Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. Examples include contests, coupons, freebies, loss leaders, point of purchase displays, premiums, prizes, product samples, and rebates. These efforts can attempt to stimulate product interest, trial, or purchase. Sales promotion is one of the seven aspects of the promotional mix. (The other six parts of the promotional mix are advertising, personal selling, direct marketing, publicity/public relations, corporate image and exhibitions.) Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability.
Purpose of sales promotion:
Companies
use sales promotion:(1) to attract new product users who will hopefully turn
into loyal consumers; (2) to reward existing consumers with a price reduction
to maintain their loyalty; and (3) to encourage repeat sales from occasional
consumers.
Objectives of Sales
Promotion:
Basically,
sales promotion has three specific objectives. First, it is meant to provide
important marketing information to the potential buyers. Secondly, to convince and influence the potential
buyers through persuasive measures. Thirdly, sales promotion is meant to act as
a powerful tool of competition. The specific objectives of sales promotion are
as follows:
a.
To introduce new products or services:
Sales
promotion is often used to motivate prospective consumers to try new products
and services. Dealers are also induced to introduce new products and services
in the market. Usually, free samples are provided through dealers during such
introduction. Similarly, discounts in cash or goods may also be offered to
dealers to stock new products or deal with new services. Free samples, trade
discounts, cash discounts are basically sales promotion measures.
b.
To attract new customers:
Sales
promotion measures also play an important role in attracting new customers for
an organization. Usually, new customers are those persons that are won away
from other firms. Samples, gifts, prizes, etc. are used to encourage consumers
to try a new brand or shift their patronage to new dealers.
c.
To induce existing customers to buy
more:
Sales
promotion devices are most often used to induce the existing customers of a
firm to buy more. Product development, offering three products at the cost of
two, discount coupons, are some of the sales promotion devices used by firms to
motivate the existing buyers to buy more of a specific product.
d.
Helps the firm to remain competitive:
Most
of the companies undertake sales promotion activities in order to remain in the
competitive market. Therefore, in the modern competitive world no firm can
escape the responsibility of undertaking sales promotion activities.
e.
To increase sales in off-seasons:
Many
products like air-coolers, fans, refrigerators, air-conditioners, cold drinks,
room heaters, etc. have seasonal demand. Manufacturers and dealers dealing with
such type of goods make every effort to maintain a stable demand throughout the
year.
In
other words, firms try to encourage the purchase of such goods in off-seasons
also. That is the main reason behind discounts and off-season price reductions
of such items in the market during slack seasons.
f.
To add to the stock of the dealers:
Dealers like
wholesalers and retailers usually deal with a variety of goods. Their selling
activity becomes easier when the manufacturer supplements their efforts by
sales promotion measures. When a product or service is well supported by sales
promotion, dealers are automatically induced to have more of such items.
1) Rebate: under it
in order to clear the excess stock, products are offered at some reduced price.
For example, giving a rebate by a car manufacturer to the tune of 12,000/- for
a limited period of time.
2) Discount: Under this
method, the customers are offered products on less than the listed price. For
example, giving a discount of 30% on the sale of Liberty Shoes. Similarly
giving a discount of 50% + 40% by the KOUTONS.
3) Refunds: Under this
method, some part of the price of an article is refunded to the customer on
showing proof of purchase. For example, refunding an amount of 5/- on showing
the empty packet of the product priced 100/-
4) Product
combination: Under this method, along with the main product some other
product is offered to the customer as a gift.
5) Quantity
Gift:
Under this method, some extra quantity of the main product is passed on as a
gift to the customers. For example, 25% extra toothpaste in a packet of 200 gm
tooth paste. Similarly, a free gift of one RICHLOOK shirt on the purchase of
two shirts.
6) Instant
draw and Assigned gift: Under this method, a customer is asked to scratch a
card on the purchase of a product and the name of the product is inscribed
thereupon which is immediately offered to the customer as a gift. For example,
on buying a car when the card is scratched such gifts are offered – TV,
Refrigerator, Computer, Mixer, Dinner Set, T-shirt etc.
7) Lucky draw: Under this
method, the customers of a particular product are offered gifts on a fixed date
and the winners are decided by the draw of lots. While purchasing the product,
the customers are given a coupon with a specific number printed on it.
On the
basis of this number alone the buyer claims to have won the gift. For example,
Buy a bathing soap and get a gold coin offer can be used under this method.
8) Usable
benefits:
Under this method, coupons are distributed among the consumers on behalf of the
producer. Coupon is a kind of certificate telling that the product mentioned
therein can be obtained at special discount. Possession of a coupon motivates
the consumer to buy the product, even when he/she has no need of it. Such
coupons are published in newspapers and magazines.
9) Full
Finance @ 10%: Under this method, the product is sold and money received
in installment at 0% rate of interest. The seller determines the number of
installments in which the price of the product will be recovered from the
customer. No interest is charged on these installments.
10) Samples or
Sampling:
Under this method, the producer distributes free samples of his /her product
among the consumers. Sales representatives distribute these samples from
door-to-door. This method is used mostly in case of products of daily use, e.g.
Tea, Washing Powder, and Toothpaste etc. Thus, the consumers willy-nilly make
use of free sample.
11) Contests: Some
producers organize contests with a view to popularizing their products.
Consumers taking part in the contest are asked to answer some very simple
questions on a form and forward the same to the company. The blank form is made
available to that consumer who buys the product first.
Result is declared on the basis of
all the forms received by a particular date. Attractive prizes are given to the
winners of the contest. Such contests can be organized in different ways.
Sales Promotion Tools:
Sales
promotion tools are given below: