A REPORT ON

Study of the “Consumer Oriented Sales Promotion in FMCG

sector.”

A report submitted in partial fulfillment of

The requirements of
Master of Business Administration
Class of 2014-16
Lotus Business School, Pune

Under guidance of
Prof. Abhijeet Syamote

Submitted By

1
 DECLARATION

I, undersigned honestly declare that, this project titled Study of Consumer Oriented
Sales Promotion in FMCG Sector is a genuine project prepared by me and submitted
to the Director, Lotus Business School, punawale, Pune in a partial fulfillment MBA.
The project work is original and conclusions drawn herein are based on the data
collected by myself. To the best of my knowledge, the matter presented in this
project has not been submitted for Award of any degree, diploma or membership
either to this or any other Institute or University.

Place:-Pune Suwarnakar Supriya

Date:

2
 TABLE OF CONTENTS

Sr. No. Particular Page No

1 Acknowledgment 7

2 8
Executive Summary

3 9
Introduction

4 13
Review of Literature

5 15
Research Methodology

6 Finding & Suggestions

7 31
Conclusions

8 36
Bibliography

3
 ACKNOWLEDGEMENT

I am extremely grateful to all those people who have shared their expertise and
knowledge with me and without whom the completion of the project would have
been virtually impossible

I am highly thankful to my guides, Prof. Abhijeet Saymote Guidance during

the course of completion of this project. His valuable guidance, suggestion and
support provide me just the right kind of view desired to accomplish the task of
completing this project. A great enthusiasm was filled in by him and always proves
a source of inspiration to us.

I am indebted for their valuable support and cooperation during the entire tenure of
this project. Not to forget all those who have kept my spirits surging and helped
delivering my best.

I would like to express my deepest sense of respect to Mr. Charudatta Bodhankar

(Director of Lotus Business School) who offered opportunity for management.

At last I would like to thank all the respondents met in the preparation, who gave
their valuable time to provide us required information and their honest support to
complete our project in time.

Suwarnakar supriya

4
 Executive Summary

. As a part of our study curriculum it is necessary to conduct a grand project. It provides us an

opportunity to understand the particular topic in depth and which leads to through to that topic.
My topic for the grand project is titled as “STUDY OF CONSUMER ORIENTED SALES
PROMOTION IN FMCG SECTOR ”in which emphasis given to the effect of sales promotion
on buying habits of consumers.

To start with we will give brief information regarding FMCG sector then moving to the main
topic we will explain what is topic is all about. Promotion is one of the pillars of marketing mix
and same way sales promotion is also one of the elements of promotion.

With respect to consumer oriented sales promotion there are certain theories narrated as operant
conditioning and projective theory. Based on secondary source certain theoretical aspects are
also included as a part of study.

Then after concentration is given to the primary research. It includes the analysis and results of
survey which was focuses on consumer’s behavior towards sales promotion campaign. The
survey was conducted with the help of structured questionnaire.

At last conclusion of report, findings and suggestions was given based on study of secondary
source as well as primary research.

5
 CHAPTER 1
INTRODUCTION

INTRODUCTION OF PROJECT

6
. “Study of consumer oriented sales promotion in FMCG sector”

The importance of consumer sales promotion in the marketing mix of the fast moving consumer
goods (FMCG) category throughout the world has increased. Companies spend considerable
time in planning such activities. However, in order to enhance the effectiveness of these
activities, manufacturers should understand consumer and retailer interpretations of their
promotional activities. The study here pertains to consumer’s perceptions regarding sales
promotion. Some past researches have suggested that promotion itself has an effect on the
perceived value of the brand. This is because promotions provide utilitarian benefits such as
monetary savings, added value, increased quality and convenience as well as hedonic benefits
such as entertainment, exploration and self-expression.

Broadly speaking most of the companies using Marketing Mix which includes…

o Price

o Place (Channel of Distribution)

o Product

o Promotion

These are the four basic pillar of marketing mix. Most of the marketing strategies are built on the
basis of these criteria.
Promotion is one of the important elements of marketing mix. There are so many elements of
promotion such as …

o Advertising

o Direct Marketing

o Public Relations

o Sales Promotion

Traditionally, sales Promotions have been used by marketer to increase sales in the short
term. However, in the last few decades this communication tool has evolved and now is

7
considered from a strategic point of view. For this reason, it is necessary to realize new studies in

this area and study how consumers evaluate sales promotions.

Sales promotions have grown in both importance and frequency over the past few decades.
Although an accurate estimate for total sales promotions expenditures does not exist, we can be
sure that the trend is up.

Sales promotion serves three essential roles: It informs, persuades and reminds prospective
customers about a company and its products. Even the most useful product or brand will be a
failure if no one knows that it is available. As we know, channels of distribution take more time
in creating awareness because a product has to pass through many hands between a producer and
consumers.

Therefore, a producer has to inform channel members as well as ultimate consumers about the
attributes and availability of his products. The second purpose of promotion is persuasion. The
cut throat competition among different products puts tremendous pressure on their manufacturers
and they are compelled to undertake sales promotion activities. The third purpose of promotion
is reminding consumers about products availability and its potential to satisfy their needs.

From these elements Sales Promotion is the element which is in the focus of this project. Further
Sales Promotion is quite broad term it includes …

1. Consumer Oriented Sales Promotion

2. Trade Oriented Sales Promotion

Tools of Consumer Oriented Sales Promotion:

8
There are so many tools or technique available to the marketers for achieving objective of sales
promotion. These tools should be used considering all other factors affecting such as cost, time,
competitors, availability of goods etc. These tools are as under…

1. Coupons
2. Price-Off
3. Freebies
4. Scratch Cards
5. Lucky Draws
6. Bundling Offer
7. Extra Quantity

Sales Promotion Strategy

Sales are the lifeblood of a business, without sales there would be no business in the first place;
therefore it is very important that if a business wants to succeed, it should have a sales promotion
strategy in mind. The primary objective of a sales promotion is to improve a company’s sales by
predicting and modifying your target customers purchasing behavior and patterns.

Sales promotion is very important as it not only helps to boost sales but it also helps a business to
draw new customers while at the same time retaining older ones. There are a variety of sales
promotional strategies that a business can use to increase their sales, however it is important that
we first understand what a sales promotion strategy actually is and why it is so important.

A sales promotion strategy is an activity that is designed to help boost the sales of a product or
service. This can be done through an advertising campaign, public relation activities, a free
sampling campaign, a free gift campaign, a trading stamps campaign, through demonstrations
and exhibitions, through prize giving competitions, through temporary price cuts, and through
door-to-door sales, telemarketing, personal sales letters, and emails.

The importance of a sales promotion strategy cannot be underestimated. This is because a sales
promotion strategy is important to a business boosting its sales.

When developing a sales promotion strategy for your business, it is important that you keep the
following points in mind.

9
  Consumer attitudes and buying patterns
 Your brand strategy
 Your competitive strategy
 Your advertising strategy
 Other external factors that can influence products availability and pricing.

There are three types of sales promotion strategies:

o A push strategy
o A pull strategy or
o A combination of the two

A Push Strategy:

A ‘push’ sales promotion strategy involves ‘pushing’ distributors and retailers to sell your
products and services to the consumer by offering various kinds of promotions and personal
selling efforts. What happens here is that a company promotes their product/services to a reseller
who in turn promotes it to another reseller or to the consumer. The basic objective of this
strategy is to persuade retailers, wholesalers and distributors to carry your brand, give it shelf
space, promote it by advertising, and ultimately ‘push’ it forward to the consumer. Typical push
sales promotion strategies include; buy-back guarantees, free trials, contests, discounts, and
specialty advertising items.

A Pull Strategy:

A ‘pull’ sales promotion strategy focuses more on the consumer instead of the reseller or
distributor. This strategy involves getting the consumer to ‘pull’ or purchase the product/services
directly from the company itself. This strategy targets its marketing efforts directly on the
consumers with the hope that it will stimulate interest and demand for the product. This pull
strategy is often used when distributors are reluctant to carry or distribute a product. Typical pull
sales promotion strategies include; samples, coupons, cash refunds or rebates, loyalty programs
and rewards, contests, sweepstakes, games, and point-of-purchase displays.

A Combination of Two Strategies:

10
 A ‘combination’ sales promotion strategy is just that; it is a combination of a push and a pull
strategy. It focuses both on the distributor as well as the consumers, targeting both parties
directly. It offers consumer incentives side by side with dealer discounts.

11
 CHAPTER 2
INDUSTRY PROFILE

INTRODUCTION:-

The Indian economy is changing in profound ways by the onward march of its “consumers”.

12
Consumer growth has, of course, always been a central engine of economic growth, but what is
significant about the past decade is the acceleration in the pace of change, which in one way
reflects greatly on the growth, character and role of FMCG companies.

Having stated this, even the most prestigious FMCG firms are always under pressure when it
comes to retaining position and growing in the ever competitive scenario. This is a big challenge,
and it is rapidly becoming a strategic imperative.

In order to recognize the contribution of the FMCG sector to the socio-economic growth of
India, to analyze opportunities and challenges over the coming years, and to develop
recommendations to its stake holders (including FMCG companies, retailers and the
Government), FICCI’s FMCG Committee and Techno park joined hands to produce this first of
its kind research report on the FMCG sector.

This research report dwells into the current state and future outlook of FMCG industry, along
with deliberating on issues, challenges and opportunities facing the FMCG industry.
The report suggests practical strategies and recommendations for policy makers towards
achieving competitive advantage in an increasing competitive scenario

MAJOR SEGMENTS OF THE FMCG INDUSTRY:

13
INDIAN CONSUMERS SPENDING PATTERN

14
BACKGROUND & INCEPTION OF THE COMPANY: ITC Limited

15
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its
diversified business includes five segments: Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards & Packaging, Agri Business & Information Technology.
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the Indian Tobacco Company Limited in 1970 and further to I.T.C. Limited in 1974.
The periods in the name were removed in September 2001 for the company to be renamed as
ITC Ltd.
The company completed 100 years in 2010 and as of 2012-13, had an annual turnover of
US$8.31 billion and a market capitalization of US$45 billion. It employs over 25,000 people at
more than 60 locations across India and is part of Forbes 2000 list. CHAIRMEN- Y C
DEVESHWAR

History

ITC was formed on 24 August 1910 under the name of Imperial Tobacco Company of India
Limited, and the company went public on 27 October 1954. The earlier decades of the company's
activities centered mainly around tobacco products. In the 1970s, it diversified into non-tobacco
businesses.

In 1975, the company acquired a hotel in Chennai, which was renamed the 'ITC-Welcomgroup
Hotel Chola' (now renamed to My Fortune, Chennai).

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepali and British joint venture,
with the shares divided between ITC, British American Tobacco and various independent
domestic shareholders in Nepal. In 2002, Surya Tobacco became a subsidiary of ITC and its
name was changed to Surya Nepal Private Limited.

In 2000, ITC launched the Expressions range of greeting cards. the Wills Sport range of casual
wear. and a wholly owned information technology subsidiary, ITC Infotech India Limited.

In 2001, ITC introduced the Kitchens of India brand of ready-to-eat gourmet Indian recipes..

In 2002, ITC entered the confectionery and staples segments and acquired the Bhadrachalam
Paperboards Division. and the safety matches company WIMCO Limited.

ITC entered the incense sticks or agarbattis business in 2003, selling its products under the
Mangaldeep brand.

ITC diversified into body care products in 2005.

16
In 2010, ITC launched its handrolled cigar - Armenteros - in the Indian market..

ITC is today the only company in world to be carbon positive, water positive, and solid waste
recycling positive. Almost 40% of the energy consumed in the ITC is from renewable sources.[.

ITC owned "Chambal Agritech LTD" an Australian "Technico PTY" subsidiary in May, 2008,
diversifying its business portal & to develop synergy between Seed Potato Production and Chip
stock supply. later the name changed to "Technico Agri Sciences Ltd" wholly owned
subsidiary of ITC Ltd.

Products and Brands

Cigarettes

ITC Ltd sells 80 percent of the cigarettes in India, where 275 million people use tobacco
products and the total cigarette market is worth close to $6 billion (around Rs.65,000 core) ITC's
major cigarette brands include Wills Navy Cut, Gold Flake Kings, lights, Gold, Insignia, India
Kings, Classic (Verve, Menthol, Menthol Rush, Regular, Citric Twist, Mild & Ultra Mild), 555,
Silk Cut, Scissors, Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke & Royal.

Other businesses Foods: ITC's major food brands include Kitchens of India; Aashirvaad,
Mint-o, gum-o, B natural, Sun feast, Candy man, Bingo And Yippee.

ITC is India's largest seller of branded foods with sales of over Rs. 4,600 core in 2012-13.It is
present across 5 categories in the Foods business namely Staples, Snack Foods, Ready-To-Eat
Foods, Juices and Confectionery.

17
Lifestyle apparel: ITC sells its products under the Wills Lifestyle and John Players
brands. Wills Lifestyle was accorded the ‘Super brand’ status and John Players was
included in the top 10 ‘Most Trusted Apparel Brands 2012’ by The Economic Times

Personal care products include perfumes, hair care and skincare categories. Major
brands are Fiama Di Wills, Vivel, Essenza Di Wills, Superia and Engage.

Stationery: Brands include Classmate, Paper Kraft and Color Crew. Launched in 2003,
Classmate went on to become India's largest notebook brand in 2007.

Safety Matches and Agarbattis: Ship, i Kno and Aim brands of safety matches and the
Mangaldeep brand of agarbattis (Incense Sticks).

Hotels: ITC's Hotels division (under brands including WelcomHotel) is India's second
largest hotel chain with over 90 hotels throughout India. ITC is also the exclusive
franchisee in India of two brands owned by Sheraton International Inc. Brands in the
hospitality sector owned and operated by its subsidiaries include Fortune Park Hotels and
Welcom Heritage Hotels.

Paperboard: Products such as specialty paper, graphic and other paper are sold under the
ITC brand by the ITC Paperboards and Specialty Papers Division like Classmate product
of ITC well known for their quality.

Packaging and Printing: ITC's Packaging and Printing division operates manufacturing
facilities at Haridwar and Chennai and services domestic and export markets.

Information Technology: ITC operates through its fully owned subsidiary ITC InfoTech
India Limited, which is a SEI CMM Level 5 company.

CHAPTER 3

18
 REVIEW OF LITERATURE

Consumer Oriented Sales Promotion is the main topic of this project. Here emphasize is given to
motivate consumer to increase sales. Consumer Oriented Sales Promotion includes Sampling,
Couponing, Premiums, Contest, Refunds, Rebates, Bonus Pack’s, Price-off, Event marketing etc.

Definition:

According to A.H.R. Delens: “Sales promotion means any steps that are taken for the purpose

of obtaining an increasing sale. Often this term refers specially to selling efforts that are designed

to supplement personal selling and advertising and by co-ordination helps them to become more

effective.”

19
Marketer’s uses consumer oriented sales promotion tools for the following reasons:

 To increase short term sales

 To induce trial
 To reduce inventory
 To establish a brand name
 To make cross selling
 To cope up with competition
 To avoid advertising clutter

20
FMCG SECTOR:
India FMCG sectors’ significant characteristics can be listed as strong MNC presence,
well established distribution network, intense competition between the organized and
unorganized players and low operational cost. Easy availability of important raw materials,
cheaper labor costs and presence across the entire value chain gives India a competitive
advantage.

Products which have a swift turnover and relatively low cost are known as Fast
Moving Consumer Goods (FMCG). FMCG items are those which generally get replaced within a

year. Examples of FMCG commonly include a wide range of repeatedly purchased consumer
products such as toiletries, soap, cosmetics, oral care products, shaving products and detergents,
as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic
goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products
etc.

 The Indian FMCG sector is the fourth largest sector the economy with a total
market size of Rs. 167,100crs.
 The market is estimated to grow to US$ 100 billion by 2025, according to market
research firm Nielsen.
 In the last decade the FMCG sector has grown at an average of 11% a year; in the last
five years, annual growth accelerated to 17%.
 FMCGs are slowly and gradually positioning and deeply penetrating in the fast growing
rural market. The Rural mindset is open to consumption of newer, more contemporary
food categories and as a result, drive consistent growth. FMCG industry to be Rs.4000-
6000 billion industry by 2020.
 Indian rural market currently worth US$ 9 bn is expected to become a US$ 100 bn
opportunity by 2025.
 By 2025, total consumption is likely to quadruple making India the 5th largest
consumer market.

Marketing of non-durable goods or Fast Moving Consumer Goods (FMCG) is a subject

that has not received the attention it deserves. While there are several good books and
articles on the subject that largely concentrates either on the marketing of industrial
goods or on the marketing of durable goods likes T.V., Car and Scooter etc. In India,
specific studies on brand choice for consumable non-durable goods have received little
attention from researchers. So, while reviewing the literature, interest is entirely focused
on studies conducted in India and abroad dealing not only with product under study
and/or other consumer non-durables, but to generate some understanding of analogous

21
nature. It was essential to present a review of literature in order to formulate the research
problem succinctly and to highlight the importance of undertaking this study. Conceptual
framework and some empirical studies on the topic have a direct or indirect bearing on
the present study. In this chapter, research work done in the past regarding awareness,
purchasing behaviour, brand preference for FMCG products, factors influencing brand
preferences and alternative purchase plans have been reviewed and presented under the
following subheadings:
2.1 Awareness among consumers about branded products
2.2 Purchasing behaviour of consumers
2.3 Brand preference for FMCG products
2.4 Factors influencing brand preferences for FMCG products
2.5 Alternative purchase

22
 CHAPTER 4
RESEARCH METHODOLOGY

Research objective:

1. To study consumer preferences with respect to sales promotion in FMCG sector.

2. To examine tradeoffs, relative importance of different attributes while responding

to a sales promotion offer.

3. To study the effect of sales promotions in FMCG sector.

Research type:
Descriptive Research involves the description of the characteristics of the variable, description of
the extent of association between variables and it allows the researcher to infer about the
variables
.

23
Data Collection method

Secondary data collection- As secondary data was not available with dealers, so these were
collected from different websites, journals,

CHAPTER 5
FINDINGS AND SUGGESTIONS

24
 Sales Promotion, a short-term inducement, offered to a consumer or trade has gained
momentum as a promotional tool world over. It represents nearly three fourth of the marketing
budget at most consumer product companies. Sales promotions can enhance consumers’ self-
perception of being “smart” or a “good” shopper

 Quality as the most influencing factors in the purchase decision while price is also an
important for purchase decision.

 Schemes always attract more and more consumers towards particular brand.
Simultaneously it gives idea about the factors which consumers look most in the product
before they make final decision

 Price off and extra quantity is the two main offers/schemes which consumers have came
across at the time of purchase

 People are ready to buy products of brand which suits their budget means more quantity
25
 + less cost + quality.

 Extra quantity with less or same price, more satisfaction, quality and other factors
influence consumers to switch over to other brands.

 People are more quality and price oriented.

 Consumer remember that name of the product by the company name and also from the
past performance of that company

SUGGESTIONS

26
From this project I have suggested that based upon my observations and some surveys which
already research from this topic following as:

1) Temporary price reductions (price off) substantially increase sales

2) Sales Promotion leads to purchase acceleration/stockpiling effects

3) Sales Promotion leads to primary increase in demand for a category

27
CHAPTER 6
CONCLUSION
28
.

I concluded for this project which is based on whole secondary data founded many long term
and short term impacts on sales promotion strategy in FMCG sector. Followings are reasons:

From this project it is found that promotion not only increases sales of main product but it also
lead to increase in sales of complementary categories. Found strong cross relationships between
products of the promoted product category indicating brand substitution behavior. They stated
that retail price promotions work as a form of implicit price bundling whereby the consumer
surplus is transferred from the promoted item to non promoted items. Also found that retail price
promotions create significant complementary and substitution effects within the store.

The result showed that consumer promotions for leading brands of established packaged
products had no after-effects on the brand’s sales or repeat buying loyalty. The extra sales of a
brand while promoted came virtually all from the brand’s existing long-term customer base for
which the experience of buying the promoted brand was nothing new.

29
LIMITATIONS OF THE STUDY

1) The data was huge and time was limited.

2) All the research conducted by secondary data so, not able get exact data.

30
 CHAPTER 7
BIBLOGRAPHY
31
BOOKS

Philip Kotler, “Marketing Management”, 11th edition, Pearson

education Asia Publication.

C.R.Kothari, “Research Methodology methods &techniques”, New

Age International (p) ltd .publishers, 2nd edition.

Website

http://www.ukessays.com/essays/marketing/consumer-oriented-sales-promotion-in-fmcg-sector-
marketing-essay.php
www.nielsen.com
http://www.itcportal.com/about-itc/profile/history-and-evolution.aspx

Newspapers

32
Times of India
Hindustan Times

Journals

Sales & Marketing Management

Strategic Entrepreneurship Journal
Journal of Consumer Research

33