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Subject COMMERCE

Paper No and Title MARKETING MANAGEMENT

Module No and Title 24: SALES PROMOTION

Module Tag COM_P7_M24

COMMERCE PAPER No.7 : MARKETING MANAGEMENT

MODULE No.24 : SALES PROMOTION
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TABLE OF CONTENTS
1. Learning Outcomes
2. Introduction

2.1 Concept and Definitions

2.2 Relationship between Sales Promotion and Advertising

3. Sales Promotion Objectives

4. Significance of Sales Promotion

4.1 Importance from the point of view of Manufacturers

4.2 Importance from the point of view of Consumers

5. Methods/ Levels/ Tools of Sales Promotion

5.1 Evaluating Sales Promotion

6. Sales promotion Budget

7. Summary

COMMERCE PAPER No.7 : MARKETING MANAGEMENT

MODULE No.24 : SALES PROMOTION
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1. Learning Outcomes
After studying this module, you shall be able to:

 To Describe the concept of Sales Promotion

 To Identify the Objectives of SP
 To State the Importance of SP
 To Analyze the various Methods of SP
 To be able to evaluate SP

2. Introduction

2.1 Concept and Definitions

The term "sales promotion" refers to the use of short term incentives to increase the sale of products
or services. Sales promotion may be focused toward the distribution channel (by furnishing
incentives for sales) or directly at the consumer. It is a method generally used by the companies for
introducing new products, clearing inventories, building clientele and above all giving sales a little
boost or push. Sales promotion is one of the seven elements of a promotional mix, along with
advertising, personal selling, corporate image, public relations, direct marketing and exhibitions.
Sales promotion is generally used as a technique of promotion to supplement and coordinate with
other two main elements (advertising and personal selling) of company’s promotion mix. It may be
a package of various promotional activities that help in enhancing sales.

Fig. 1 Sales Promotion

Consumer sales promotion denotes a large share of the total marketing expenditure despite which
it remains an area that still demands attention as a critical component of the promotion mix which
aims to boost short term sales. Thus it is not denying the fact that most of the marketers employ
sales promotions strategies to attract the market share for their products and services.

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MODULE No.24 : SALES PROMOTION
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One of the basic characteristics of sales promotion is that it is neither fixed nor permanent. If the
sales volume of the product is affected by seasonal influences, the company may decide to offer
price discounts or to lower the price but for a short period. However, if the prices are reduces
because of the stiff competition, it is not sales promotion rather a function of pricing.

2.2 Relationship between Sales Promotion and Advertising

The two terms sales promotion and advertising are often confused and used interchangeably by the
marketers. But both of these terms are different and have individual identity with distinct definitions
and uses. So, it becomes important to understand the role each plays in reaching today's ever more
intelligent consumer.

Advertising is a tool in marketing mix used for the positioning of a product or service against
that of competitors. It is also used to create an image of a brand of a product in the minds of the
consumers and to enhance its value in their eyes. A television commercial for a brand new
automobile emphasizing the car's new features and styling is an example of advertising. Sales
promotions, as already discussed, include various strategies that are designed to offer consumers
an additional incentive to buy (usually in the short-term). Examples of sales promotions include
discount coupons, buy-one-get-one offers and special ‘Day-of-the-week’ discount at the grocery
stores but all for a limited period of time. The significant difference between advertising and sales
promotion is the approach that is adopted to appeal to the consumer. Advertising is emotional in
nature and the objective is to create a long-term brand image. For example, in case of products like
perfumes, makeup, body lotions and jewelry there is a need for imaginative advertising to create
the attention needed to sell these products. Sales promotions, on the other hand, are based on
rationality (unemotional). A discount coupon for a product appeals more to the consumer's rational
mind (by using comparative analysis) and promotes the sales.

3. Objectives of Sales Promotion

Till now we have learnt that the main objective of sales promotion is to increase sales
through short term incentives. However, there are some other objectives of sales
promotion, which may be listed as follows:

1. To increase the buying response at the customers level.

2. To attract new customers.
3. To ensure dealer effectiveness.
4. To make aware the public about the new product, its usage and advantages.
5. To capture the major percentage of total market share.
6. To meet the competition from other firms.
7. To use off-season discounts to boost sales.
8. To create brand image.
9. To create additional positive points about the products for sales persons.
10. To make provisions to do away with customer's dissatisfactions.
11. To bridge the gap between advertising and personal selling.
12. To maintain communications with large market segments.

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13. To build a favourable attitude towards the product.
14. To stock more at the various intermediary levels.

4. Significance of Sales Promotion

Sales promotion is a marketing activity that adds to the basic value proposition behind a product
(e.g., getting more for less) for a limited time in order to stimulate consumer purchasing, selling
effectiveness, or the effort of the sales force. Thus, sales promotion is considered as one of the
important and powerful tool for increasing the levels of sales.

4.1 Importance from the point of view of Manufacturers

i. It helps in increasing the sales in a competitive market leading to increase in profits.

ii. It is especially helpful at the time of introducing new products in the market by drawing
the attention of potential customers;
iii. When a new product is introduced or there is a change of fashion or taste of consumers,
existing stocks can be quickly disposed-off with the help of different schemes of sales
promotion;
iv. It is helpful in earning the loyalty and thus stabilizing sales volume by keeping its
customers with them. In the age of competition it is quite possible that a customer may
switch to other brands. In such a situation, various incentives under sales promotion
schemes help to retain the customers.

4.2 Importance from the point of view of Consumers

i. The consumer gets the product at comparatively cheap and more affordable rate;
ii. It gives financial benefit to the customers by way of providing prizes, coupons, gift
vouchers and sending them to visit different places;
iii. The quality, uses and distinguished features are highlighted through it to make
aware consumers about the different aspects of products.
iv. Certain schemes like exchange, return or money back offer creates confidence in
the mind of customers about the quality of goods; and
v. Many a times companies extend exchange offers. It helps in overall raising the
living standards of customers. By exchanging their old items with the new products,
consumers can use latest products available in the market and improve their image
in the society.

5. Methods/ Techniques/ 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 (as shown in Fig. 2). Some of the commonly used tools of sales
promotion have been discussed in the following paragraphs.

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Fig. 2 Sales Promotion Techniques

(i) Free samples - Sometimes free samples of products such as shampoo, washing powder,
coffee powder, etc. are distributed to attract consumers’ attention so that they try out these
product and new customers are created. Some companies also distribute samples among
selected/ related persons in order to promote the product. For example, in the case of
medicines, free samples are given to the physicians, so that they can try these on their
patients.

(ii) Premium or Bonus offer - A milk shaker along with Nescafe cold coffee, mug with
Bournvita, toothbrush with 500 grams of toothpaste, 30% extra in a pack of one kg., etc.
are some of the examples of premium or bonus given free with the purchase of a product.
These may prove effective in inducing consumers to buy such product. This is also useful
for encouraging and rewarding existing customers.

(iii) Exchange schemes - It refers to offering a company gives in 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 old television with a
new LED television’ are some of the examples of exchange scheme.

(iv) Price-off offer – The products are sold at a price lower than the original price in such
kind of offer. ‘Rs. 2 off on purchase of a Margo soap, Rs. 15 off on a pack of 250 grams of
Tata Premium tea, Rs. 1000 off on OTG/ microwave’ etc. are some of the examples of such

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offers. These type of scheme are formulated to push up sales even in off-season or slack
season and also sometimes, at the time of introducing a new product in the market.

(v) Coupons - Sometimes, we find coupons either in the packet of a product or through an
advertisement printed in the newspaper or magazine or through mail. The holder of the
coupon gets the product at a discount on presenting it to the retailer. For example, you
might have come across coupons like, ‘show this and get Rs. 15 off on purchase of 5 kg.
of Annapurna Atta’ or ‘the cutout of the coupon will get you additional 5% discount’. The
reduced price under this scheme attracts the attention of the potential customers towards
new or improved products.

(vi) Fairs and Exhibitions - Fairs and exhibitions are organized by the government as well
as private organizers at local, regional, national or international level to introduce new
products, demonstrate the products and to explain special features and usefulness of the
products. ‘International Trade Fair’ held every year at Pragati Maidan, New Delhi from
14th to 27th November, is a well-known example of Fairs and Exhibitions as a tool of sales
promotion.

(vii) 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 their
benefits. This tool induces customers to buy that particular product more frequently to
collect the stamps of required value.

(viii) Scratch and win offer - Under this scheme a customer is induced to buy and scratch
a specific marked area on the package of the product and get 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 winning of a car/bike or a special tour arranged
by the manufacturers.

(ix) Money Back offer - The customers are sometimes 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.

(x) Full Finance @ 0% - Under this method, the product is sold and sale money received
in installments at 0% rate of interest. The number of installments in which the price of the
product will be recovered from the customer is generally fixed by the seller and these
installments are interest free.

(xi) Contests – ‘Contests’ is very widely held form of sale promotion used by marketing
managers to popularize their products. Consumers taking part in the contest are asked to

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answer some very simple questions on a form and forward the same to the company. There
may be consumer contests, salesman’s contest and dealer’s contests.

6. Evaluating Sales Promotion

In order to know whether the sales promotion programme related to the objectives of the
company are being accomplished or not, the marketers evaluate these programme. The
common techniques that are used to measure these programme are (i) Pretesting (ii)
Concurrent testing, and (iii) Post testing.

1. Pre testing – Pre testing technique is used to select the most effective promotional
tool from a number of alternative promotional concepts. It helps the marketers to
know that how the sales promotion is to be communicated and what to be
communicated by indicating consumers’ perceptions towards their product and risk
involved. The concept is tried and tested in the selected target market at a small
scale and the scheme is introduced in the actual market if it finds the acceptance
with the trial audience.

6. Sales Promotion Budget

The marketing manager is also given the responsibility of projecting the budget or cost of
the sales promotion activities of the company. Various activities are categorized and
allotment of the required funds is specified to each category keeping in mind the expected
expenditure. For this, an estimate of the overall expenditure on sale promotion activities is
also required to be made. This can be done in following two possible ways:

1. Top-down approach – In this approach, the top management informs the sales
promotion manager regarding the total amount of the budget to be spent over the
specified period. As the limit is set first and the plans are adjusted accordingly
afterwards, this approach faces a serious limitation related to such limits which are
likely to be ‘rule of thumb’ or arbitrary. As a result, the sales promotional personnel
feel helpless for the want of funds and lack of financial freedom.
2. Bottom-up approach – In contrast to the earlier approach, this approach take a
reverse path. Here, first of all the target audience is selected, then objectives are set,
afterwards the relative allocations are planned and costs are estimated so that the
budget can be designed and this total outlay becomes the budget limit. This budget
becomes final only after it is approved by the top management.

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7. Summary
 Sales promotions is the direct and immediate inducement hat adds extra value to the
product which prompts the sales force, dealers and customers to buy the product.
 Sales promotion utilizes a variety of incentive tools such as samples, coupons, discounts,
premiums, refunds, rebates, contests, trade deals, etc. for a pre-determined period of time.
 The basic objective of such promotions is to stimulate consumer interest in various
products, services, activities and special events.
 Sales promotions are largely directed towards end-users called consumers.

COMMERCE PAPER No.7 : MARKETING MANAGEMENT

MODULE No.24 : SALES PROMOTION