There are many reasons why sales promotion is one of the fastest growing IMC tools. Explain what you believe are the two most significant benefits provided by sales promotion that may account for this growth.
Introduction
Whenever a commercial transaction of any kind occurs, there must be a buyer and a seller. Sales is the business of presenting individuals or organizations with the products or services that meet their real or perceived needs. Selling may be as simple as producing the product or service requested by the purchaser. Often it is more complex, occasioning the use of psychological insights that employ many things. A wide variety of specialists are employed – in advertising research, promotion, publicity, packaging, fulfillment of the order, and customer service – to develop strategies and execute tactics whose sole purpose is to accomplish sales. For this particular paper, the field of sales promotion will be tackled.
To maximize understanding, here are brief definitions of these tools. A range of tactical marketing techniques designed within a strategic marketing framework to add value to a product or service in order to achieve specific sales and marketing objectives. This extra value may be of a short-term tactical nature or it may be part of a longer-term franchise-building program (2004). Sales promotions are marketing events which stimulate purchasing. These include sweepstakes, contests, grand openings, coupons, premiums, samples, price packs, and rebates (1991).
Sales promotion includes those activities which assist in the sale and advertising of goods. Among these promotional procedures are the preparation of catalogs, sales manuals, and displays; the enlisting of dealer cooperation for the display and sale of goods; and the promoting of sampling campaigns, contests, and many other similar items. In many firms sales-promotion departments have been established to supervise these operations, while in others they are divided between sales and the advertising departments.
Body
Marketing is one of the major segments of the economy of every country. Through this area of economic activity goods and services flow from producers to consumers, thereby completing the basic mission of every economic system - that of satisfying the needs and wants of the people. This is a twofold task: (1) discovering what goods and services consumers need and want, and (2) providing these items for them in the places where they are, at the times that they want them, and at prices that they are able and willing to pay. Marketing involves tools that would help in the selling of merchandise.
To maximize understanding, a brief definition of various marketing tools will be discussed. Sales promotions are marketing events which stimulate purchasing. These include sweepstakes, contests, grand openings, coupons, premiums, samples, price packs, and rebates. Advertising is paid, nonpersonal mass communication or direct marketing tools such as flyers, brochures, catalogs, and the like. Publicity is free, nonpersonal (but sometimes personal) mass communication. It is composed of press releases and publicity stunts that attract media attention and subsequent coverage in news stories and editorials. Public relations encompass publicity and also include personal and nonpersonal communication by company speakers through newsletters, lobbying, and contact with media and citizens. Personal selling is personal communication with a sales agent persuading consumers to buy products and services. Display refers to point-of-purchase items such as posters, signs, and other in-store media that direct consumers to buy a particular product. Over recent years, cyber or internet marketing, and sponsorship has become a distinct tool in the marketing communications mix. These promotional mix factors sometimes run independently yet concurrently, which is fine if that is the intention (1991). Each component has a specific task to achieve and the message is greatly enhanced if it is reinforced by other tools in the mix (2004).
The importance of sales promotion has increased significantly over the years. Some time ago, advertising accounted for about 60 per cent of the advertising and sales promotion budget. However, over the last years sales promotion has continuously increased its share. Today, it is estimated that between 65 and 75 per cent of the budget is spent on sales promotion. This evolution can be attributed to a number of factors (2004).
When an executive selects the right sales people; provides each person with optimal managerial supervision; compensates each person with the ideal combination of benefits, pay, and perks; and provides them knowledge of the sales environment, that executive has a dream sales team. Each of these four factors is critical both separately and as it relates to the other three. Because the factors are interdependent, it is vital to the success of the sales effort to consider all four factors in developing a sales force (Weitzul, 1993).
The promotion manager, in addition to ensuring marketing communications congruence, is in charge of all overt efforts to promote a product. This includes advertising, sales promotion, public relations and publicity, personal selling, display, and anything new (1991).
Given the right fit of these three factors, the product should be effectively sold. In this model, the marketplace is the final measure of the success or failure of the first three steps. That is, it provides the final feedback on the first three parts of the system, the product itself, and other organizational functions associated with the product. If the product does not sell, then a problem exists with the sales force, the product itself, other organizational functions that support the product, or all three. The marketplace component of the model is designed to assess potential problem areas, focus on them, and highlight ways to modify them (2001).
Companies must do more than simply build quality into their products; they must also communicate product quality. The product's look and feel should communicate its quality level. Quality is also communicated through other elements of the marketing mix. A high price usually signals a premium-quality product. The product's brand name, packaging, distribution and promotion also announce its quality. All of these elements must work together to communicate and support the brand's image (1991).
Consumer sales promotions come in many traditional forms: coupons, rebates, price packs, premiums, samples, in-store displays, and many others. These will be discussed in the succeeding paragraphs. These forms of sales promotions can be quite effective if tied in with advertising and trade and promotion, and if they match consumers' needs and are well-timed.
Small "free" samples are used to introduce a new product or a "new and improved" mature product. Samples are sometimes sent directly to consumers through the mail. Often, a coupon or refund offer accompanies the freebie. Sampling via mail or door-to-door dropoff is very expensive, so only big companies with big promotion budgets can afford this kind of product introduction, but it delights consumers ( 2001).
Samples are also attached to packages of other products, given out, or even featured in an ad. The potential promotional feat aspect of samples is that they induce trial, which is very important to packaged-goods items that have a short purchase cycle. We can see samples of perfumes included in magazines. Samples of make up offered for free with a purchase, samples of food beverages being given out in the grocery stores, and many others.
Coupons have been around for generations. They appear on print ads in magazines and especially newspapers. They can be mailed, inserted inside a product package, or picked up from a point-of-purchase (POP) display. Many coupons are now generated by scanners at the checkout stand and placed in customers' shopping bags. In this case, the cashier scan computer is programmed to flag certain products and issue cents off coupons for competing products.
The cashier coupon is a promotional feat because it targets consumers based on their immediate purchase behavior. Cashier coupons, which usually offer a substantial cash discount, signal the consumer that she's made a mistake in buying a certain brand of coffee, and next time she can get money off her next purchase of Yuban.
Some manufacturers have switched to rebates, where the consumer gets the price reduction by mailing some proof of purchase back to the manufacturer who then mails a check back to the consumer who then must go to the bank and deposit the check. As you can see, this saves on retailer handling fees but does not reduce energy expenditures on the part of the manufacturer. Alas, the poor consumer must go through major hoops and barrels to receive cash back from a rebate offer (1991).
Premiums are similar to samples and are often included in- or on-package. Kids' cereal premiums serve as the best example of this successful technique. The trick is offering a premium that is related to the purchased product (like offering a WD-40 sample with a Wagner Power Painter), is something that consumers really want and probably can't get other ways (like junior astronaut certificates from Safeway's Frosted Flakes), and/or is a self-liquidating premium of a t-shirt, hat, seat cushion, cup, pen, or other item with a company's brandmarks emblazoned on the item (such as Budweiser t-shirts and other "specialty advertising" merchandise) and sold at very low prices. Any variation on these themes could provide a cost-effective way to serve customers better and reward you not only with immediate purchase but perhaps brand loyalty as well ( 2001).
Point-of-purchase (POP) promotions (usually displays or demos next to a product) remind shoppers to pick up the displayed item. Some POPs are simply convenient product holders that highlight a particular brand. Some companies supply these holders to aid merchants who stock impulse items such as cigarettes. Due to the competition for shelf space, this is one successful way to get a display (Soares, 1991).
Another display idea offers shoppers expensive items such as silverware or china at good deals. All shoppers need do to participate is either buy a certain amount of goods from the store or just enter the store. Safeway sponsors these promotional displays periodically.
Marketers have taken advantage of our desire to win by luck by offering us cash, trips, and goodies to participate in games, contests, and sweepstakes. A game gives consumers pieces to a puzzle each time they come in the store or buy. McDonald's or one of the other fast-food franchises has a game of some sort going all the time--to the point where many consumers are fed up with the whole enchilada, especially if the game is complicated or hard to win (2003).
A contest requires entrants to guess trivia questions or submit something that is judged by someone. As you read this, at least one radio station in your local area is staging a contest on the air. Many listeners tune out when the DJ announces "Be our thirteenth caller to answer correctly and win.”
Sweepstakes involve entering your name for a chance at big prizes. Some stores prefer sweepstakes because they are easy to enter and administer, they are superior to contests. They note that sweepstakes generate interest in a brand. "In an increasingly cluttered media environment, sweepstakes can provide consumers with an extra incentive for attending to an advertisement.”
Promotional activities can be more cost effective by using cross promotion, where a coupon or other incentive for one product is distributed or promoted by another product or service. Cross promotions are especially useful for small businesses who can help each other and better serve their joint customers (1998).
Cross promotions are also good for large businesses. In 1990, American Savings Bank and Continental Airlines offered a cross promotion where a customer who got a CD from American Savings would get a free companion ticket or reduced fare from Continental. There is nothing special about this cross promotion except that it shows that large service companies can work together to encourage trade and satisfy customers. Cross promotion is an area that has yet to be fully exploited by companies with complementary products or services.
Tie-ins, similar to cross promotions, occur when several services or products pool their promotion resources to increase sales, promote new use, or broaden user base. Sometimes, advertising tie-ins are used (e.g., when mall merchants share expenses for a 60-second cable TV spot highlighting each business and their mall.
Cross promotions and tie-ins have the potential for promotional feat status because they appeal to customers on many levels. If cleverly done, such as with movie tie-ins, plenty of money can be made (or saved) by all. Like other classic sales promotions, most effective cross promotions will fail to make the news, but they are still promotional feats if they exceed promotional objectives and contribute to the overall marketing communications mix for a product or service ( 1991).
Strength of Sales Promotions compared with other IMC tools
Factors that lead to the increasing use of sales promotion is summarized below:
· Short-term orientation of marketing managers
· Measurability and accountability
· Perceived lack of effectiveness of advertising
· Brand expansion and proliferation and lack of brand differentiation
· Declining brand loyalty and increasing price-orientation of consumers
· Increasing in-store decision making
· Distribution channel power and the competition for shelf space
Companies are becoming increasingly short-term oriented. Marketing executives are often judged on the basis of the short-term sales evolution of the products and brands for which they are responsible. However, the impact of many communications tools, such as advertising, sponsorship and marketing public relations, only become apparent in the long run.
Furthermore, their impact is often only cognitive (e.g. increased brand awareness) or attitudinal (e.g. a better brand image). The inherent characteristic of sales promotion is that its results are immediately visible. Since the objectives of sales promotion are often to increase the number of customers and/or to increase sales (per customer) in the short run, the results of a sales promotion campaign are immediately and exactly measurable. Since marketing managers are increasingly accountable for their communications budgets, they are easily tempted to deploy campaigns that will produce sales results in the short run. The perception of many marketing managers is that it is increasingly difficult to reach customers by means of traditional advertising, because of rising costs, legal constraints, and increasing media clutter. Brand confusion and irritation levels as a result of advertising are high and rising. Sales promotion is often perceived as a tool that is capable of reaching the customer more directly and effectively (2004).
Especially in mature consumer markets, an increasing number of brands and sub-brands are offered. Since the overall quality of the brands has improved, and the functional differences between brands have become less important, consumers increasingly face more difficult multiple-brand buying situations, and shopping convenience falls. Advertising is no longer capable of explaining the difference between brands and to effectively position them. On the contrary, sales promotion offers the consumer a simple reason to buy a product, and makes the buying decision less complex. It reduces the stress that many consumers experience and makes the shopping expedition less time-consuming (1993).
Furthermore, consumers become increasingly less brand loyal and more price-conscious, and a lot of buying decisions are taken on the shop floor. Therefore, they can be more easily convinced to switch brands on the basis of an in-store incentive that offers them extra value immediately. Sales promotion is exactly doing that ( 2004).
Finally, distribution channels such as supermarkets are becoming increasingly powerful. The proliferation of brands, all struggling for exposure, put manufacturers into a position that they increasingly have to encourage retailers to make shelf space available. The retailers, in turn, are faced with a choice of more and more brands, and increasingly demand incentives from manufacturers to allow their brands adequate shelf space and support. This leads to an increasing trade promotion activity. Furthermore, manufacturers are also urged to promote their products to the end-consumer to generate as much store traffic as possible, leading to more end-consumer promotion ( 2004).
The table below compares sales promotion to other marketing communication tools based on key characteristics:
Sales Promotion
Advertising
Public relations
Personal selling
Direct marketing
Communications
Ability to deliver a personal message
Low
Low
Low
High
High
Ability to reach a large audience
Medium
High
Medium
Low
Medium
Level of interaction
Low
Low
Low
High
High
Credibility given by target audience
Medium
Low
High
Medium
Medium
Costs
Absolute costs
Medium
High
Low
High
Medium
Cost per contact
Medium
Low
Low
High
High
Wastage
Medium
High
High
Low
Low
Size of investment
Medium
High
Low
High
Medium
Control
Ability to target particular audiences
High
Medium
Low
Medium
High
Management's ability to adjust: the deployment of the tool as circumstances change
High
Medium
Low
Medium
High
Source: 2004
The next table lists the advantages and disadvantages of various IMC tools:
Advantagesa
Disadvantages
Generative activities
Sales promotion
Boosts short-term sales performance
Erodes profits and undermines brand value through lowered price
Market research
Fosters interaction with consumers and buyers. Generates new ideas
May produce minor product changes in competition with other offerings
New product development
Can involve customers. Develops productive capacity of the provider. Can lead to differentiated offerings
May result in product proliferation. Can be risky for first provider of innovative product
Representative activities
Advertising
Simultaneous communication with many people - multiplicity of media channels allows greater precision in targeting
Simultaneous communication with many people. Media are expensive, especially broadcast TV
Publicity
Low cost, relative to advertising. Can be received credibly
Diffuse and indirect
Personal selling
Complex co-constructions of problem definition and solution can be negotiated in direct interaction, with personal commitment
Expensive, although telesales (rather less personal) is increasingly used
Demonstration/exhibition
Tangibilizes (makes tangible) the product benefits
Attendees may not be prepared to purchase. Can be costly
Direct mail
With detailed and accurate databases, advertising is unnecessary
Some people see it as intrusive
Sponsorship
Promotes the interests of the provider by associating with an event or cause
Can be expensive, with no direct measurable payback. May backfire if the event or cause comes under criticism
Source:2001
This move toward sales promotions is due to several factors. First, because of the proliferation of products that resemble each other to the point that consumers cannot differentiate them, buyers walk the aisles looking for quick bargains. In short, consumers are price- and promotion-sensitive when they can't tell the difference among competing products. We discussed this problem earlier. The conservative approach to product development that has dogged marketers over the past decade shows no signs of abating. Therefore, even great advertising can't fool the people all the time when no true difference between products exists (1991).
Another reason for the surge in sales promotions is the specious notion that increased sales volume in the short run is good news, even if it costs the company millions and fails to obtain brand loyalty. Marketers are blindly copying each other in the incentives-based price wars (2004). The prevailing thought seems to be, "If company X is offering a centsoff coupon then we'll match 'em." The result is consumer confusion at best; at worst, savvy consumer purchasing at the expense of brand loyalty.
So, for a sales promotion to be a promotional feat, it must cost-effectively achieve its purpose--to encourage immediate trial. Additionally, it must enhance the brand image, shorten the purchase cycle, or at least increase usage at no significant cost to the producer. A final component--it must make the news, in effect, generate publicity.
A sales promotion must have a vision. In too many cases, vision has become a catchall phrase for dreaming big dreams. While a vision should point towards an overall target, in successful sales forces, vision exists as a tangible guidance mechanism. A clearly articulated vision provides direction to the sales promotion, salespeople and management. It is quite easy for some of the salespeople to head a little bit in one direction, while others go in another direction. After a time, they are too far apart to communicate, and the whole effort on sales promotion starts to fall apart. Vision should operate as a map that guides you forward, and lets you know if you are still together (1998). The notions of identifying a target and constructing a road map to help an organization reach a target is not in and of itself new to today's sales forces.
How Sales Promotions make changes in business
Proctor & Gamble makes extensive use of coupons to promote its products. In 1992 the company decided to spend 50 per cent less on couponing, and change its strategy into an EDLP (Every Day Low Prices) approach. Retail prices were dropped by US$2 billion. In January 1996, an 18-month no-coupon test was launched in a part of the state of New York, where 90 per cent of the shoppers were known to use coupons. Almost all other manufacturers, retailers and wholesalers believed that this was a meaningful strategy, and some of them followed P&G's decision. However, the no-coupon strategy met with considerable protest by consumers. They appeared to consider coupons as 'an inalienable right', and consumers in the test region started boycotts, public hearings, and petition drives. Signs saying 'save our coupons' appeared in front gardens, and the local media were bombarded with complaint letters. By the time the protests appeared in the national media, public officials claimed that Procter & Gamble was the company of 'profit and greed' that hurt 'average Joe', and they voted a resolution to ask P&G to abandon its strategy. More than 20,000 people signed a petition against the no-couponing strategy.
After 14 months, in April 1997, P&G stopped its no-coupon test. They agreed to distribute US$4.2 billion worth of coupons that could be redeemed at any supermarket in the region for any consumer or food item. Procter & Gamble still claimed that during the test period consumers received at least an equally good value for money, without the cost and inconvenience of coupons. Nevertheless, during the test period the sales of the company were unsatisfactory. On the contrary, the use of coupons of P&G's competitors in different product categories increased substantially. The P&G experience has shown that promotions are often regarded by the consumer as a normal incentive or reward when buying a company's products. The experience has lead P&G to use new methods of coupon distribution. More and more coupons are made available in more targeted ways: shelf dispensers at the point of sale, in frequent buyer and loyalty programmes, in combination with free samples at the store, through direct mailings, the Internet, or electronically at the check-out. Fewer coupons are distributed through mass media inserts.
Although coupons have similar advantages and disadvantages as direct price cuts, there are some differences. A coupon does not look like a price cut, because the price on the product or on the shelf is not changed. Therefore, the impact on the price/quality perception of the consumer is less prominent. Coupons - certainly those that are mailed or otherwise distributed to a specific segment of consumers - allow a certain amount of selectivity and targeting that a plain price cut on shelf or on pack cannot achieve. On the other hand, coupon campaigns are less easy for manufacturers to organize and for distributors to handle. Furthermore, coupon campaigns often suffer from misredemption, i.e. retailers sometimes accept coupons regardless of whether the consumer has actually bought the correct product. Increasingly, coupons are used by regular buyers, in which case they do not lead to trial or brand switching, as intended, but rather reward loyal customers and reduce profits without any long-term effect. Although coupons are ubiquitous, consumers do not get tired of them (2004).
In spite of these criticisms, coupons are known to build brand awareness and loyalty and do represent a short-term reduction in price, targeting budget-conscious consumers. In fact, coupons have the potential to induce brand switching and induce purchase, indicating that consumers are influenced by the discount and welcome the price break. This interaction of the promotional strategy at all levels of the communication paradigm may well explain the popularity of coupons with consumers ( 1998).
In 1990, Duracell offered a unique premium that is sure to attract customers and may keep them. To combat Eveready's bunny campaign, Duracell battery ads touted a batter tester as part of the Duracell package. Their particular package premium exemplifies a new kind of cheap yet useful accessory to the purchased product.
The "package premium" idea is not new. Bailey's Irish Cream and Tia Maria coffee liqueur are sometimes packaged in reusable, attractive tins at no extra cost. In 1990, Freixenet appended gold markers on their Cordon Negro champagne so users could write personal messages right on the bottle. These kinds of package-related premiums often induce trial and are worth considering when looking for a unique way to get people to buy your product (1991).
One of the best POPs ever made was Pepsi's "tipping can" display. Here's how it worked. The battery-operated display (either two six-packs or a one-liter bottle) would suddenly lurch partway off the shelf every 30 seconds. Shoppers' eyes would be drawn toward it and they would be amused--and reminded to pick up the Pepsi. Merchants were encouraged to set up multiple displays so an entire shelf would appear to tip. Kids lined up just to see the display. The award-winning display "helped get more trade support and greatly increased Pepsi sales" in test market stores (Soares, 1991).
The tipping Pepsi POP is a promotional feat. It garnered trade support (very difficult these days) and encouraged sales. Plus, it won a promotions award, which shows industry acknowledgment of a superior promotions project. The Pepsi display typifies the kind of POP that will make it in the 1990s. It moved (static displays are boring), ran by itself for weeks and took up hardly any space (no hassle for merchants), increased store traffic (benefitted merchants), entertained customers, and increased sales volume for Pepsi. Considering that it was a dynamic display, it was also relatively inexpensive.
Conclusion
Consumer sales promotions are incentives designed to stimulate immediate purchase or use of a product. Sales promotions spending is fast becoming the choice of marketers compared to the other integrated marketing tools in selling to consumers. Accounting of consumer-oriented sales promotions is hazy, since many companies report money spent on samples and other inducements as manufacturing rather than promotional costs. But there seems to be a trend toward more sales promotions at the expense of advertising and the other marketing mix.
Sales promotion is an instrument of the integrated marketing communications mix that attempts to seduce the customer to act immediately, urging the buyer to buy the product now. It can be used to achieve a variety of objectives that are mainly short-term and sales-oriented: stimulate product trial; brand switching; more product usage and store traffic; and counter competitors' actions. These are actually the characteristics of this marketing communication tool that gives it its strength and makes it the preferred choice of marketers when selling.
Various tools are used towards resellers, salespersons, and end-consumers. Notwithstanding a short-term boost in sales that is often seen as a result of sales promotion, profitable and lasting long-term effects can seldom be noticed. However, as a result of short-term orientedness, the proliferation of brands and products, the need for greater measurability of marketing results and the greater levels of accountability of marketing managers, sales promotions, and especially trade promotions take up an increasingly important part of the integrated marketing communications budget.
And as with every other part of the marketing activity, this mission must be accomplished at a profit to the entrepreneurs who are engaged in it. Freedom of choice is one of the basic ingredients, and the organization and operation of marketing are such that consumers are able to avail themselves of this privilege of choice from among the many types of marketing tools that are offered to them.
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