What is sales promotion discuss major types of consumer and trade related sales promotion schemes
One
of the most difficult marketing decisions facing companies is how much to spend
on promotional John Wanamaker, the departmental - store magazine, said, "I
know that half of my advertising is wasted but I don't know which half."
Thus
it is not surprising that industries and companies vary considerably in how
much they spend on promotion. Promotional expenditures might amount to 30-50%
of sales in case in cosmetics industry and only 10-20% in the industrial
equipment industry. Within a industry, a low and high spending companies can be
found.
How
do companies decide on their promotion budget? There are mainly four methods
of sales promotion :
• Affordable Method :
Many
companies set the promotion budget at what they think the company can afford.
One executive explained this method as follows : "Why, it’s simple.
First I go upstairs to the controller and how much they can afford to give us
this year. He says a million and half. Later, the boss comes to me and asks
how much we should spend and I say ‘Oh about a million and half."
It
is a method which is uncertain one and makes long term planning difficult.
• Percentage of Sales Method :
Many
companies set their promotion expenditures at a specified percentage of
sales. Accordingly the sales is set on the basis of sales.
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In
this a specified sales percentage is decided for the promotional budget
Advantages of this method :
First,
its use means that promotional budget vary with what a company can afford.
Second,
it encourages the management to think in terms of the relationship among promotion
costs, selling price, and profit per unit,
Third,
it encourages the competitive stability to the extent that competing firms
spend approximately the same % of their sales on promotion.
Inspite
of the advantages, the % sales method has little to justify it. Its reasoning
is circular : It views sales as the determiner of the promotion rather than as
a result. It leads to budget setting by availability of funds rather than by
marketing opportunities.
•
Competitive Parity Method :
Some
companies set their promotional budget to achieve share-of-voice parity with
other competitors. Two arguments are made in support of competitive parity
method. One is that the competitors expenditure represents the collective
wisdom of the industry. The other is that maintaining a competitive parity
helps prevent promotional wars.
Neither
argument is valid. There are no grounds for believing that competition knows
better what should be spent on promotion.
•
Objective and Task Method :
The
objective & task method calls upon marketers to develop their promotion
budgets by defining their specific objectives, determining the task that must
be performed to achieve these objectives, and estimating the cost of performing
these tasks.
Deciding
on the promotion mix :
Companies
face the task of distributing the total promotion budget over the five
promotional tools :
•
Advertising
•
Sales Promotion
•
Public Relations and Publicity
•
Sales Force
•
Direct Marketing.
Whatever
method a company adopt for promoting its product it must be from above
mentioned method.
What is Sales Promotion ?
Promotion is the final element in the marketing
mix. After the nature of product is decided, its price fixed and the methods of
distribution decided, the manufactures has to take effective steps in meeting the
consumers in the markets. In the present consumer oriented markets it is the
duty of manufacturers to know what is required by the consumer. It is also
their duty to make the customers know where, when how and at what prices. The
products would be available.
Meaning of Promotion
The
term promotion is the term and includes mainly three type of sales activity :
1.
Mass impersonal selling methods (Advertising).
2.
Face to face personal selling (Salesman ship).
3.
Activities other than personal selling and advertising such as point of
purchase display (P.O.P.) show and exhibitions, demonstrations and other non
securing selling efforts. This form of activity is called ‘Sales Promotion’.
There
are two type of promotion blends :-
1.
Pull Blend.
2.
Push Blend.
Both
of these are closely related to the channel of Distribution.
1.
A pull blend is one in which mass impersonal, sales efforts are given the
greatest emphasis. The purpose of pull blend to pre-sell to the final
consumers. So that they demand the product at the retail level of distribution.
The firm adopting this strategy would spend more on advertising and sales
promotion rather than in personal selling. These efforts pull down the product
from the manufacturer.
2.
A push blend emphasizes personal selling. Naturally firms adopting this method
develop a strong sales force at both the distributor and the dealer level. This
method would tends to push the product through the channel of distribution.
Promotion and Selling
The term promotion is very often used as a
synonym for selling. But selling is a narrow term which includes only transfer
of title or personal selling. Promotion on the other hand is broader in its
outlook and includes a variety of activities used ultimately for increasing
sales volume.
Promotion and Sales Promotion
Similarly the terms sales promotion can not be
taken to mean what is commonly does. Sales promotion, is only a part of the
promotion. Basically promotion is an "exercise" in information
persecution and influence. Promotion has come to mean the over all
co-ordination of advertising selling, publicity and public relations. Promotion
is a helping function designed to make all other marketing activities more
effective and efficient. But sales promotion as such helps only the selling
activity still, there exit same difference of opinion on the real connection of
the term sales promotion.
Acc. to A.H.R. Delons :-
"Sales promotion means any step that are taken
for the purpose of obtaining or increasing sales".
Acc.
to W.Q. Kelly Opines :-
"Muddled
misused misunderstood that is sales promotion Acc. to him the field of sales
promotion as a marketing activity is still vaguely defined and organized.
Sales Promotion and Advertising
There is no universally accepted distribution
between these two terms. To same advertising includes all forms of mass media
communication directed towards influencing the end consumer. Sales promotion on
the other hand, includes the form of mass communication directed towards
information and influencing the channel of distribution (e.g. distributors,
retailers etc.). Hence a price of product literature distributed by retailers
in sales promotion. These sales promotion merges on one side in to advertising
and on the other in to personal salesman ship. It is concerned with the
dissemination of information to whole salers, retailers, customers (both actual
and potential, and to the salesman).
Sales promotion is concerned with the creation.
Application and dissemination of material and techniques that supplement advertising
and personal selling. Sales promotion makes use of direct mail, catalogues,
trade shows, sales contests, premiums, samples, windows displays and other
aids. Its purpose is to increase the desire of salesman, distributors and
dealers to sell a certain brand to make consumers more eager to buy that brand.
Personal selling and advertising do include prospects to make these decisions.
Sale promotion provides an extra stimulus.
Objective
of Sales Promotion
1. To increase sales directly by publicity through
media which are complementary to press and poster advertising.
2. To disseminate information through sales man
dealers etc. So as to insure the product getting in to satisfactory use by the
ultimate consumer.
3. To attract new consumer.
4. To face the competition effectively.
5. To help salesman in selling more to the
retailers and consumers.
6. To check seasonal decline in sales. Generally
speaking sales promotion involves rendering the following services:-
(a) Services to dealers.
(b) Services to own salesman.
(c) Special publicity.
Sales Promotional at different levels
1. Sales promotion at Dealers Level :-
It may include various schemes some of which are
discussed here.
(i) Advertising Materials :-
The advertising material prepared by the company
such as store signs, banners, shelf signs, board etc. are distributed to sub
dealer for display purposes this is in fact a method of advertising.
(ii) Store Demonstration :-
In the promises of the whole saler or the retailer
the products sales personnel will conduct special demonstration for the
companies product. A personal demonstration is good to introduce a new product
at its peculiar advantage can be high lightened and the consumer’s doubt clear.
It can be used to restimulate an old product. A good demonstration with a great
dealer of action will draw heavy crowds in to the store and will attract
attention to the product.
(iii) Special Display and Shows :-
These are in seasonal in character but could be
arranged in an elaborate manner and for all the products of an company. Usually
these are arranged along with trade fair and exhibition. Besides effecting
sales these shows impress the company’s name generally on the public.
Sales
promotion at consumer’s level
The
various schemes of sale promotion at Consumer’s Level may include.
1.
Coupons (A Chit of Stated Value) :-
These
are given directly to the consumer these coupons are in most cases kept inside
the package. The consumers many receive a price reduction of the stated values
of the coupon at the time of purchase. The retailer receives reimbursement for
the value of the coupon form the manufacturer. Coupons act as a short run
stimulus to the sale of the product, since they are directly tied with the
purchase of the item. They encourage the retailer to stock the product.
What
is important is that a coupon offer does not spoil the named price of the brand
nor does it un pair the margin of the dealers. But it is not easy to measure
the effectiveness of a coupon offer. One over knows how many customer would
have bought the product without the incentive. It is also difficult to find out
how many customers were held after the coupon offer expired.
2.
Price-off-offer (Also known as bargain offer price packs) :-
This
offer is intended to stimulate the sales during a slump season. In this method
the customer is offered a reduction from the printed price list. It is also
used when a substitute for competing product enters the market.
Many
experts on sales promotion fed that ‘Off Schemes’ are among the weaker and less
desirable methods of promotion. These can be trade resentment particularly when
the retailer raises the price to retain his margin. Secondly that is not
conductive to building up brand loyalty. Consumers may simply shift to the
products that offer this scheme.
3.
Samples :-
In
the hope of converting a prospect into a customer a sample (Some quantity of
the product) may be given. This helps the consumer to verify the real quality
of the product. Various pair manufacturing companies offer this method. For
developing brand loyalty this method is quite useful. Sampling is a fast method
of demand creation because one knows the result as soon as the consumer has had
time to use the sample and buy the brand.
Disadvantage
of Sampler :-
Offering
sample in quit expensive. There is the cost of producing samples. The
distribution costs are also high. Sample have to be mailed to potential
customers or to be distributed through retail shops. There are also problems
when the real product does not resemble the sample supplied.
4.
Money Refund Offer :-
An
offer usually stated on the package is that manufacturers will return with in a
stated period part or all of the purchaser’s money if he is not completely
satisfied with the product.
5.
Trading Stamps :-
A
premium in the form of stamps is given by the sellers to consumers while
selling goods. The number and value of stamp that the buyer receives depends on
the values of the purchase. These stamps are redeemable through premium
catalogues at the stamp redemption centres.
6.
Buy-Back Allowance :
This
an allowance following a previous trade deal not offer a certain amount of
money for new purchases based on the quantity of purchases on the first trade
deal. It extends the life of a trade deal and helps to prevent part deal sales
decline. It greatly strengthens the buyer’s motivation to co-operate on the
first deal.
7.
Premium :-
There
are various forms of premiums provided by the manufacturer as sales promotional
devices :-
(a)
Coupons are supplied for effecting price reductions.
(b)
Factory in pack premium these are popular in the case of Body food and Tin food
items, Spoons, Cups, Measuring, Glass etc. and such other items are packed with
the product in the box itself. Factory in pack premium are particularly goods
for product meant for children. The Binaca Toothpaste packs contain animal
shape toys. These are very attractive and qutie popular among the children.
(c)
Self Liquidating Premiums :-
The
cost of the premium is collected from the buyer himself. But when the buyers
pays for it he has to pay only a considerably low price for the premium. This
is possible for the manufacturer purchases the items in bulk at a premium and
his cost per unit as is substantially low.
Other
Steps by Manufacturer for Promoting Sales
Dealers
can be helps in different ways :-
1.
Communicating Market News :-
Often
this service is reciprocal the manufacturer may acquaint his dealer with the
fact relating to his production and prices while the dealer may familiarize him
in return with the information bearing on charges in the consumer's demand,
their like and dislike complaints and criticism, substitutes etc.
2.
Inviting to Sales Conference and Convention :-
The
gestures of regard and respect pave the way for better relation and
co-operation.
3.
Offering Reasonable Terms of Sale :-
Of
all the forms of encouragement, the monetary incentive evokes immediate
response. Hence every producer must offer the most responsible terms of sale
such as longer periods of credit and higher rates of descants.
4. Supplying
suitable packages and useful things.
5.
By taking the return back.
6.
By furnishing them with sales literature and display materials.
Aggressive
Selling
Meaning
:-
Goods
are produced for market. Manufacturers have to make efforts to sell all they
produce. When the manufacturers uses various sales efforts to obtain increased
sales volume for his product it is called aggressive selling or offensive
selling. The sales efforts which a manufacturer makes to retain his customers
i.e. to protect his already established market against against his competitors
is termed as defensive selling. In contrast to this aggressive selling is concerned with the
sales efforts made with the express objective of selling more by expanding the
market for the product of the selling firm.
Aggressive
Selling and Defensive Selling :-
Aggressive
selling is based on the answer to the question how much does the firm gain (in
term of sales with profit) by using this method defensive selling is based on
consideration as to how much the firm will lose if it does not use this method
increase of sales can be obtained from two sources:-
1.
New customers if the market is expending.
2.
From the competitors i.e. those consumers who were purchasing similar product
of competiting firms, if the market for the product is static.
Acc.
to H. Whitehead :-
"In
case of an expanding market all the firm may stand to gain by following the
methods of aggressive selling but if the market is static manufacturer of a new
market will have to be much more aggressive to capture the established market
of competitors".
When
Aggressive selling is resorted ?
Usually
manufacturer of a new product has to do aggressive selling :-
1.
When the product has been improved.
2.
When the manufacturer’s product is supervisor in quality to the product of the
established competitor.
3.
When the total market for the product or line of product to expanding.
4.
If the manufacturer’s share of the market is comparatively small.
5.
If the manufacturer has unused production capacity with heavy investment in
plant and equipment he will like to develop the demand for his product rapidly
so that demand for his product is equal to the optimum production capacity of
his plant ; and
6.
When primary demand for a product must be created and provision must be made in
the channel of distribution to educate consumers regarding the new product and
to instruct them in its use.
Method
of Aggressive Selling :-
Sales
promotion efforts use for aggressive selling may be divided in two classes.
1.
Trade Promotion.
2.
Consumer Promotion.
1.
Trade Promotion :-
Under
trade promotion methods special incentives are offered to the trader to buy
products of the firm. Such incentive may take one or more of the following firm
:-
(a)
Cash Allowance :-
A
definite percentage of discount is allowed on the purchase of given unit of a
product.
(b)
Extra Product :-
Instead
of giving any cash allowance extra product is given with each unit of product
ordered. For instance if a box normally contains 20 Cakes of Soap, special box
contains 25 cakes may be made and sold at the same price as that of the box of
20 cakes.
(c)
Gifts :-
Various
gifts are awarded in return for an order of a particular magnitude.
2.
Consumer Promotion :-
Under
consumer promotion method special incentives are offered to the consumers to
buy the firms product. The more prominent amongst such incentives are as
following.
(a)
Coupons :-
A
coupon of a giving value is sent to the consumer. By presenting this coupon to
the retailer consumers can purchase a particular product mentioned on the
coupon at a reduced price. The retailer sells the products mentioned. In the
coupon to such consumer (consumers presenting the coupons) under and agreement
with the manufacturer at a price lower than the user retail price. Thus the
consumer get the benefit of reduced price to the extent of the value of the
coupons.
(b)
Self Liquidating Offers :-
Under
this system, the firm offers an article at an attracting price if the consumer
send a given sum of money accompanied by a given number of box tops from the
packages of a particular product the benefit to the consumer is that he
receives the articles at a bargain price.
(c)
Bargain Packs :-
Under
this system a product is sold at a reduced price for a short period Bargain pack
method encourages new consumers to try the product. It is also helpful in
obtaining large displays in the shops.
(d)
Sampling :-
The
method involves giving the product or a small quantity of the product to a
consumer free with the hope that the customer will be favourable impressed with
its actual use and will eventually become a regular purchaser of the product.
A
firm selling new product or an extensively improved product finds this methods
useful. Also a firm whose market is hold by competitors whose free sampling
almost expensive.
The
above mentioned methods may be reinforced by adopting.
(i)
Direct method of selling through.
(ii)
Offer of door to door selling.
(iii)
Hire purchase and installment payment methods of selling and by forming
combination.
Other
Methods of Aggressive Selling :-
(i)
Employment of ‘Missionary Salesman also known as Promotional Salesman’. These
salesman call upon retailers and aggressively promote a product.
(ii)
Instead of using wholesalers, the firm may develop its own sales force to call
directly on retailers.
(iii)
The firm may follow a compromise method by employing a manufacturer’s agent and
giving him a large enough commission to encourage him to sell product
intensively and aggressively.
(iv)
New territory exploitation sales promotion has a particularly important role in
developing the company’s product in new territories.
(v)
Increment and promotions.
(vi)
Letters to dealer and Customer.
In
fact, an ingenious sales manager can devise any number of incentives schemes
for promoting the sales volume.
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