Understanding Sales Promotion: Introduction, Meaning, and Objectives

Introduction of Sales Promotion

Every businessman wants to increase the sale of goods that he deals in. He can adopt several ways for that purpose. You might have heard about “lakhpati bano”, “win a tour to Singapore”, “30% extra in a pack of one kg”, “scratch the card and win a prize” etc. You might also have seen gifts like lunch box, pencil box, pen, shampoo pouch etc. offered free with some products. There are also exchange offers, like in exchange of existing model of television you can get a new model at a reduced price. You may have also observed in your neighbouring markets notices of “winter sale”, “summer sale”, “trade fairs”, “discount upto 50%” and many other schemes to attract customers to buy certain products. 

All these are incentives offered by manufacturers or dealers to increase the sale of their goods. These incentives may be in the form of free samples, gifts, discount coupons, demonstrations, shows, contests etc. All these measures normally motivate the customers to buy more and thus, it increases sales of the product. This approach of selling goods is known as “Sales Promotion”. 

You have learnt about advertising and personal selling in the earlier lessons. Personal selling involves face-to-face contact with specific individuals, while advertising is directed towards a large number of potential customers. They also help in increasing sales of goods. Thus, advertising can be used as means of communication to inform potential customers about the incentives offered for sales promotion. 

Personal selling can as well include communication of the incentives to individual customers. But sales promotion differs from advertising and personal selling in terms of its approach and technique. Sales promotion adopts short term, non-recurring methods to boost up sales in different ways. These offers are not available to the customers throughout the year. During festivals, end of the seasons, year ending and some other occasions these schemes are generally found in the market.

Meaning of Sale promotion

Sales promotion is the process of persuading a potential customer to buy the product. Sales promotion is designed to be used as a short-term tactic to boost sales   it is not really designed to build long-term customer loyalty. Some sales promotions are aimed at consumers. Others are targeted at intermediaries (such as agents and wholesalers) or at the firm’s sales force.

When undertaking a sales promotion, there are several factors that a business must take into account:

1. What does the promotion cost will the resulting sales boost justify the investment?
2. Is the sales promotion consistent with the brand image? A promotion that heavily discounts a product with a premium price might do some long-term damage to a brand
3. Will the sales promotion attract customers who will continue to buy the product once the promotion ends, or will it simply attract those customers who are always on the look-out for a bargain?

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.

Often, they are original and creative, and hence a comprehensive list of all available techniques is virtually impossible (since original sales promotions are launched daily). Here are some examples of popular sales promotions activities:

1. 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.
2. Customer Relationship Management (CRM) incentives such as bonus points or money off coupons. There are many examples of CRM, from banks to supermarkets.
3. New media - Websites and mobile phones that support a sales promotion. For example, in the United Kingdom, nestle printed individual codes on KIT-KAT packaging, whereby a consumer would enter the code into a dynamic website to see if they had won a prize. Consumers could also text codes via their mobile phones to the same effect.
4. Merchandising additions such as dump bins, point-of-sale materials and product demonstrations.

Objectives of Sales Promotion

1. To introduce new products: Have you ever heard about distribution of free samples? Perhaps you know that many companies distribute free samples while introducing new products. The consumers after using these free samples may develop a taste for it and buy the products later for consumption.
2. To attract new customers and retain the existing ones: Sales promotion measures help to attract or create new customers for the products. While moving in the market, customers are generally attracted towards the product that offers discount, gift, prize, etc. on buying. These are some of the tools used to encourage the customers to buy the goods. Thus, it helps to retain the existing customers, and at the same time it also attracts some new customers to buy the product.
3. To maintain sales of seasonal products: There are some products like air conditioner, fan, refrigerator, cooler, winter clothes, room heater, sunscreen lotion, glycerine soap etc., which are used only in particular seasons. To maintain the sale of these types of products normally the manufacturers and dealers give off-season discount. For example, you can buy air conditioner in winter at a reduced price. Similarly, you may get discount on winter clothes during summer.
4. To meet the challenge of competition: Today’s business faces competition all the time. New products frequently come to the market and at the same time improvement also takes place. So sales promotion measures have become essential to retain the market share of the seller or producer in the product-market.

Importance of Sales promotion

For manufacturers 

1. Increases the volume of sales
2. Helps to introduce new products in the market
3. Enables quick disposal of existing stocks.

For Consumers 

1. Goods are available cheaper rate
2. Financial benefits to the customers
3. Generates awareness about new brands
4. Stabilizes the volumes of sales
5. Creates confidence in the mind of customers regarding quality
6. Raise standard of living 

Methods of Sales Promotion

There are many methods of sales promotion, including:

1. Money off coupons – customers receive coupons, or cut coupons out of newspapers or a products packaging that enables them to buy the product next time at a reduced price
2. Competitions – buying the product will allow the customer to take part in a chance to win a prize
3. Discount vouchers – a voucher (like a money off coupon)
4. Free gifts – a free product when buy another product
5. Point of sale materials – e.g., posters, display stands – ways of presenting the product in its best way or show the customer that the product is there.
6. Loyalty cards – e.g., Nectar and Air Miles; where customers earn points for buying certain goods or shopping at certain retailers – that can later be exchanged for money, goods or other offers.

Tools of Sales Promotion 

To increase the sale of any product manufactures or producers adopt different measures like sample, gift, bonus, and many more. These are known as tools or techniques or methods of sales promotion. Let us know more about some of the commonly used tools of sales promotion.

1. Free samples: You might have received free samples of shampoo, washing powder, coffee powder, etc. while purchasing various items from the market. Sometimes these free samples are also distributed by the shopkeeper even without purchasing any item from his shop. These are distributed to attract consumers to try out a new product and thereby create new customers. Some businessmen distribute samples among selected persons in order to popularize the product. For example, in the case of medicine free samples are distributed among physicians, in the case of textbooks, specimen copies are distributed among teachers.
2. Premium or Bonus offer: A milk shaker along with Nescafe, mug with Bournvita, toothbrush with 500 grams of toothpaste, 30% extra in a pack of one kg. are the examples of premium or bonus given free with the purchase of a product? They are effective in inducing consumers to buy a particular product. This is also useful for encouraging and rewarding existing customers.
3. Exchange schemes: It refers to offering exchange of old product for a new product at a price less than the original price of the product. This is useful for drawing attention to product improvement. ‘Bring your old mixer-cum-juicer and exchange it for a new one just by paying Rs.500’ or ‘exchange your black and white television with a colours television’ are various popular examples of exchange scheme.
4. Price-off offer: Under this offer, products are sold at a price lower than the original price. ‘Rs. 2 off on purchase of a lifebouy soap, Rs. 15 off on a pack of 250 grams of Taj Mahal tea, Rs. 1000 off on cooler’ etc. are some of the common schemes. This type of scheme is designed to boost up sales in off-season and sometimes while introducing a new product in the market.
5. Coupons: Sometimes, coupons are issued by manufacturers either in the packet of a product or through an advertisement printed in the newspaper or magazine or through mail. These coupons can be presented to the retailer while buying the product. The holder of the coupon gets the product at a discount. For example, you might have come across coupons like, ‘show this and get Rs. 15 off on purchase of 5 kg. of Annapurna Atta’. The reduced price under this scheme attracts the attention of the prospective customers towards new or improved products.
6. Fairs and Exhibitions: Fairs and exhibitions may be organised at local, regional, national or international level to introduce new products, demonstrate the products and to explain special features and usefulness of the products. Goods are displayed and demonstrated and their sale is also conducted at a reasonable discount. ‘International Trade Fair’ in New Delhi at Pragati Maidan, which is held from 14th to 27th November every year, is a well-known example of Fairs and Exhibitions as a tool of sales promotion.
7. Trading stamps: In case of some specific products trading stamps are distributed among the customers according to the value of their purchase. The customers are required to collect these stamps of sufficient value within a particular period in order to avail of some benefits. This tool induces customers to buy that product more frequently to collect the stamps of required value.
8. Scratch and win offer: To induce the customer to buy a particular product ‘scratch and win’ scheme is also offered. Under this scheme a customer scratches a specific marked area on the package of the product and gets the benefit according to the message written there. In this way customers may get some item free as mentioned on the marked area or may avail of price-off, or sometimes visit different places on special tour arranged by the manufacturers.
9. Money Back offer: Under this scheme customers are given assurance that full value of the product will be returned to them if they are not satisfied after using the product. This creates confidence among the customers with regard to the quality of the product. This technique is particularly useful while introducing new products in the market.

Sales promotion basically belongs to strategies which are push and pull

1. Push - A push strategy involves convincing trade intermediary channel members to "push" the product through the distribution channels to the ultimate consumer via promotions and personal selling efforts.
2. Pull - A pull strategy attempts to get consumers to "pull" the product from the manufacturer through the marketing channel. The company focuses its marketing communications efforts on consumers in the hope that it stimulates interest and demand for the product at the end-user level.

Types of Sales Promotion

Sales promotions are essential to the proper marketing of products and companies. There are many variations of sales promotions and listed below are the 3 kinds of Sales Promos based on target market. By identifying these types of sales promotions, you can develop a more defined campaign with higher chances of success.

1. Consumer Market Directed - Possibly the most common and popular of sales promotions, consumer marketing directed sales promos are those intended to appeal to the end consumer. Consumers are exposed to sales promotions nearly every day. Recent studies have shown that sales promos do play a conscious role in the buying decision process.
2. Business Market Directed - This type of sales promotion marketing is targeted at other business entities. It is a sales promo that may propose a certain level of distributorship and other trade functions to companies. Often formal and less creative than a Consumer Market Directed Sales Promo, it works well in Business-to-business dealings. This type of sales promo can also be limiting due to the marketer’s personal network.
3. Government Market Directed - Due to the wide nature of marketing communications target market, sales promos can span the identification of the Government as part of our market. Dealings with government agencies and other state related offices will require a separate marketing plan and a government market directed communications campaign for your sales promotion will best suit the project.

FAQ’s

The main advantage and disadvantage of sales promotion?

1. Advantage – Effective at achieving a quick boost to sales and Encourages customers to trial a product or switch brands. 
2. Disadvantage – Sales effect may only be short term customers may come to expect or anticipate further promotions and May damage brand image.

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