-One-Free (BOGOF) which is an example of a self-liquidating promotion.
For example if a loaf of bread is priced at $1, and cost 10 cents to manufacture, if you sell two
for $1, you are still in profit especially if there is a corresponding increase in sales. This is
known as a PREMIUM sales promotion tactic.
(H) Customer Relationship Management (CRM) incentives such as bonus points or money off
coupons. There are many examples of CRM, from banks to supermarkets.
Many of the examples above are focused upon consumers. Dont forget that promotions can be
aimed at wholesales and distributors as well. These are known as Trade Sales Promotions.
Examples here might include joint promotions between a manufacturer and a distributor, sales
promotion leaflets and other materials (such as T-shirts), and incentives for distributor sales
people and their retail clients.

Main 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:

1. 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.
2. To attract new customers:
Sales promotion measures also play an important role in attracting new customers for an
organisation. 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.
3. 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.
4. 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.
5. 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.
6. 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.

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. Producers
may spend a lot on advertising and personal selling. Still the product may not sell. So incentives
need to be offered to attract customers to buy the product. Thus, sales promotion is important to
increase the sale of any product. Let us discuss the importance of sales promotion from the point
of view of manufacturers and consumers.
From the point of view of manufacturers
Sales promotion is important for manufacturers because
i. it helps to increase sales in a competitive market and thus, increases profits;
ii. it helps to introduce new products in the market by drawing the attention of potential
customers;
iii. when a new product is introduced or there is a change of fashion or taste of consumers,
existing stocks can be quickly disposed off;
iv. it stabilizesit stabilizes sales volume by keeping its customers with them. In the age of
competition it is quite much possible that a customer may change his/her mind and try other
brands. Various incentives under sales promotion schemes help to retain the customers
From the point of view of consumers Sales promotion is important for consumers because
i.
ii.
iii.
iv.
v.

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;
certain schemes like money back offer creates confidence in the mind of customers
about the quality of goods; and
it helps to raise the standard of living of people. By exchanging their old items they can
use latest items available in the market. Use of such goods improves their image in
society.

Sales Promotion Advantages

1.A sales promotion can offer a variety of advantages for a small business.
A sales promotion is a marketing technique that is designed to entice a customer to take a
specific action such as make a purchase or request more information. A sales promotion usually
occurs for a limited period of time to help create a sense of urgency. Examples of sales
promotion can include coupons, free trial periods and discounts, to name a few. Sales promotions
offer a number of advantages to the owner of a small business.
2.Luring New Customers with Price
By offering a reduced price on a popular item, you can lure customers away from competitors,
which may ultimately help turn them into regular shoppers. For example, if you own a small
electronics store that's competing with a large retailer, offer a discounted price on a popular cell
phone model for a limited time. If you serve the customers well during the purchase process,
they may be willing to come back.
3.Gaining Community Favor
Create a good name for your business by staging a promotion that supports a worthy cause. For
example, if your town needs a new fire engine or police car, donate a portion of customer
purchases at your business to the cause. You'll be helping your community, which is a win-win
for everyone and may lead to more business for you.

4.Encourage Repeat Purchases

Businesses like airlines and hotels successfully use rewards programs to encourage customer
loyalty, and you can do the same for your small business. If you own a coffee shop, for instance,
give customers a rewards card that you hole-punch each time they make a purchase. After they
make five or 10 purchases, they can redeem the card for a free cup of coffee.
5.Entice Reluctant Consumers
Giving away free products or services is a good way to get people to try them for the first time,
which may lead to a purchase. If you own a deli and you've added a new sandwich to the menu,
pass out small samples to each of your customers as they come in the door. If you operate a
health club, offer a free trial membership or free personal training sessions to get people to give
you a try.

6.Providing Information
A sales promotion can help you provide information to potential customers that aids them in
making a decision. This can be beneficial for products or services that are complicated or are
unfamiliar to consumers. For example, if you're a financial planner and you're attempting to gain
clients in the area of retirement planning, a free seminar allows you to explain what you do and
how some of your investment products work.
7.Attract Customers
Sales promotions are commonly used by new companies or established businesses launching
new products or aggressively trying to grow their customer base. The idea with this objective is
to give up short-term profits to draw in targeted customers who become loyal and spend more
money over time. Plus, if you hold promotions on particular items, customers commonly make
other purchases at regular price while there.
8.Turn Over Inventory
Sales promotions help you keep inventory moving, which is beneficial for a variety of reasons.
You can use sales promotions to get some money on inventory nearing the end of its buying
season. You also can use them to sell off merchandise nearing expiration or about to perish. This
prevents you from having to throw out such items as a total loss. In general, keeping inventory
fresh motivates loyal customers to return often to see what new products you have in store.
9.Upsell and Word-of-Mouth
Sales promotions also are used to make a bigger sale to a customer. Electronics retailers, for
instance, commonly offer customers reduced prices on printers, software and accessories when
they buy a large piece of hardware such as a computer or laptop. The idea is to get more revenue
from a customer while they are already in store rather than having to lure them back with more
advertising investment. Plus, satisfied customers are likely to tell friends and families about their
great deal, which can help grow your business that much more quickly

DISADVANTAGES OF SALES PROMOTIONS

While sales promotion is a powerful and effective method to produce immediate short term
positive results, it is not a cure for a bad product or bad advertising. In fact, a promotion is speed
up the killing of a bad product.
1. Increased price sensitivity
Frequently promoted brands in the product category, especially on the basis of price, make
consumers and traders more price sensitive not only for the promoted brands but for other brands
as well in the same product category.

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. Quality image may become tarnished

If the promotions in a product category have been rare, or the product happens to be of high
involvement category, 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.

3. Dealers forward buy and divert stocks

In case of deals for the trade, many dealers forward buy, in excess of their inventory
requirements. This is particularly happens if a product is low bulk, much in demand and the
inventory holding costs are favourably low. This is true both for wholesalers as well as retailers.

Forward buying of excessive stocks on deals or quantity discounts can lead to diversion of some
of the stocks in non-deal areas. Forward buying of excessive stocks on deals or quantity
discounts can lead to diversion of some of the stocks in non- deal areas.

Wholesalers and retailers do not hesitate in selling these excess stocks in non- deal areas on
prices that are less than the list price, but keeping some reasonable margin for themselves. This is
likely to have a negative effect on price discrimination efforts of the company as dealers and
those areas would not be buying even the normal requirements from the company.
4.Merchandising support from dealers is doubtful
One of the trade promotions tool is to offer promotional allowances to trade people to motivate
them to provide merchandising support and to pass on some benefit to consumers. This generally
is the condition attached with such promotional allowances. 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. Short-term orientation
Sales promotions are generally for a short duration. This gives a boost to sales for a short period.
This short-term orientation may sometimes have negative effects on long-term future of the
organization. Promotions mostly build short-term sales volume that is not maintained. Heavy use
of sales promotion, in certain product categories, may be responsible for causing brand quality
image dilution.

The argument given in favour is that companies should develop superior products or services
which are better than competitors and consumer should be convinced through appropriate and
focused advertising about the superiority of the product and its image.
This will result in lasting brand identities reflecting consumer values. Then there will be no need
to offer any extra benefits; only the lasting brand image will keep customers loyal to the brand.

Role of sales promotion

. Sales promotion has been defined as a direct inducement that offers an extra value or incentive
for the product to the sales force, distributors, or the ultimate consumer with the primary
objectives of creating an immediate sale.
. The sales promotion contains two types of inducement that provide extra incentive to buy. The
incentive is very important element in the promotional program; it can be couponing, reduction
in price, and free samples of the product.
. The sales promotion can be allocated also in the marketing intermediaries; the retail and
wholesale. By giving they more discount offers by offering them more financial incentives to
stock and promote for the manufacture products.

ADVERTISING & SALES MANAGEMENT

PROJECT

ON

SALES PROMOTION

BY

APURVA CHODANKAR

S . S DEMPO COLLEGE OF COMMERCE

AND ECONOMICS
MCOM PART 2
ROLL NO 42

APURVA CHODANKAR
M.COM II ROLL NO :42
DIV :MANGEMENT
SUBJECT :ADVERTISING & SALES MANGEMENT