SALES PROMOTIONS

Sales Promotions may be defined as (short term) incentives

to encourage trial or purchase of any product

Sales Promotions: Marketing activities that add to

the perceived value of a product for a limited time
and thus directly stimulate customer purchases
Brand image advertising is a strategic activity,
using rational & emotional appeals
to encourage prospects to buy the brand
rather than choose competitive brands

Sales Promotions are usually tactical actions,

providing customers incentives to buy a specific brand
within a particular time, or to buy larger than normal
amounts, or to try a new category or brand

Certain Sales Promotions cannot be short term exercises –

customer loyalty programmes like frequent flier schemes
or credit card reward point offers
Advertising

 Increases ‘prime franchise’ of brand –

gives reasons to prefer / select brand
 Requires time to achieve results
 Effects decay slowly after campaign concludes
 Can build brand loyalty over time
Sales Promotions

 Exhibit immediate response by way of sales

 Cannot easily get new loyal customers,
especially in mature markets
 Succeed due to “deal prone” customers
 Brand loyal users seldom tempted
even for trial purchase
 No residual effect after cessation of promo
Reasons for Rapid Growth
in Sales Promotions

 Multiplicity of parity brands in each category

 Customers have become ‘deal oriented’
 Most companies use sales promotions;
not offering incentives risky for a brand
 Advertising efficiency declining due to media clutter
and fragmentation along with rising costs
 Greater pressure to achieve volume targets
Roles & Objectives
Customer oriented
 Generating trial at launch
 Generating trial among
non-users
 Encouraging larger volume
purchases
 Retaining loyalty
 Moving stagnant stocks
 Creating excitement for
fashions / fads
 Countering competitive
promotions / launches
Trade oriented
 Offsetting competitive
promotions
 Getting more shelf space
 Achieving off-season
stocking
 Motivating during launch,
inducing stocking & visibility
Consumer Oriented Schemes

Most schemes are ‘indiscriminate’ – they tend to reward

all buyers identically, irrespective of brand loyalty
A scheme where coupons or a used pack may be
exchanged against the next purchase tends to build some
loyalty, if only for the duration of the scheme
Not all customers are equal…
Providing average-value products to all customers
means wasting resources in over-satisfying
less profitable customers while under-satisfying
more valuable (more loyal) customers

Can you guess the outcome?

More valuable / profitable customers leave due to

dissatisfaction… less desirable customers stay,
diluting profits and creating frustration among all
Sampling

 Free / subsidized trial – single / multiple stage

 Somewhat expensive, but quite effective
 “Get them to try… if you want them to buy”
 Coupons on pack / in print media / door to door
 15-20% savings attractive
 Redemption rates usually 10-15%
 Handling charge to ensure cooperation from trade
Discounts / Price Offs

 Very commonly used

 Tend to downgrade brand image,
especially if used too often
 Easy to administer, but
pack changes might be needed
Premium Packs

 Also called bonus packs – larger than

normal quantity at same price
 Deleterious effect on brand image
less than simple price-off
 Need pack change
Gifts
 Banded offers – gift attached outside pack;
also called on-pack gifts
 In-pack gifts
 BOGOF
 Scratch cards – retailer cooperation needed
 Separate gifts – retailer cooperation needed;
scheme has to be adequately advertised
Special Packs

 Usually packs that may be re-used as mugs,

jars, storage containers…
 May also be used for next purchase
which comes as “refill pack” at lower price
Demonstrations
Are these sales promotions or some other type of
marketing activity?

 Common for durables

 Can be clubbed with special offers
 Can create quick awareness and excitement
Games

 Contests / games / lucky draws

 Governed by laws applicable to lotteries
 Other legal implications
 Need extensive advertising support
Loyalty Programmes
 Extensively used by retail chains: supermarkets,
departmental stores, medicine shops
 Also by airlines, hotels, credit cards…
 Rewards & redemptions moving out of specific sector to
include unrelated non-competing brands – airlines, fuel
pumps, retail, multiplexes, florists, coffee shops, salons /
saloons, bookstores, spas… the list goes on
Loyalty & Rewards Programmes

 Long term perspectives essential

 Offers must target attractive and valuable customers
 Question: does the programme align with company
capabilities, mission, aims?
 Will customers value the programme?
 Will partnering make the programme more competitive?
Trade Oriented Schemes
Quite commonly used to obtain cooperation
from various levels of distribution channels.
Usually transparent to buyers / customers,
except display contests

 Display contests quite useful for launches and

seasonal products; create quick awareness
and interest among buyers
 Special discounts – to induce higher stocking
 Free goods – much like the above
 Speciality advertising items / allowances /
shop décor items…
Some Tips…
1. Aim: to maximize effect of promotion at minimum expenditure
on promotion + support advertising
2. Scheme should encourage immediate response
3. Incentives / rewards should be meaningful
from customers’ perspective
4. Clear, transparent, credible, honest, easily understood
5. Support ad highly visible in multiple media
6. Close identification with brand – theme, mood, visuals…
7. Should benefit customers, trade channels, sales force
8. Follow legal stipulations
More Tips…
 Freebies give immediate surge in volumes… but used too
often means consumers get habituated
 Look beyond the obvious: Pepsi offer with mobile phone
service providers, retailers… don’t make the buyer work
too hard to win
 “Add-on” better than “Pile-on”: give-aways must be
complementary and meaningful for the buyer... “who
needs a third shirt?”
 Let the customer work out the freebie: gifts worth Rs X
or price reduction of Rs X