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Critical Evaluation of Sales Promotions as a component of OxyCola I.M.C. Campaign

Critical Evaluation of Sales Promotions as a component of OxyCola I.M.C. Campaign

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Published by Tom Jacob
A Critical Evaluation Report on Sales Promotions as a Component of an I.M.C. Campaign submitted by Tom Jacob as the Individual Report assignment of Integrated Marketing Communications module of Liverpool John Moores University MBA in Apr 2009
A Critical Evaluation Report on Sales Promotions as a Component of an I.M.C. Campaign submitted by Tom Jacob as the Individual Report assignment of Integrated Marketing Communications module of Liverpool John Moores University MBA in Apr 2009

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Published by: Tom Jacob on Dec 04, 2009
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05/05/2013

Liverpool John Moores University

Critical Evaluation of Sales Promotions as a component of OxyCola I.M.C. Campaign
Submitted By: Tom Jacob

Course Name: Module Name: Module Code: Submission Date: Submitted to:

Master of Business Administration Integrated Marketing Communications MGTMKM024 April 2009 Princewill Omorogiuwa
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Executive Summary
As any tool maker will tell you, it’s not the tool; it’s how you use it.... (An African Proverb) Today’s highly competitive market and challenging economic conditions have prompted the companies to turn to marketing to provide them with a competitive advantage. In order to maximise the efficiency of marketing, it is essential that that the message communicated is consistent. This is where the Integrated Marketing Communication comes into its own. A planning process which sees the whole rather than the parts, it ensures that all forms of communications and messages are carefully linked together, making sure that they work in harmony. Sales promotions is an important component in this process. Key sensitising issues considered are as follows:      Application of sales promotion theories in developing an communications campaign for OxyCola Critical Evaluation of sales promotions as a tool for marketing communications mix Critical review of the usage of sales promotion in OxyCola communications campaign Bridging the gap between the theory and practice in sales promotion. Development of appropriate solutions and conclusion This summary report aims to bridge the gap between the sales promotion theories and their practice in the real world. The conceptual aspects of these theories and their real world usage are discussed in detail. The ongoing academic debates on the long term effectiveness of sales promotions are also mentioned. Different sales promotions techniques like Price Discounts & Special Offers, Sampling, Contest & Competitions, Free Gifts and Cause related Promotions are reviewed with a special emphasis on their use in the OxyCola campaign. The report looks to identify the best sales promotional tools that can be used to build brand awareness, the primary promotional goal in the case of OxyCola. A critical evaluation of sales promotions suggests that it should be used to complement the broader campaign strategy. Advantages of sales promotions like scalability and flexibility are identified. At the same time, care should be taken to make sure that the long term objectives are not be forsaken for short term benefits. The report stresses the importance of using sales promotions alongside other marketing initiatives like Public Relations and Advertising. These should be carefully linked together to maximise the effect of the campaign To sum up, sales promotions can be a great marketing tool if used correctly. And to do so, it should be used in relation with the overall promotional and brand strategy and should coincide with other marketing initiatives. If used cleverly, Sales promotion can indeed provide OxyCola with the initial boost with which it can go on and become a successful brand.

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Contents

Introduction Literature Review Sales Promotions: Tools and Objectives Sales Promotions: Applications in OxyCola Campaign Critical Evaluation of Sales Promotions Suggested Solutions Conclusion Reference

04 04 05 07 08 08 08 09

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Introduction
"People don't ask for facts in making up their minds. They would rather have one good, soul-satisfying emotion than a dozen facts." (Robert Keith Leavitt 1939)

Introducing a new brand in to today’s competitive market is a tricky business, even for a well established, market leading company. The job becomes much more difficult for an upstart company like OxyCola, who will have to build the brand from scratch. To build a successful brand image, it is important that OxyCola portrays a consistent brand personality that people can relate to. Integrated Marketing Communications is “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service or organization are relevant to that person and consistent over time.” (American Marketing Association 2009). This process makes sure that the ‘noise’ made is consistent and will compliment the brand values. Promotions can be defined as ‘sum of activities which will enlighten the public about a brand or a product’. In essence, it creates brand awareness and will keep the customer ‘in the know’. A typical Promotional Mix will consist of Advertising, Personal Selling, Sales Promotion, Direct Marketing, Sponsorships and Public Relations. (Kerin, Hartley &Rudelius 2003) This report tries to critically evaluate -and thereby bring out advantages and limitations- the concept of Sales Promotion. As the OxyCola Campaign was conceived as B to C campaign, this report will be evaluating Consumer Sales Promotions only. The report will study different tools used for consumer sales promotion & their evaluation techniques, its’ importance in the promotional mix, and the views of prominent authors in the field. The first part of essay is a literature review which attempts to bring out major theories and concepts of sales promotion, and will enhance our understanding of the subject. The report then discusses different sales promotional tools, their objectives and how they are practically applied in the OxyCola Campaign. The report also explains how these theories helped in the creation of an effective campaign. We will then look at the limitations of this concept. This report will also try to understand the gaps between sales promotion theories and their practice. The aim of this report is to look at ways of bridging the gap between theory and practice of sales promotions.

Literature Review
Sales Promotions is traditionally defined as a ‘‘tactical, short term stimulant which will increase customer awareness and there by sales’’ (Kumar 1998). But recent years have seen a shift away from this way of thinking and Sales Promotions is now seen more of as a brand building tool. Schultz, Robinson & Petrison (1997) interprets the role of Sales Promotion as ‘‘marketing and communication activities that change the price/value relationship of a product or service perceived by the target, thereby (1) generating immediate sales and (2) altering long-term brand value. Mullin & Cummins (2008) cites that ‘‘a good sales promotion
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will stop customers for a moment, cause them to think about the brand and product, move them to make a decision to follow up the sales promotion’’ In practice, Sales Promotions is a collection of activities and techniques, which include deals, discounts, coupons, loyalty programs, refunds, contests, sampling, gift offers and special displays, which are used to ‘sell’ a product or a service to the customer (Brown 1993). Brown believes that by itself, sales promotions cannot build long standing customer relationships, but agrees that it can aid the process. Robinson & Carmack (1987) also back this argument up by hypothesizing that sales promotions are at its’ most useful in the decision-making and purchasing stages of the buying process. Blythe (2006) is also of the same opinion and states that the customer will switch back as soon as the promotion ends. Yeshin (2006) disagrees to the above stated views and states that Sales Promotions have undergone a dramatic change in the resent years. He also argues that the fact that more money is spent on sales promotions than any other tool signifies the importance of Sales Promotion and stress the need of re-evaluating its’ fundamental role in the promotional mix. The brand building qualities of sales promotions, particularly on overcoming cultural challenges is discussed by Sandhusen (2000) as well. Yeshin also states that it is impossible to understand the true value of sales promotion in relation to the level of its costs as there is almost no published sources for sales promotion. Schultz, Robinson & Petrison (1997) also acknowledges the need to scientifically measure the results of sales promotions. Even though mathematical regression models exist (Fill 2002) to determine the contribution of sales promotions to the sales, it doesn’t take in to account the attitude and behavioural changes in the customer. Marketing Week (cited in Keillor, Owens & Hausknecht 2007, p.154) has likened sales promotions to the ‘‘reality television of the marketing world’’ and warned that customers might stop taking notice because sales promotions are now very common and customers are becoming increasingly suspicious & hostile towards these techniques. Doole & Lowe (2007) agrees and point out that sales promotions should constantly evolve and embrace new techniques like product placement and viral marketing so that it can catch the imagination of a customer. Weitz, & Wensley also supports this line of thinking and writes that ‘‘consumers have become promotion elastic’’ and ‘‘larger and more lucrative incentives will be required’’. Schultz & Schultz (2004) say that it is important to understand what promotions work for the customers, so that the promotion efforts can be more targeted and ‘wastage’ can be reduced. This line of thinking has initiated serious debates and is making waves in academic circles where the ethics of such promotional activities are hotly argued. (Kerin, Hartley &Rudelius 2003)

Sales Promotions: Tools and Objectives
Most Sales promotions are impersonal and complements and/or supplements other initiatives like advertising and personal selling. Various sales promotional tools include deals & discounts, event marketing, sampling, sponsorships, prize competitions, loyalty programs, product placement and viral marketing.

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Price Discounts & Special Offers
This sales promotion technique exploits human psychology and the customer is attracted not by the immediate need of the product, but by the ‘opportunity to buy on the cheap’ (Keillor, Owens & Hausknecht 2007). Cash incentives are used effectively by super markets who ‘bait’ the customer with an exceptional price discount on one item, with the expectation that the customer will buy other products as well. Another type of price discounts is the incorporation of additional products (buy one get one free). This promotion is used to push sales and/or achieve seasonal targets. The obvious disadvantage is the decrease in the profitability (without taking in to account the economy of scale factor)

Sampling
An expensive promotion technique, sampling involves introducing a new customer to the brand by allowing him to trial the product. This is very effective, particularly in the case of a new brand, as the customer gains first hand information & feel of the product. Schultz, Robinson & Petrison (1997) argues that sampling can persuade those customers who would not have tried the product otherwise. They also point out that sampling will only work if the product is noticeably superior to the ones already in the market. This can be a possible pitfall as ‘superiority’ is qualitative and will depend on the customer perception.

Contest & Competitions
Comparatively low cost (when set against the trade volume), these promotional tools try to motivate the potential buyer by offering him/her a chance to win a substantial prize. This can be anything from a dream holiday to a luxury car. These tools are at their most effective at the point of sale. The disadvantages include low level of participation and legal problems some countries require the participants to demonstrate some kind of skill- (Yeshin, C.I.M 1998).

Free Gifts
This sales promotion technique is used to promote and create awareness of the brand. This can either be distributed randomly (t-shirts and caps) or can be coupled with the product itself. One of the most common examples is the ‘Happy Meals’ offer by McDonalds. This promotion can create goodwill among the customers. Another technique is to use sequential gifts offers like collectables, which has an added advantage of creating brand loyalty (Yeshin, C.I.M 1998). A major problem with this type of promotion is the difficulty to identify items of sufficient perceived value.

Cause related Promotions
Used mainly to project the brand image and personality, this sales promotion technique allows the brand to be portrayed alongside ‘good-causes’ and share a bit of the lime light. The brand can create an emotional bond with the customer as this promotion creates a ‘caring’ and ‘considerate to the others’ image. One example is the recycling program run by the electronic retailer Currys. This can also give the customer a ‘value-added product’, emotionally and/or practically. (Brody 2004)
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Sales Promotions: Applications in OxyCola Campaign
One of the main promotional goals of the I.M.C campaign designed by MMAT Inc. for OxyCola was brand awareness. As the brand and the product are new to the market, it is critical that the brand and its values are promoted heavily. A secondary objective was to facilitate the trial of the product by the target audience. The promotional mix -particularly the sales promotions- for OxyCola was designed with this in mind.

Price Discounts
Most customers prefer cash discounts over any other type of promotions (Keillor, Owens & Hausknecht 2007). The product was introduced in to the market with a 25% price discount on the RRP. This will be an adequate incentive for a customer to try the product out. This will be complimented by a ‘4 for the price of 3’ scheme which will again encourage the customer to buy the product in bulk. This promotion aided the overall promotional goals, because it made sure that the customer will check out the product.

Sampling
According to Copley (2004) most customers are reluctant to check out a product brought to the market by an upstart company. Sampling can be the answer to this attitude as the customer is put in to a win-win situation. OxyCola samples will be distributed in Gyms Tube Stations and Universities. It is also considered to be an efficient way to promote the brand values as the customers are gaining first hand information about the product. Sampling will help to achieve the promotional goals of the I.M.C. campaign because it increases the brand awareness and at the same time facilitate a trial of the product.

Free Gifts
Classy white T-Shirts and Caps with OxyCola logo on it will be distributed to the members of the target market, especially in the trendsetting areas of London like Mayfair and Tottenham Court Road. It is important to note that these free gifts are distributed randomly. This has two advantages. 1) It will increase the brand awareness and enhance the brand equity of OxyCola (Yeshin, C.I.M 1998) and 2) it will encourage repeated buying and thereby create customer loyalty. This will help the overall goals of the campaign by increasing the awareness of the OxyCola brand.

Cause related Promotions
This is an important part of the OxyCola campaign as cause related promotions can capture the customer imagination. OxyCola will support the non-smoking and healthy living initiatives by the NHS and other NGOs. It will also support the London Mayor’s continued push for using push-cycles for short distance journeys. This will reinforce the brand image and personality of OxyCola. This will also generate lot of PR for the company and the target audience - health conscious and trendy people- will relate themselves to the efforts made by the company, which in turn will create a loyal customer base.
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Critical Evaluation of Sales Promotions
Like any other technique, sales promotions have its’ fair share of advantages and limitations. One of the advantages is that it is extremely scalable and can be used at any given budget. As OxyCola campaign was designed with a million pound budget in mind, this factor becomes very important. Again, the flexibility-you can design the promotions with specific goals-, of the different techniques was important as the campaign was used to promote the brand awareness and introduce the OxyCola in the market. It is particularly noteworthy that no other promotion can secure the trial of the product. Another benefit is the relatively quick response (in terms of sales) time of the Sales Promotion One obvious disadvantage is the difficulty to estimate the long term benefits of Sales Promotion and its’ effects on the brand image. Can the price reductions of OxyCola win the customer loyalty? It is also easy to lose focus of your overall brand strategy and use sales promotions for short term gains. One example is the bulk buying promotion used by OxyCola (4 for the price of 3), which didn’t aid the primary goals of the campaign, the brand awareness. It can also create a negative impact on the brand itself.

Suggested Solutions
It is important to realise that the Sales promotions should always compliment and support the main promotional goals of the campaign. It is very easy to get carried away and use every trick in the book to maximize the short term gains. Every tool should be checked against the goals before being used. This will also contribute to the budgeting efficiency of the campaign. For example, sampling can use profiling and should target the gyms and posh universities only. Sales promotions should be used with great discretion, and care should be taken to make sure that it is not run for too long. OxyCola sales promotions should coincide with the launch of the product, and should be shortly withdrawn after that. Later on, one month long sales promotions should coincide with summer and Christmas seasons. It is also understood that sales promotions should be used in conjunction with other marketing initiatives to reap the maximum benefits.

Conclusion
After the critical analysis of the issues, literature review and application of the theories in the real world, this report comes to the conclusion that sales promotion is an important promotion tool which can be very effectively used by OxyCola in its’ launch campaign. Literature in the field provides a good understanding of the advantages and limitations of Sales promotions. If used in relation with the overall promotional and brand strategy, sales promotion can indeed provide OxyCola with the initial boost with which it can go on and become a successful brand.

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Reference
    

Blythe, J. (2006), Marketing, Thousand Oaks: SAGE Publications. Brody, R. (2004), Effectively managing human service organizations, Thousand Oaks: SAGE Publications. Brown, C. (1993), the sales promotion handbook, London: Kogan Page Publishers. Copley, P. (2004), Marketing communications management: concepts and theories, cases and practices, Oxford: Butterworth-Heinemann. Doole, I., Lowe, R. (2007), International Marketing Strategy: Analysis, Development and Implementation, Paris: Cengage Learning EMEA.
Keillor, D.B., Owens, D.L., Hausknecht, D.R. (2007), Marketing in the 21st Century: Integrated marketing communication, Westport, CT: Greenwood Publishing Group.

   

Kerin, R. A., Hartley, S.W., Rudelius, W. (2003), Marketing: The Core, London: McGraw Hill Professional. Leavitt, R. K. (1949), Common Sense about Fund Raising, New York: Stratford Press. Mullin, R., Cummins, J. (2008), Sales Promotion: How to Create, Implement and Integrate Campaigns that Really Work, London: Kogan Page Publishers. Robinson, W.A., Carmack, L.L. (1987), Best Sales Promotions: 6th Volume, Illinois: NTC Business Books.
Sandhusen, R. (2000), Marketing, New York: Barron's Educational Series.

    

Schultz, D.E., Robinson, W.A., Petrison, L. (1997), Sales promotion essentials: the 10 basic sales promotion techniques and how to use them, London: McGraw Hill Professional. Schultz, D.E., Schultz, H.F. (2004), IMC, the Next Generation: Five Steps for Delivering Value and Measuring Returns Using Marketing Communication, London: McGraw Hill Professional. Weitz, B.A., Wensley, R. (2002), Handbook of Marketing, Thousand Oaks: SAGE Publications. Yeshin, T., C.I.M (1998), Integrated marketing communications: the holistic approach, Oxford: Butterworth-Heinemann. Yeshin, T. (2006), Sales Promotion, Paris: Cengage Learning EMEA.

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