MMH/5TH .

SEM/ADVERTISING & SALES PROMOTION/DSE-2AT/UNIT –

IV
Management of Sales promotion : importance & Need for sales promotion,
Planning for consumer schemes & Contests, Different types of Consumer
Schemes.
What is sales promotion?

Sales promotion is a set of short-term activities that are designed to encourage

immediate purchase and increase brand awareness. Sales promotions are a
campaign that uses time-sensitive offers — sales, discounts, coupons, etc., to
engage existing consumers and bring in a larger audience. Many companies make
this a core component of their marketing efforts, though sometimes it’s the most
annoying type of communication for people. It is a marketing strategy where a
business will use short-term campaigns to spark interest and create demand for a
product, service or other offers.

Sales promotions can have many objectives and ideal outcomes, which we will
explore in detail throughout this article.

Primarily, sales promotions are used to motivate buying behavior or trigger an

uptick in purchases in the short term, in order to reach a benchmark or goal.
Although the immediate purpose of a sales promotion is an uptick in sales, there
are plenty of other benefits to building out a strategic sales promotion technique
with your marketing team.

Interrelationship of Sales Promotion and Advertising:

Sales promotion includes all those activities which promote sales such as
distribution of samples, discount coupons, contests, display of goods, fairs and
exhibitions, etc. Advertising, on the other hand, is any paid form of non- personal
presentation and promotion of ideas, goods and services. The objectives of both
sales promotion and advertising are similar and they complement each other.
They are interrelated in the sense that they are integral parts of the ‘promotion
mix’ of the business. Advertising supports sales promotion activities by informing
the public about such efforts of the company. Similarly, sales promotion activities
remind the people of the message advertised by the business firm.
Objectives of Sales Promotion:
The basic purpose of sales promotion is to increase the sales of a product by
creating demand. Sales promotion has a capability to complement and supplement
the advertising functions of the marketing. It helps marketers to realize a variety
of objectives. These objectives are for both marketers and traders.
Types of Sales Promotion Programs:
Sales promotional activities may broadly be classified into the following:
(i) Consumers sales promotion program
(ii) Dealers sales promotion program
(i) Consumers Sales Promotion Program:
Sales promotion directed towards the consumers may be conducted either to
increase the consumer’s knowledge of the product regarding its use or it may be
conducted to attract new customers. In some cases, this type of programme is also
conducted to retaliate against a competitors’ sales activities.
In some cases, this type of sales promotional programme becomes necessary in
view of seasonal decline in sales. For example, woolens are put on discount at
January-end each year, the end of the winter season.
In case of consumers sales promotion programme, an attempt is made to reach the
consumer at his home or at a retail store. The techniques of promotion used are-
free samples, contests, coupons, demonstrations, price reductions, counter-
display cards, etc. Free samples are distributed among the prospects to arouse
interest.
Sales contests are conducted to attract new customers or to introduce new
products. For this purpose, an entry form is designed and the consumer is asked
to forward the entry form along with the cash memo of the product or wrappers,
foils, etc.
In the demonstration method, the technical experts or sale demonstrators are sent
to various customers to induce them to buy the product. This technique is used by
Real Value (fire-fighting equipments), Birla-Yamaha (petrol and diesel
generators), etc. Sometimes, coupons are introduced either through press
advertising or through the package of the product itself, which induce the
consumer to buy the product at a concessional price.
(ii) Dealers Sales Promotion Program:
The products are often sold through retailers and wholesalers. In such cases,
promotional activities are conducted to induce the dealers to keep a large stock
with them. These activities might include extra cash or trade discount on the basis
of orders placed. They are also known as Trade Promotion.

Depending upon the mode of application, Sales promotion may be classified

under two broad categories-“Psh Promotion” and “Pull Promotion”.
What is Push Promotion Strategy?
A push promotional strategy is a marketing strategy that sees companies take its
products to its consumers. The goal of this strategy is to get the product directly
in front of the customers, in the form of trade shows and point of sale
displays. These are the most common push promotion strategies used today:
Direct selling to customers in showrooms
Point of Sale (POS) displays
Trade show promotions
Package or display design
Advantages of Push Marketing Strategy
There are many advantages to using a push marketing strategy including:
The ability to establish a sales channel
Create product exposure, demand, and consumer awareness about a product
Able to forecast and predict demand
What is a Pull Promotional Strategy?
A pull promotional strategy also called a pull marketing strategy, is the opposite
of a push strategy. Instead of directly attempting to get products in front of
customers, a pull strategy aims to get the customers to come to the product (hence
the term “pull”).
A pull strategy is all about getting the customer to come to you. There are six
widely used pull marketing strategies employed today:
Advertising and mass media production
Word-of-mouth referrals
Customer relationship management
Sales promotions and discounts
Social media coverage
Email marketing
Pull marketing strategies have gained momentum in the mobile-based world. With
geofencing, geotargeting, and similar technologies, pull strategies are becoming
increasingly easier and more relevant.
Advantages of Pull Marketing Strategy
There are many advantages of using a pull marketing strategy, including:
Establishing direct contact with your customers
Building consumer loyalty
Stronger bargaining power with retailers or distributors
No pressure to conduct outbound marketing
Ability to test a product’s acceptance in the market and gain feedback on the
product
Whichever promotional strategy you choose, it is important to use a strategy that
works with your small business goals. Keep organized and thrive
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Following are the objectives of sales promotion:

i. It improves the performance of middlemen and acts as a supplement to
advertising and personal selling.
ii. It motivates sales force to give desire emphasis on new accounts, latent
accounts, new products and new territories.
iii. It increases sales and makes sales of slow moving products faster and stabilize
fluctuating sales pattern.
iv. It attracts channel members to participate in manufacturer promotion effort.
v. Motivating the dealers to buy high volumes of products and push more of the
brands that are on promotion.
vi. Supporting and supplementing the advertising and personal selling efforts.
vii. Making consumers to switch brands in favour of firm.
viii. To overcome the seasonal fluctuation of products.
ix. Inducing retailers to promote the brand by local advertising and POP display.
x. Sales promotions motivate the salesmen to sell more and to sell the full line of
products.
xi. To reduce the perception of risk associated with the purchase of a product.
Need and Importance of Sales Promotion:
Sales promotion acts as a bridge between advertising and personal selling. Due to
the adversity of markets, the importance of sales promotion has increased
tremendously. Sales promotion helps remove the consumer’s dissatisfaction about
a particular product, manufacturer, and create brand-image in the minds of the
consumers and the users.
Sales promotional devices are the only promotional devices available at the point-
of-purchase. An advertising medium reaches the prospects at their homes, offices,
etc. and may soon be forgotten. The sales promotional devices at the point-of-
purchase stimulate the customers to make purchase promptly on the spot.
Business firms use promotional tools to achieve the following benefits:
(i) Attracting Attention:
The first aim of sales promotion is to attract the attention of the prospective buyers
and inform them about the availability, characteristics and uses of a particular
product.
(ii) Highlighting Utility of Product:
Promotion helps in letting the people know about the utility of the new products.
It also tells them how the concerned products will be helpful in satisfying their
specific demands.
(iii) Stimulation of Demand of New Product:
Promotional activities are used to create interest in the new product and to
persuade people to buy the same. This helps in launching the new product.
(iv) Product Differentiation:
Promotion helps in differentiating a particular product of the firm from the
competing products of other firms. A firm can also use data revealing how its
product compares with the other products.
(v) Synergy in Promotional Activities:
Sales promotion activities supplement personal selling and advertising efforts of
the firm. They add to the overall effectiveness of the firm’s promotional activities.
(vi) Stabilisation of Sales Volume:
In the modern age of competition, it is an important purpose of promotion to help
in stabilising sales volume by reassuring the customers about the quality and price
of the product. It is possible that a customer using a particular brand, may buy
another because the other brand is promoted in an effective manner.
(vii) Performance Appraisal or Marketing Control:
The management of a company can keep an effective check on the results
achieved through sales promotion schemes, because it is in a position to analyse
the costs incurred and the benefits derived.

Tools and Techniques of Sales Promotion

To increase sales of any product, producers adopt different measures like
distributing samples, gifts, coupons, bonus, etc. They are known as techniques of
sales promotion. People who see these devices are in a buying mood and thus they
can be easily persuaded to buy those products.
Some of the commonly used tools of sales promotion are as follows:
1. Coupons:
Coupons are issued by producers of packaged goods or by retailers that enables
customers to buy the product next time at a reduced price. These coupons are
either advertised by producers/retailers in newspapers or distributed in weekly
flyers via mail across households. For examples, Big Bazaar issues coupons for
selected items in their weekly flyers that are distributed via mail or along with
newspapers.
2. Free Samples:
Free samples are small and packaged portion of the (main) merchandise
distributed for free. Free samples are developed for introducing new products.
These samples may be distributed door-to-door (through personal selling) or retail
stores. For examples, Sensodyne Toothpaste meant for relieving tooth sensitivity
is unique product introduced in India. The manufacturer of Sensodyne has been
reaching out to local dentists of Mumbai who have been distributing free sample
of these toothpastes to create awareness among their patients.

3. Price-Off Offer:
This involves offering products to consumers at discounted or reduced prices by
a certain percentage from the regular price of the product. This activity aims at
attracting consumers to other or newer brands, seasonal and unseasonal goods.
For example- a 15 to 60 percent off on clothes before some festive season in retail
shops are examples of sales or sales promotion.
4. Fairs and Exhibitions:
Fairs and exhibitions may be organised at local, regional, national or international
level to introduce new products, demonstrate the products and to explain special
features and usefulness of the products. For example- ‘International Trade Fair’
held in New Delhi in November every year.
5. Free Gifts:
Producers may distribute a free gift along with their product as a incentive to the
consumers for purchasing the product. For example- milkshake along with
Nescafe, toothbrush along with a toothpaste.
6. Competitions or Contests:
Producers can organise competitions or contests among salespersons to encourage
them to generate more sales from new customers. Companies can offer a car or
consumer durables for generating a certain percentage sales in a particular month
or quarter.
7. Free Service:
Producers/retailers may promise free service to consumers for a specified period
of time after sales. For example- few car retailers offer free servicing for the first
6 months if certain car components are damaged or are under performing.
8. Special Rebate:
Rebate is a partial refund to someone who has paid more or extra on purchase of
a specified quantity or value of goods within a specified period. Unlike, price cut
off or discounts, rebates are provided after the full payment of full invoice amount.
9. Full Finance @ 0%:
Under this method, the product is sold and money is received on installment basis
at 0% or without interest rate. The seller determines the number of installments in
which the price of the product will be recovered from the customers.
10. Scratch and Win Offer:
Under this scheme, a customer scratches a specific marked area on the package of
the product and gets the benefit according to the message written therein.
11. Money-Back Offer:
Under this scheme customers are 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.
12. Exchange Schemes:
It refers to 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. Example—”Exchange your black and white television with a
colour television.”
All tools of sales promotion are fairly simple and can be reduce to twelve in
number. Almost all promotions make use of one or more of these tools, alone or
in some carefully developed combination.
i. Price deals (price-off, price-cut, cents-off, denote the same thing)
ii. Bonus-packs (price-pack)
iii. Refunds and rebates (both terms are used interchangeably)
iv. Coupons
v. Contests and sweepstakes
vi. Premiums –
a. In-packs, on-packs, near packs and container premiums
b. Free—in-mail premiums
c. Self-liquidating premiums
vii. Sampling
viii. Continuity plans
ix. Trade coupons
x. Trade allowances and deals
xi. Exchange offers
xii. Displays, trade fairs, exhibitions, and event sponsorship.
The list apparently appears to be short, however, considering the possible
combinations, the figure reaches to about eight million different approaches. In
most cases a combination of two or more techniques will combine the strengths
and compensate for the weaknesses and will produce better results compared to
either technique used alone.
Promotions directed at the ultimate consumers are called consumer promotions.
These promotions can be developed for durable as well as non-durable goods.
Most of these products are typically used by individuals or households and are
generally sold by retails stores. Same techniques, which are used for consumer
promotions are also used to promote products to business users, such as stationary,
computer systems and consumables, machinery, automobiles, and many other
products. Most of these techniques can be used both for consumer as well as trade
promotions.
There is plenty of variety, flexibility, and motivation to action. A judicious
combination of techniques can be used to achieve almost any promotion objective.
The flexibility of sales promotion has the potential of being used by small and
large companies, selling goods or services, and by profit and nonprofit
organisations. Customers are motivated, stimulated, and influenced to respond in
a predictable manner to sales promotions.
i. Price Deals:
Price deals are probably the most commonly used promotional techniques. A price
deal for customers means a reduction in the price of promoted product and the
customer saves money on purchase. Such a deal is designed to stimulate
customers to try a new product, to encourage new users to try an existing product,
or to encourage customers to continue product patronage, increase purchase
quantity, purchase multiple units, and accelerate usage rate, etc., such deals are
suitable when the brand loyalty is low, product category is considered a
commodity, and price is the primary consideration by the customers.
Price Discounts:
A price discount can be used as a defensive as well as an offensive tool. More
often discounts are offered to match or beat the competitor’s prices. When used
as an offensive weapon, the objective is to generate additional sales and increase
market share and long run profits.
Price discounts (also called cents-off deals) are communicated to the consumers
through advertising, at the point-of-purchase by listing the reduced price on the
package or signs near the product or window display, or by the sales people. Such
discounts may appear in newspapers, magazines, and television advertisements.
Similar discounts are often advertised by retailers in local media (called feature
advertising) and by manufactures in national print and audio-visual media.
Manufacturers often offer extra incentives to retailers to gain their cooperation.
Retailers may announces price discounts for a variety of reasons. By announcing
a price discount on some popular consumer item, the retailer’s intention is to
increase store-traffic. Whenever the store-traffic increases, customers visiting the
store not only buy promoted product, but some of them buy other products as well.
It is also possible that the retailer bought excessive stocks when the manufacturer
offered trade deal and to clear this excess inventory the retailer offers a price
discount to consumers. Yet another reason can be that when retailer feels
threatened, then the only way to respond to competitive situation is to offer a price
discount to consumers to move the product off the shelves.
Determining the quantum of discount depends on the consumers’ price
perceptions and may be difficult to decide. There is no precise answer, however,
experts generally agree that discount should be at least 5% to 20% of the normal
price. Of course, the discounts may differ across product categories. Price
discount generally do not stimulate consumers to buy a product in large quantities
if the unit value is low, product is not bulky, and the holding cost is not high.
If advertising support has been effective, or prior to offering price discount, there
has been a sample drop of the product, then even first time buyers may purchase
the product.
Such promotions work very well in gaining the attention of consumers,
particularly at the point-of-purchase (POP) among similar brands, and may also
encourage unplanned or impulse buying. If there are three different models of a
product and because of the discount offer the price of the higher end model
appears not too high to the consumer, compared to the lesser- priced model, then
consumer may buy the higher end model.
For example, if the price of a more expensive wristwatch is Rs. 3000 and the next
lesser model is priced at Rs. 2400. The discount offer on higher model is 12%,
then the effective price of higher end model would be Rs. 2640, and the customer
may buy the higher end model.
ii. Price-Pack Deals:
Price-packs are also called value-packs. This may take any of the two forms,
bonus pack and banded pack. In case of bonus pack offer, an additional quantity
of the same product is offered free when the standard pack size of the product is
purchased at the regular price. This type of deal is often seen in case of laundry
products, food products, and personal care products, etc.
This is a way to reward the present consumers and may not have any impact on
the users of competitive brands. A variation of this offer, and more commonly
observed, is when the marketer develops special packs of the product containing
more quantity, but the price is proportionately low. For example, the regular price
of a standard pack of a product is Rs. 50 and the quantity contained in the pack is
100 gms.
For the purpose of sales promotion the company offers a special pack containing
150 gms, and the price is Rs. 62 only. This is a method to “load” the consumer up
with the product. This technique is often used to introduce a new large size of the
product, or to encourage continued usage, and also to increase consumption.
Many offers of this type are seen in consumer non-durable products consumed on
daily basis.
It is termed as banded pack offer when two or more units of a product are sold at
a reduced price compared to the regular price (couple of months ago, Lux
International offered a similar deal. The pack contained four cakes of soap at the
price of three). The products are generally banded together physically, or put
together in a blister pack, such as razor-and-blade, toothpaste and tooth-brush, or
a smaller size of the same product may be attached to the regular size.
Another variation of this technique is “buy-one-take-one-free”, or some similar
offer (it could be “same for less” or “more for the same”). This is a fairly popular
technique in cases of footwear, shirts, jeans, towels, and many other varieties of
products. Akai offered a 14″ colour television on purchase of 21″ colour
television.
Bonus-Packs:
Bonus packs are generally limited to low bulk, low-price products, however, of
late exceptions, such as Akai offer have been observed. Additional quantity of the
same product or additional unit of the product is appreciated as a reward by the
consumer. This also offers consumers the satisfaction of being “smart shopper”.

iii. Refunds and Rebates:

The terms refund and rebate are used as meaning the same thing/Long ago, the
term rebate was popular by the automobile industry in the developed countries.
There is a subtle difference between these two terms. The Random House
Dictionary defines a refund as repayment of money, and a rebate as a return of
part of the original payment for some service or merchandise. This means a refund
is repayment of total money paid for purchase, while the rebate represents
repayment of only of part of the money paid for purchase. However, both these
terms are used interchangeably in the real world of marketing.
A promotion of offering refund or rebate by a marketer is a promise to give back
a certain amount of money after the purchase. The offer may be for a product
purchase alone or in combination with other products. Depending on the
objectives, refund offers are used to encourage trial of a new product, purchase of
increased quantity, or increasing the frequency of purchase, or to encourage the
customers to purchase those products whose purchases can be postponed, such as
refrigerators, microwave ovens, air-conditioners, and other consumer durable
products.
Refund offers seem to work very well in guaranteeing the trial of a product or
service, since there is no risk involved for the customer because of the promise of
total refund of the purchase amount.
Evidence suggests that customers look at refunds as rewards for purchase. This
appears to build brand loyalty rather than diminish it. For example, Maruti
announced a gift cheque of Rs. 1,30,000 as a loyalty reward on purchase of a
Maruti Esteem car, if the family already owned any other Maruti car. The offer
was valid for a month only.
Gillette announced a refund offer. A customer was required to buy a pack of & 7
O’clock P II for Rs. 55.50. On returning the empty pack, the customer gets Rs.
55.50 off on Gillette Sensor excel.
A computer magazine, “Chip”, offered a refund of Rs. 350 on sending one- year
subscription, which the customer can use to purchase special issues of the
magazine.
When consumers increase purchase quantity, they carry more stocks of the
product and stay out of markets. This dampens the competition for a while.
In diverse product categories, such as exercise equipment, mixers and juicers, hair
dryers, ceiling fans, inkjet printers, and magazines, etc., refund offers are fairly
common. Some of these promotions appear in audio-visual or print media.
‘Readers Digest’ regularly makes this offer. Some of them offer a free trial period,
and in case the customer is not satisfied, there would be total refund or money and
no questions asked. The customer has to send back the product within a specified
period of time. In these situations the refund offer is being used to encourage trial
at no risk to the customer. This is a powerful method of ensure trial.
Refunds are quite effective in competitive situation where consumers perceive
little or no differentiation among brands. The refund offer may sway the decision
in favour of the promoted product. When the product is good but the brand share
is low, a refund seems to work very well. There are occasions when the company
decides to move in new geographic markets, such refund promotion may prove to
be quite effective in motivating high-risk perceivers to decide in favour of the
promoted product as the perceived risk is likely to appear as manageable.
In local-convenience stores, the shopkeepers recommend certain products of
commodity type, such as rice, flour, or cooking oil to consumers. The assurance
given to customers is that if the product is not liked after usage for any reason,
total money will be refunded or the customer will have the option to buy any other
product of choice. This type of refund policy builds store loyalty among
consumers who continue the patronage.
Refund offer is limited only by the imagination of the promotion planner and the
budget allocation. Refund offers can be used to achieve a variety of promotion
objectives, such as to guarantee trial, to reward loyal consumers, to load
consumers, to increase purchase frequency, to introduce new products, to enter
new markets, to encourage the purchase of related products, etc.
iv. Coupons:
Coupons can be considered as certificates offered by retailers or manufacturers
that entitle the owner to some stated savings or claim the specified thing. Coupons
bear a date of expiry and cannot be redeemed after the cutoff date. Offer of a
coupon is a very versatile technique and can be used to achieve many different
sales promotion objectives. When coupons are offered by the manufacturer all the
costs associated with advertising and distributing the coupons, redeeming their
face values, and paying retailers a fee for handling, are borne by the manufacturer.
When retailers offer coupons of their own, they have to bear all the above
mentioned costs themselves. Coupons originating from the manufacturers are
redeemable at any retail shop that carries the promoted product. The retailers serve
as the agents of manufacturer in accepting and redeeming the coupons and send
the collected to the concerned manufacturer along with their claims of
reimbursement.
Retailer-originated coupons are redeemable only at a particular store or a group
of stores (for example, a chain store having many outlets). The retailer- originated
coupons generally have one objective, to encourage the consumers to shop at a
particular store. Their interest is not tied up with any brand or manufacturer,
unless there has been an agreement with the marketer of some co-operative
venture. In such a case the objective would be to encourage shopping at a
particular store and buy a certain manufacturer’s brand. Coupons are particularly
attractive to consumers who are price sensitive.
Research has shown that the tendency to use coupons rises under certain
conditions:
(a) When consumers perceive that there is need to control the budget
(b) Consumers are inclined to experiment with new products or services
(c) Consumers use coupons for products which are consumed regularly, such as
tea, coffee, laundry products, etc.
Consumers who are strongly loyal to brands, or those who consider that collecting
coupons is not worth the effort, are least likely to use coupons. Coupons generally
attract older, better educated, urban, middle-income families. Comparatively,
coupons seem not to be so popular with young, less educated, unmarried
individuals. In case the coupons happen to be related to some current fashion or
fad, then younger, middle-income individuals are likely to be attracted.
v. Contests and Sweepstakes:
These are part of Interest promotions because such sales promotions create not
only interest but also produce excitement and enthusiasm in consumers. There
seems to be quite a bit of confusion in understanding these terms. A contest
requires the participants to perform some task. For example, the participants may
be required to write a slogan, choose a name, or create a design, etc. To decide
which entries are first second, or third, etc., an expert or a panel of experts
examines the entries and judges the winning ones.
The prizes, depending on the announced number of prizes, are declared. A contest
is based on testing the skill or ability and may not involve the proof-of-purchase
(this is called a “consideration”) to enter the contests.
A sweepstakes is a random drawing and is sometimes called a chance contest.
This too may or may not involve the purchase of any product or service.
A lottery prize is decided on the basis of chance and requires a “consideration”
for entry that may be proof-of-purchase of ticket or a product.
According to the American Association of Advertising Agencies, “A contest is an
event that invites the customer to apply skill to solve or complete a special
problem”. The same agency says. “A sweepstakes does not call for the application
of skill on the part of the consumer. Winners are determined by a drawing from
all entry forms. In other words, prizes are awarded on the basis of chance”.
Often a combination of contest and sweepstakes is employed in some promotions.
The winners are decided in two stages. The first part involves a contest in terms
of skill, or knowledge. If more correct entries are received, the second stage then
involves a draw of chance to decide the winners. A well-known television
programme in India, “Surabhi”, is an example of this type of promotion.
Anyone can send the answers to the questions on a postcard. Generally correct
entries, running in thousands, are received. Out of these correct entries, depending
on the number of prizes to be given, some are picked up on a random basis to
declare the winners. In India, contests and sweepstakes are very popular
promotional techniques and are frequently used in diverse product categories and
services. The range covers low as well as high-involvement products.
Starting from such low-priced product as “Pan Masala” or expensive products
such as cars, and almost everything in between, including sporting events, use
contests and sweepstakes.
Among all the sales promotional devices, probably the most exciting and highly
rewarding are the contests and sweepstakes. Every imaginable prize or reward is
used to excite and attract customers to participate. The prizes may be gold or silver
jewellery, hefty sums of money, cars, two-wheeler autos, colour televisions,
computers, music systems, free air tickets, stay in five star hotels, holiday in health
resorts, and anything else depending on the imagination of the marketer.
To add an element of extreme urgency and speed up the response, early bird prizes
are announced for the first 25 to 50 or 100 entries. In certain case all those who
furnish the proof-of-purchase are given some specified premium.
Experience shows that everyone concerned, consumers, trades people, and sales
force, get a share of excitement when the contest or sweepstakes is well planned
and executed. The prizes seem to be much larger to contestants than the money
spent by the sponsor. For instance, in case the manufacturer plans to distribute
free samples of a product, it can cost far more than the total money spent by the
manufacturer for the prizes. Contests and sweepstakes generate considerable
interest and awareness, and can be used to gain large sales increases.
The success or otherwise of a contest or sweepstakes depends largely on the
selection of prizes and prize structure. In most cases the structure represents a
typical pyramid, that is there is a bumper prize of very high value. For instance, a
car worth Rs. 300,000 or more, or jewellery of the same value, then a number of
prizes in the immediate value range, a large number of prizes of small value, and
a larger number of consolation prizes.
To make the contest or sweepstakes more tempting, there may be more than one
winner of first prize (such as 10 first prizes for ten lucky winners). Different
combinations of prizes are evolving. The duration of contests and sweepstakes
varies considerably, depending on the objectives set for sales promotion.
A producer of branded wheat flour, “Shakti Bhog Atta”, announced an interesting
promotion. Grocery stores owners informed the consumers regarding the
possibility of prizes that consumers can win with continued use of the brand.
There were no first of second prizes, the top prize was a Santro car, besides many
other prizes. Each pack of flour contained a coupon with certain half-word or one-
third word printed on it.
For example, to win a Santro car, the consumer was required to collect three
coupons that would complete the name of the prize, that is, Santro. On one coupon
would be ‘SA’ the other two coupons should have ‘NT’ and ‘RO’, thereby
completing the word Santro and entitling the consumer to win a Santro car by
submitting the three coupons. No final date of promotion closing was announced.
Consumers kept on buying the same brand and collected many coupons, most not
winning anything because in most cases the coupons had the same or different
letters, not fit to complete the desired word. Letters on some coupons were part of
either the brand of washing machine, television, or wristwatch, etc.
Because of the nature of the product, consumers did not mind continued purchase
of the brand and kept on collect the coupons. This is an example of a very clever
sales promotion of a product, which is considered a commodity. However, the
technique proved to be extremely effective in retaining the customers and
motivating them to continue using the same brand for an extended period of time.
In case of consumer durable products, Bajaj Auto announced a promotion to
encourage the purchase of any Bajaj Scooter. The promotion named “Crorepati
Hungama” lasting one month (1st December to 31st December 1999). The
promotion said, “buy any scooter, scratch a card, and win a sure prize”. The prizes
were around 8000, the top prize being rupees ten million.
Hundred prizes of Rs. 100,000 each, seven hundred prizes of Sansui music
systems, seven thousand prizes of Kodak cameras, and many Timex watches. A
very tempting promotion, and simple too. Just buy a scooter, scratch a card and
win a sure prize. The factor of chance limited only to what one gets, no losers, all
winners.
These two examples present the use of the same method of sales promotion. The
first example presents the use of ‘chance’ in case of a consumer non-durable,
which is a low-involvement category product and there is hardly anything like
brand loyalty. In fact, in most households the flour comes from flourmills where
people take their wheat to be converted into wheat flour. Such service providing
flourmills are locates in almost all localities.
The same element of chance has been used in case of consumer durable product
of high-involvement category. The promotion planning shows how effective the
sweepstakes can be in increasing the sales, and block competition.
vi. Premiums:
A premium (gift) is a reward given to the consumer for performing a particular
act, generally purchasing a product or service. The premium may be free or
available to the consumer by paying a price well below the regular market price.
Getting a printer free with the purchase of a computer, or getting a bar of detergent
free with the purchase of four cakes of toilet soap, or getting a Swiss knife well
below the market when the consumer purchases a microwave oven, are typical
examples of premium.
Marketers choose premiums that have much appeal to the consumes, or products
that are related in some way to the products of the marketer. For example,
Kellogg’s Choices packs contained small plastic toys like different types of
dinosaur replicas or sometimes, a plastic lunch box. As the product is primarily
targeted at kids, these premiums had great appeal to them. Computer magazines
often include a compact disc with each issue.
There are many varieties of premiums and are sometimes referred as direct
premiums and mail premiums. Direct premiums are used to reward the customers
immediately at the time of purchase, and mail premiums require the customers to
take some action, such as mailing the proof of multiple purchases to the marketer.
After the receipt of the proof, the marketer sends the premium to the consumer.
a. In-Pack, On-Pack, and Container Premiums:
These various terms for premiums are primarily used to distinguish the difference
in methods of rewarding the consumers. Such premiums are attached either to the
product, enclosed with the product, or otherwise available with the product when
the consumer buys the product. The premiums can be used to solve a competitive
price advantage or to counter the competitor’s coupon promotion.
Depending on the consumers’ value perception of the premium, the consumers
may even be agreeable to purchase the product at a slightly high total price for the
combination of the product and the premium. When all similar products in a
certain price range are perceived as basically alike, a premium offer with the
purchase of the product is quite an effective method to gain shelf space or even
display.
Premium offers provide a point of difference, more so when the product category
is fairly crowded. These are all different approaches to offer immediate reward to
the consumer at the time of purchase. The premium is likely to offer a reason and
an incentive to buy the product.
b. Free-in-Mail Premiums:
Free-in-mail premiums are unique because the promotion objectives may be quite
different. In-mail premiums do not provide an immediate reward at the time of
purchase. Consumers have to take some action to claim the premium, such as
sending the proof of a single or multiple purchases and wait for some period of
time for the delivery of the premium through mail or courier.
When consumers do not perceive any meaningful persuasive differentiation
between brands and the market is competitive, such promotions work very well.
The motivation to purchase and continue purchasing the product gets shifted to
the incentive of premium as the purchase situation is one of total low-involvement
as far as the product category is concerned. Considerable brand switching is
possible if only one proof-of-purchase is to be sent to the marketer.
Another factor that may contribute to brand switching is the attractiveness and
value of the premium as perceived by the consumers. Where multiple purchases
are involved as proof of purchase, generally the usual inter-purchase interval is
more, and consumers are more likely to stay with the brand.
If the premium is particularly attractive, there would be a number of consumers
who would want the premium in a hurry and make the required number of
purchases. This would help to load-up the consumer. Or, there may be some
flexibility in conditions, such as the consumers may have the option to send one,
two, or more proofs of purchase along with a specified sum of money to obtain
the premium quickly. Much depends on the ingenuity of promotion planner.

Benefits of Sales Promotion:

(i) Creates differentiation – When you launch a new product or ask customers to
engage with your business in a new way, this sets you apart from your
competition. Promotion planning compels you to identify something new or
different that offers value to your customers;
(ii) Creates new content and communication opportunities – One of the easiest
way to create new content for your customers is to create news by using sales
promotion.
(iii) Creates upsell and cross sell opportunities – When you package or bundle
products around a theme or solution, you can often generate sales of multiple
items rather than a single item.
(iv) Drives customer decision making – Limited availability offers can create a
sense of scarcity in your customers that get them to act. If you can add sampling
of your promotional item to the mix, you can create compelling reasons to buy.
(v) Creates word-of-mouth opportunities – Promotions can often get your regular
customers a new reason to be surprised and delighted by your business which gets
them to talk about your product to their friends;
(vi) Creates training opportunities for staff – Promotions give a chance to train,
prepare and re-engage the sales staff in what’s new in the business;
(vii) Creates testing opportunities – Promotion gives a limited time window to test
new ideas and new products and to measure them. This will help to figure out
whether they warrant additional investment of time and money to make them
permanent products or services;
(viii) Grows revenue – Sales promotions are a great way to build year-over-year
and month-over-month revenue growth.
(ix) Encourage existing customers to buy more-A great sales promotion idea could
focus specifically on repeat customers. Encouraging repeat business is easier and
more cost-effective than attracting new clients. In fact, a 5% increase in customer
retention generates more than a 25% increase in profit, on average.
By providing existing customers with exclusive incentives, you can increase
loyalty, generate repeat purchases and hopefully draw high-quality referrals. You
can also attract long-term and repeat customers. This practice is a good one for
any sales pipeline, as repeat clients move through the funnel quickly, since they
already know what to expect.
(x) Sell out extra inventory-Sales promotions are an efficient way to clear out
extra inventory at the end of a sales period. If there’s a particular product taking
up too much space, going out of production or becoming redundant, retailers can
run a sales promotion such as ‘buy one get one free’ to help clear it out.
(xi) Sell during off-season or slow periods-Similar to selling out extra inventory,
if your business is seasonal or has slower periods, well-timed sales promotions
can help inject purchases and galvanize interest during a time where sales are
often slow or stagnant.

Limitations of Sales Promotion:

Sales promotion activities are often criticised on the following grounds:
(i) No Real Incentives:
The incentives offered through sales promotion schemes are fictional, and not
real. It is said that the manufacturer will realise the cost of these incentives by
raising the price of goods.
(ii) Shoddy Products are Passed-off:
Only products which are lacking in quality, or are not likely to be favoured by
consumers, require sales promotion efforts.
(iii) Short Term Perspective:
The sales promotion schemes are carried out during particular seasons and not on
a permanent basis; the results achieved through them are generally short-lived. As
soon as the incentives offered under such schemes are withdrawn, the benefit in
terms of increased sales may also vanish.
(iv) Switching of Demand:
Sales promotion shifts demand from one brand to another. It does not create new
demand.
(v) Reflection of Crisis:
Frequent use of sales promotion activities may lead consumers to think that the
product is of inferior quality. They may not, therefore, prefer to buy such products.

What are consumer promotions?

Consumer promotions are the strategies businesses use to gain more customers or
develop brand loyalty among current customers. Common customer promotions
involve sales tactics that make customers feel like they are getting a good deal or
special value. Typically, consumer promotions occur during a specific period of
time or are temporary, although many brands also offer special promotions to
first-time customers. The consumer promotion your brand chooses depends on
your business structure and how you anticipate your target audience will respond.

Why do we use consumer promotions?

Consumer promotions are beneficial for the following reasons:

Build brand loyalty: Rewarding your current customers with special offers or
sales may entice them to keep visiting your store or website. Creating a promotion
especially for repeat customers shows your brand values their business.

Gain new customers: An exciting new promotion can influence consumers to try
your brand out for the first time. This is your chance to get them to learn more
about your products or services.
Boost profits: Consumer promotions can help your brand sell a lot of
merchandise or services in a short period of time. This can be beneficial for brands
that experience a sales slump during certain times of the year.

Clear out old merchandise: If your company has a lot of old merchandise sitting
around, you can use a clearance promotion to get rid of these items. Along with
helping consumers feel like they got a good deal, you can make room for new and
exciting products.

Gain leads: When customers use your promotions, you can ask them for their
contact information. This is a great way to get them into your sales funnel.
Make your brand known: Using consumer promotions can help your brand
become more wide-known among your target audience. By using the right
advertisements, you can get people excited about checking out your promotion.
Types of consumer promotions

Here are some common techniques businesses use to bring in more consumers to
their brand:

Sales
Lowering your prices during a limited period of time can influence customers to
take advantage of your deals. Along with offering a certain percentage off your
goods or services, you may choose to do a buy one get one free or half off deal.
Some brands even do the same sales every year so that consumers look forward
to shopping with them then.
Contests
Contests and sweepstakes are a way to create buzz around your brand and get
people excited. They're also a useful way to collect consumer information, which
your sales team can use when generating leads. As more brands use social media
for marketing purposes, brands are doing different contests where users need to
tag a certain number of friends or share a post to enter the contest. This is a useful
way to get people to essentially advertise your brand to their personal network.
Samples
Handing out samples of your product is a useful promotion tactic. Once people
get a taste of what you have to offer, they may be interested in purchasing the full
thing. Sampling can also help your brand gain recognition, especially if your
brand is handing out samples at events like charity runs or corporate conferences.
Brands can also give a sample of their services. For instance, fitness centers and
gyms often let people try out their facility for free.
Coupons and codes
Coupons and codes are some of the most common consumer promotions brands
use. By sending out coupons in the mail or emailing digital codes, you can
encourage people to shop at your business during a specific period of time. Along
with giving consumers a good deal, coupons and discount codes help create a
sense of urgency.
Rebates
A rebate is a type of discount where a customer can send in their proof of purchase
and get money back. Brands can benefit from this tactic as they can make a sale
now and payout discounts later on. While this requires more effort from the
customer, many people may be willing to send in the applicable forms to get a
good deal. This gives you the ability to advertise the regular and rebate price,
showing consumers what a great value they're getting.
Reward programs
In order to boost brand loyalty, your company can come up with a reward program
to incentivize current customers to keep coming back for more. Oftentimes,
reward programs work on a point system, meaning that the more customers spend
at your business, the more rewards they can redeem. Reward members may also
gain early access to special sales or deals. Likewise, you can have reward-
member-only sales.
Special discounts
Some brands choose to give special discounts to people depending on their
occupation or stage in life. For instance, you may see brands that want to cater to
young people offer student discounts. Brands that wish to attract an older audience
may offer senior discounts. Finally, brands can build their reputation by offering
discounts to noble professions such as military personnel or veterans, teachers and
healthcare workers.
Free perks
As more brands build their online presence, perks such as free shipping and free
returns can be a useful sales tactic. Online shoppers may appreciate the
convenience and value of these deals. Some brands even offer free shipping to
customers who partake in their rewards program. Another useful promotion is to
have a minimum spending amount before customers qualify for these "free" perks.