Sales promotion helps in increasing sales for short-term period; however, it is not helpful enough to generate long-term customer loyalty. It is designed for potential customers, for distribution channels and also for sales force of the organisation. There are different types of sales promotion and each is given importance, depending on the circumstances or situations, like:
- ‘Consumer-based sales promotion’ is used to enhance the sale of seasonal products during off-seasons.
- ‘Middlemen or channel-based sales promotion’ is used in case when the middlemen or channel intermediaries are more close to customers than original manufacturers.
- ‘Salesmen-based sales promotion’ is used to motivate sales people when the focus of sales is to remove old inventory.
Tools and Techniques for Sales Promotion
For consumer as well as middlemen promotion, different sales promotion tools are utilised. They are as follows:
Consumer Promotion
Consumer-based sales promotion focuses on increasing the usage of a product among current users or adding new customers to the product. It can also be taken-up to respond to competitor’s sales promotion campaign or other activities. The different tools used for consumer-based sales promotion are as follows:
Free Distribution of Samples: Free samples are distributed to the end users. These samples may be provided with any particular product purchased. They may also be distributed in a retail store or even door-to-door approach may be used for the free distribution.
Coupons: Generally, coupons are provided to customers for influencing their buying activity and to promote the sales of a particular product. These coupons are the tools, providing a certain amount of saving on the purchase of a particular product. These coupons are generated by the manufacturers and are offered to customers with the help of different retailers. More commonly, these coupons are packaged alongwith the product.
Premiums or Bonus Offers: When customers buy a definite amount of a particular product from a shop, a certain amount is offered free of cost. It is called ‘bonus or premium offers’.
Money Refund Offer: This is also called ‘money back offer’. The producer uses media advertising to convey that full price Of the product would be returned to consumer within defined time-period, if the product is not upto the stated level.
Contests or Sweepstakes: There are times, when an organisation may arrange a contest to attract new customers towards its products. The contest gives a chance to the consumer to Win in cash or kind. It could be a free air ticket or it can be anything. The launch of new product may involve such sales promotion. Sweepstakes is similar to participating in a lottery.
Bonus Stamps: Manufacturers or retailers, provide bonus stamps to different consumers, based on their size and quantity of purchases. These bonus stamps are collected by the consumers, so as to make it huge enough to exchange them with desired merchandise.
Draw: In this system, every purchaser is issued a token or coupon when he buys a specified product or a specified quantity of that product in a given time-period. After the end of that period, a ‘lucky’ draw is performed and winners are given different prizes.
Cheap Bargain or Self Liquidating premium: In this method, on purchasing a particular product, the manufacturer or retailer provides another product at decreased price rate. For example, on buying one kg pack of ‘Surf’, a bucket worth Rs. 100 is provided at Rs. 50.
Middlemen Promotion
The vital elements of any distribution channel are retailers, distributors and wholesalers. Middlemen-based sales promotion plans are designed to attain desired coordination between these intermediaries. Manufacturers design variety of discounts, offers and schemes in order to motivate middlemen for achieving required sales. Some of them are as follows:
Buying Allowance/Discount: In order to attract the retailers or wholesalers, a significant allowance or discount is provided by manufacturers on purchase of their products. The manufacturer may provide discount on list price or on the amount of cash paid.
Buy-back Allowance: Based on the size of purchases made by retailers or wholesalers at the time of their first deal, the manufacturer offers a specific amount of money to them to buy additional products.
Display and Advertising Allowance: Manufacturers also provide display and promotion allowances to different retailers in order to effectively display the traditional and new products of the manufacturers. The amount of allowance is determined by the display space provided to the manufacturer’s product in the shop.
Dealer-Listed promotion: Different publicity instruments (like diaries, calendars, key rings, etc.) and advertisement messages are designed by manufacturers containing the name and address of their dealers, in order to promote them.
Push Money or PMS: In order to promote or push the sales at a pre-determined rate, manufacturers sometimes offer incentives (in the form of cash or something else) to the salesmen or retailers for every unit of products sold.
Sales Contests: Sales contests are designed by manufacturers in order to motivate sales people, retailers and distributors as well. The entity (distributor, retailer or salesman) making highest sales is provided the gifts or cash prizes. Since there is chance of winning the contest, sellers eagerly participate in such kind of motivational contests.
Advertising Material: Manufacturers design different advertising instruments or materials for retailers or distributors to promote the sales of their products. These may include signboards, new-year diaries, calendars, packing bags, posters, literature, etc.
Credit Facility: In order to promote bulk quantity purchases, the manufacturers offer credit to different dealers based on the quantity of their previous purchases.
Importance of Sales Promotion
Following points describe the importance of sales promotion:
Getting New Customers for Existing Product: Every organisation strives to acquire more customers for their existing products. The job of the organisation is to extend incentives at the right time so that new customers are attracted to the existing product.
Stimulating Middlemen: It is absolutely necessary to continuously motivate the middlemen to enhance the sales of the organisation. This is done by giving incentives, discounts, etc.
Motivating Demand during off-season: It is a proven fact that demand for seasonal products falls after the season gets over. For example, sales of air conditioners and ceiling fans decline after summer (except in cities like Mumbai). It is the objective of sales promotion to try and see that the sales do not suffer too much and some uniformity is maintained.
Motivating the Sales Representatives: The sales representatives of the organisation need to be motivated always. This is because they play a very important role in increasing sales. Sales promotions result in motivating sales people.
Facing the Competition: Sales promotion helps in designing new and unique ways to enhance sales. Different competitors develop different methods to deal with competition.
Extra Benefits: Different types of benefits at different timeframes are offered to the customers. For example, free samples before the actual purchase, gifts and discounts during the purchase and after-sales service after the purchase, are the few benefits which are provided to the customers through sales promotion.
Information of Latest Products: Sales promotion helps in informing the target customers about the latest products and of the organisation. This helps in increasing the sales of such products and services. By consuming such new products and services, the standard of living of customers increases.
Helps in Managing Budget: Every customer has limitations on their monthly and yearly budget. It is for the customers to utilise fall in prices and various sales promotion schemes in order to keep their purchases within family budget.
Limitations of Sales Promotion
Every coin has two sides, i.e., positive and negative. Sales promotion is also no exception. It has several limitations as well. They are given below:
Increased Price Sensitivity: Since, sales promotion activity is an integral part of marketing and sales, the consumers begin to wait for promotional deals. Branded goods with brand loyalty are no exception. Hence, they wait for discounts, stock clearing sales, monsoon sales, festive promotion deals, etc.
Quality Image may become Tarnished: If an organisation focuses less on promotion, it may adversely affect its brand image. Its quality image in the public may become poor.
Merchandising Support from Dealers is Doubtful: There are issues with the dealers as well. They may not pass on the benefit of discounts to the customers. As they may not have sufficient space to store the goods, the product may not be popular in their shops or the benefit offered is less than the effort required, the dealer may not be interested in organisational products.
Short-Term Orientation: Short-term benefits accrue because of the sales promotion activities. But sometimes, if these methods are not properly applied and implemented, then can have opposite effects on the future of the organisation.
Attracting New Customers at the Cost of Existing Ones: The organisation has to be very careful while making promotional offers. It should not end hurting the sentiments of existing customers. For example, if an organisation offers a discount on its products only for new customers, then the existing may feel that they have been ignored. It is therefore: necessary to make such offers on personal basis so that only non-customers know about these offers.
Easy Imitation: In case of being highly productive, the sales promotion techniques used by an organisation can be easily copied by the competitors. Competitors, generally, imitate successful sales promotions.
Lower Margins: In the absence of exceptional benefits (of the product) from that of the competitors, customers can be compelled to the product only in case of lower prices during promotion. However, it results in lower profit margin as well.