Hcl

Executive Summary

HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with

its origins in 1976. For over quarter of a century, the company have developed and

implemented solutions for multiple market segments, across a range of

technologies in India.

With sound macro economic condition and buoyant buying sentiment in the

market, the desktop PC market grossed 23.4lc units, registering a growth of 36%

over the same period last year. The notebook PC segment was the star performer,

showing massive growth, 60% sequentially and 138% year-on-year and crossing

the one lakh barrier.

This can be attributed to strong domestic growth in requirements and

aggressive sales promotion offers by the players like HP, Lenovo, and HCL

among others. Again brand recognition and image play a very important role in

purchase decisions. Brand managers of IT products, to increase the short-term

gains and keep the cash registers ticking have started using aggressive sales

promotion offers.

The objective of the project was to find out whether people actually buy

because of the sales offers incentives and whether they actually feel that sales

promotions are an effective brand-building tool also. Also some of the insights on

how to best place an effective Sales promotion program have been unleashed.

The research brings out the fact that people do buy because of the sales

promotion offers, but the impact promotional offers have on the Brand Image of

the company offering such promotions is negligible. Thus sales promotion offers

are a definite incentive to buy for a customer but they do not guarantee a long-term

relationship with the customer and hence a Brand Manager must use such offers

with a pinch of salt.

1

CHAPTER 1

THEORETICAL

BACKGROUND

OF

THE STUDY

2

Sales Promotion

Sales promotion, a key ingredient in marketing campaigns, consists of a

diverse collection of incentive tools, mostly short term, designed to stimulate

quicker or greater purchase of particular products or services by consumers or the

trade.1

Whereas advertising offers a reason to buy, sales promotion offers an

incentive to buy. Sales promotion includes tools for consumer promotion

(samples, coupons, cash refund offers, process off, premiums, prizes, patronage

rewards, free trials, warranties, tie-in promotions, cross-promotions, point-of-

purchase displays, and demonstrations); trade promotion (prices off, advertising

and display allowances, and free goods); and sales force promotions (trade shows

and conventions, contest for sales reps, and specialty advertising). These tools are

used by most organizations, including non-profit organizations. Churches, for

example, often sponsor bingo games, theatre parties, testimonial dinners and

raffles.

A decade ago, the advertising to sales-promotion ratio was about 60:40.

Today, in many consumer packaged-good companies, sales promotion accounts

for 65 to 75 percent of the combined budged. Sales promotion expenditures have

been increasing as a percentage of combined budget expenditure annually for the

last two decades. Several factors contribute to this rapid growth, particularly in the

consumer markets.2 Promotion is now more accepted by the top management as an

effective sales tool; more product managers are qualified to use sales-promotion

tools; and product managers are under pressure to increase current sales. In

addition, the number of brands has increased; competitors use promotions

frequently; many brands are seen as similar; consumers are more price-oriented;

the trade has demanded more deals from the manufacturers; and the advertising

efficiency has declined because of rising costs, media clutter, and legal restraints.

The rapid growth of sales-promotion media has created clutter similar to the

advertising clutter. Manufacturers have to find ways to rise above the clutter-for

3

instance, by offering larger coupon-redemption values or using more dramatic

point-of purchase displays and demonstrations.

Purposes of Sales promotion

Sales-promotion tools vary in their specific objectives. A free sample

stimulates consumer trial, whereas a free management-advisory service aims at

cementing long-term relationship with a retailer.

Sellers use incentive-type promotion to attract new triers, to reward loyal

customers, and to increase the repurchase rates of the occasional users. Sales

promotion often attracts brand switchers, who are primarily looking for low price,

good value, or premiums. Sales promotions are unlikely to turn them into loyal

users. Sales promotions used in markets of high brand similarity produce a high

sales response in the short term but little permanent gain in the market share. In

markets of high dissimilarity, sales promotion can alter market shares

permanently.

Farris and Quelch cite a number of sales promotion benefits flowing to

manufacturers and consumers.3 Sales promotion enable manufacturers to adjust to

short-term variations in supply and demand. They enable manufacturers to test

how high a list price they can charge, because they can always discount it. They

induce the customers to try new products instead of never straying from current

ones. They lead to more varied retail formats, such as every-day-low-price store

and the promotional-pricing store. They promote greater consumer awareness of

prices. They permit manufacturers to sell more than they would sell at list price.

They help the manufacturer adapt programs to different consumer segments.

Consumer themselves enjoy some satisfaction from being smart shoppers when

they take advantage of price specials.

Today many marketing managers first estimate what they need to spend in

trade promotion, then what they need to spend in consumer promotion. Whatever

is left they will budget for advertising. There is danger, however, in letting

advertising take a back seat, because advertising typically acts to build brand

4

loyalty. The question of whether or not sales promotion weakens brand loyalty is

subject to different interpretations. Sales promotion, with its incessant prices off,

coupons, deals and premiums, may devalue the product offering in the buyers’

minds. Buyers learn that the list price is largely a fiction. However, before

jumping to any conclusion, we need to distinguish between price promotions and

added-value promotions.

However, usually, when a brand is price promoted too often, the consumer

begins to devalue it and buy it mainly when it goes on sale. So there is risk in

putting a well-known brand leader on promotion over 30 percent of time.()

Dominant brands offer deals frequently, because most deals only subsidize current

users. Brown’s study of 2,500 instant-coffee buyers concluded that:

Sales promotions yield faster and more measurable responses in sales

than advertising does.

Sales promotions do not tend to yield new, long term buyers in mature

markets because they attract mainly deal-prone consumers who switch

among brands as deals become available.

Loyal brand buyers tend not to change their buying patterns as a result of

competitive promotion.

Advertising appears to be capable of deepening brand loyalty.4

There is also evidence that price promotions do not build permanent total

category volume. Small share competitors find it advantageous to use sales

promotion, because they cannot afford to match the market leaders’ large

advertising budgets; nor can they obtain shelf-space without offering trade

allowances or stimulate consumer trials without offering incentives. Price

competition is used by small brand seeking to enlarge its share, but it is less

effective for category leader whose growth lies in expanding the entire category.5

The upshot is that many consumer packaged goods companies feels that they are

forced to use more sales promotions than they wish. They blame the heavy use of

5

sales promotion for decreasing brand loyalty; increasing consumer price-

sensitivity; brand quality image dilution, and a focus on short-run-marketing

planning.

Major decisions in Sales Promotions

In using sales promotion, a company must establish its objectives, select the

tools, develop the program, pretest the program, implement and control it, and

evaluate the results.

Establishing the objectives

Sales promotion objectives are derived from broader promotion objectives,

which are derived from more basic marketing objectives developed for the

product. For consumers, objectives include encouraging purchase of larger-sized

units, building trial among non-users, and attracting switchers away from

competitors’ brands. For retailers, objectives include persuading retailers to carry

new items and higher levels of inventory, encouraging stocking of related items,

offsetting competitive promotions, building brand loyalty, and gaining entry into

new retail outlets. For the sales force, objectives include encouraging support of a

new product or model, encouraging more prospecting, and stimulating off-season

sales. 6 See “Marketing Memo: Sales Promotions as brand builders.”)

Marketing Memo: Sales Promotions as brand builders

6

Source: Adapted from Jacques Chevron, “Branding and Promotion: Uneasy

combination.” Brand week, September 14, 1998, p.24

Selecting Consumer-promotion tools

The promotion planner should take into account the type of the market,

sales promotion objectives, competitive conditions, and each tool’s cost

effectiveness.

The main consumer promotion tools are summarized in the following table.

We can distinguish between manufacturer promotions and retailer promotions.

Sales promotions are most effective when used together with advertising. In one

study, a price promotion alone produced 15 percent increase in sales volume.

When combined with feature advertising, sales volume increased 19 percent; when

combined with feature advertising and a point-of-purchase display, sales volume

increased 24 percent.7

Major Consumer promotion tools:

7

Building brand awareness is a long-term process. What a brand does today predicts what it will do tomorrow. Sales promotions are short term and temporary. Here are some of the tips on how to make a sale promotion an effective brand-building tool.

Make sure the promotion is justified: A new store opening, a company anniversary, and other kinds of celebrations are all good reasons for running a promotion

Tie the promotion to brand’s image: Birth dates and anniversaries are good

Look at every both for the sales job it can do and as a communication tool: A promotion is one of a brand’s many voices; it can help build brand awareness if it says the right things

Samples: Offer of a free amount of a product or service delivered door to door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer.

Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific product; mailed, enclosed in other products or attached to them, or inserted in the magazine and newspaper ads.

Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at retail shop; consumer sends a specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by mail.

Price Packs (cents-off deals): Offers to consumer savings off the regular price of a product, flagged on the label or package. A reduce price pack is a single package sold at the reduce price (such as two for the price of one). A banded pack is two related products banded together (such as a toothbrush and toothpaste)

Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. A with-pack premium accompanies the product inside or on the package. A free in-the-mail premium is mailed to the consumers who send a proof of purchase. A self-liquidating premium is sold below its normal retail price to consumers who request it.

Frequency Programs: Programs rewarding the consumers whose frequency and intensity in purchasing the company’s products and services is higher.

Prizes (Contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips, or merchandise as a result of purchasing something. A contest calls consumers to submit an entry to be examined by panel of judges who will select the best entries. A sweepstake asks consumers to submit their names in a drawing. A game presents the consumers with something every time they buy to help them win prizes.

Patronage awards: Values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors.

Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they will buy.

Product Warranties: Explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer’s money during a specified period.

Tie-in promotions: Two or more brands or companies team up on coupons, refunds, and contests to increase the pulling power

Cross-promotions: Using one brand to advertise another noncompeting brand.

Point-of-purchase (POP) Displays and Demonstrations: POP displays and

Selecting trade-promotion tools

8

Manufacturers use a number of trade promotion tools. Surprisingly a higher

percentage of promotion pie is devoted to trade promotion tools (46.9 percent)

than to consumer promotion (27.9 percent), with media advertising capturing

remaining 25.2 percent. Manufacturers use award money to the trade

1. To persuade the wholesaler or retailer to carry the brand;

2. Persuade the retailer or wholesaler to carry more units than the normal

amount;

3. To induce the retailers to promote the brand by featuring, display, and price

reductions and;

4. To stimulate retailers and their sales clerks to push the product.

The growing power of large retailers has increased their ability to demand trade

promotion at the cost of consumer promotion and advertising.8 The different trade

promotions are

Source: For more information, see Betsy Spethman, Trade Promotion Redefined,

Brandweek, March 13, 1995, pp. 25-32

Selecting Business- and sales-force-promotion tools

Companies spend billions of dollars on business-and sales-force-promotion tools

as shown in the table. These tools are used to gather business leads, impress and

reward customers, and motivate the sales force to greater effort. Companies

typically develop budgets for each business-promotion tool that remain fairly

constant from year to year.

9

Price off (off-invoice or off list): A straight discount off the list price on each case purchased during a stated time period.

Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. An advertising allowance compensates the retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special product display

Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size

Trade Shows and Conventions: Industry associations organize annual trade sows and conventions. Business marketers may spend as much as 35 percent of their annual promotion budget on trade shows

Sales Contests: A sales contest aims at including the sales force or dealers to increase their sales over a stated period, with prizes (money, trips, gifts or points) going to those who succeed

Specialty Advertising: Specialty advertising consists of useful, low cost items bearing the company’s name and address, and sometimes an advertising message that salespeople give to prospects and customers. Common items are ballpoint pens, key chains, flashlights, tote bags, and memo pads.

10

CHAPTER 2

RESEARCH

METHODOLOGY

Objectives of the survey

11

The main objective of the survey was to determine the impact of the sales

promotion offers on the buying behaviour of consumers of IT products on the

following factors:

The effect on their purchase decision (whether or not the consumers are

buying on the basis of promotional offers)

The brand image of the brand offering the sales promotion (does it increase

or decrease)

There were also a few secondary objectives of the survey, which included

What are the sales promotion tools that are most likely to spur a purchase

decision

Whether enlarging the existing customer segments is possible through sales

promotions

What is the media that is most suitable to communicate the sales promotion

offers to the consumers

The hypotheses for the survey were:

People who have bought the computers/notebooks have done so mainly

during sales promotion offers

Majority of the buyers who bought during sales offers got the information

regarding the same from either a newspaper or a magazine

Research Design:

12

The study used an exploratory research design and was conducted for the

period of 14th November 2005 to 21st January 2006

Data Collection

a) Primary Data: Through survey using structured questionnaire.

b) Secondary Data: Company resources

Area of Study: Meerut City in the state of Uttar Pradesh, which is the education

hub of Western Uttar Pradesh

Period of Study: 60 days.

Sampling Plan

Sample Design

The sample was selected on the basis of pre-qualifying question as to whether the

respondent is an existing PC/notebook user or whether he is planning to buy one in

future so that the respondents can be grouped into two categories (whose opinion

was vital for the survey):

Users (73 percent) and

Perspective buyers (27 percent)

User/Perspective Buyer

Pers. BuyerUser

Pe

rce

nt

80

60

40

20

0

27

73

13

Sampling Technique

The formulae used for calculating sample size was:

Π (1- Π) x Z 2

n = __________________

D 2

Where,

n = the sample size selected for the study

Π = the proportion of the total population that is expected to have the required

characteristics (i.e. The proportion of the total population that either uses a

computer/notebook or is planning to buy one soon)

Z = the amount of accuracy that is allowable (95 percent accuracy)

D = the amount of deviation from standard that can be allowed (1.96 standard

deviations)

On the basis of the demographic data available for Meerut city the value of

“Π” was ascertained at 0.010 that is 10 percent of the total population of Meerut

has either bought or is planning to buy computers/notebooks.

The values of “Z” and “D” are ascertained by statisticians and are a

standard. The value of “n” was ascertained as 150 (approximately) for the study.

In order to have a representative sample for the survey, using techniques

such as mall intercepts random sampling was done.

14

Data Analysis:

The data analysis was done using SPSS software; the data was analyzed using

the following statistical methods:

1) Factor Analysis

2) Discriminant Analysis

3) Perceptual Mapping

4) Regression Analysis

Limitations of the study:

There are a few limitations to the study that may arise due to the following

reasons:

1) Sampling plan: The sampling is done through random sampling; generally

through mall intercept interviews, which might distort the results but not to

a very great extent.

2) The Area of study: Meerut city might not hold good as a representative for

the whole of India and hence the survey is location specific.

15

CHAPTER 3

INDUSTRY

AND

COMPANY

PROFILE

16

INDUSTRY PROFILE:

The PC industry has been a leading driver of economic growth in the past

three decades. The explosion in the use of computers in businesses has been driven

by the need to modernize work processes and boost productivity, while the

Internet, entertainment and other digital applications were among the primary

drivers of PC adoption in the consumer market.

In India, the home PC market segment is supplied by three distinct kinds of

manufacturers. One; you have global companies like HP and Compaq along with

many players. Two; there are the Indian brands like Wipro and HCL. And three; is

the sea of kitchen tabletop PC assemblers who sell their unbranded machines at

super-low prices. This last category of unbranded machines is often referred to as

the 'gray market' and it has the majority share of the home PC market. It is

followed by Indian brands and lastly by the multinational brands.

The Indian personal computer industry witnessed a year-on-year growth of

32 per cent to 12-lakh units in the July-September quarter of 2005, an 11-per cent

increase over the previous quarter AMJ (17th November 05).

In the consumer desktop category HCL led over HP, with LG following the

market leaders at the third slot. In the overall client PC (notebooks and desktops)

market, HP retained its top slot with a sequential increase of 19% and a year-on-

year 45% growth. HCL continued to stay at second position, with a 40% year-on-

year growth, while Lenovo occupied the third position.

Current Market Trends

With sound macro economic condition and buoyant buying sentiment in the

market, PC sales in India are expected to touch 47 lakh units in Fiscal 2005-2006,

17

according to MAIT’s Industry performance review for the first half of the FY

2005-06.

The desktop PC market grossed 23.4lc units, registering a growth of 36%

over the same period last year.

The MAIT-IMRB review reveals that PC sales to the business segment

improved by 55% accounting for 78% of the total PC consumption. In the

households, while the sales were 5.10 lac units, the sector witnessed a decrease of

5% over the same period last year. Assembled PCs witnessed decline in market

share, accounting for 34% of the PC sales in H1/2005-06. The share of the Indian

brands grew to account for 31% of the market while the MNC brands accounted

for the rest at 35%.

The notebook PC segment was the star performer, showing massive

growth, 60% sequentially and 138% year-on-year and crossing the one lakh

barrier. Centrino-based notebooks constituted two-thirds of the total shipments. In

terms of market rankings, HP stayed at the top, followed by Lenovo and Acer

(IDC report). In H1/2005-06, about 16,000 notebooks were sold to the households

segment accounting for 13% of the total market (MAIT report).

The server market registered a growth of 56% over the first half of the

fiscal riding on high consumption in the medium establishments where sales

increased by 258%. Overall Printer sales grew by 43% over that in H1 2004-05 on

YoY basis. The UPS market grew by 16% over H1 of 2004-05.

The growth in the industry can be summarized in the following table:

The market was fueled by a strong demand from the notebook and

consumer desktop markets. Consistent fall in notebook prices led to a growth in

this market. In this situation Brand Image/brand perception plays a major role

18

in purchase of the products. There were massive investments in the private

educational sector that provided the momentum for growth in this market. Notable

among these were various management institutes and technical institutions.

COMPANY PROFILE

HCL's history goes to 1975 when six entrepreneurs-Shiv Nadar and five of

his associates-decided to create a computer systems and services business in India.

They faced many initial challenges and despite the lack of venture capital

available in India at that time, they opened their first office in the suburbs of New

Delhi, naming their business “Hindustan Computers Ltd” in 1976. After eight

years, HCL became the largest computer systems and services company in India.

HCL under its Umbrella has four strategic Business units HCL

technologies, Info systems, Comnet and HCL Infinity. An HCL Infosystem is

mainly into systems marketing.

Financial Overview

The company has reported consolidated revenue of Rs 2284.5 crores (USD

523.7 Mn) during the quarter ended September 30, 2005 as against Rs 1579.5

crores (USD 362.1 Mn) in the corresponding quarter of the previous year, a

growth of 45%.

HCL Infosystems

HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with

its origins in 1976. For over quarter of a century, the company have developed and

implemented solutions for multiple market segments, across a range of

technologies in India. The company has been in the forefront in introducing new

technologies and solutions for wide range of markets. HCL is the pioneer of low

cost systems. The advantage of supplying customized products makes company

scale new heights.

19

HCL Infosystems (HCLI) draws it's strength from 29 years of experience in

handling the ever changing IT scenario, strong customer relationships, ability to

provide the cutting edge technology at best-value-for-money and on top of it, an

excellent service & support infrastructure. Today HCL is country's premier

information enabling company. It offers one-stop-shop convenience to its diverse

customers having an equally diverse set of requirements. Be it a large multi-

location enterprise, or a small/medium enterprise, or a small office or a home,

HCLI has a product range, sales & support capability to serve.

Last 29 years apart from knowledge & experience have also given HCLI

continuity in relationship with the customers, thereby increasing the customer

confidence.

Companies’ strengths can be summarized as:

Ability to understand customer's business and offer right technology

Long-standing relationship with customers

Pan India support & service infrastructure

Best-vale-for-money offerings

Alliances & Partnerships:

To provide world-class solutions and services to all our customers, we have

formed Alliances and Partnerships with leading IT companies worldwide.

HCL Infosystems has alliances with global technology leaders like Intel, AMD,

Toshiba, Ericsson, Microsoft, Nokia and Sun Microsystems, SAP, Scansoft, SCO,

EMC, Veritas, Citrix, CISCO, Oracle, Computer Associates, RedHat, Infocus,

Duplo, Samsung, Novell.

These alliances on one hand give them access to best technology & products as

well enhancing their understanding of the latest in technology. On the other hand

they enhance company’s product portfolio, and enable HCLI to be one stop shop

for its customers.

Core Values:

The company shall uphold the dignity of the individual,

20

It shall honor all commitments,

It shall be committed to Quality, Innovation and Growth in every endeavor,

It shall be responsible corporate citizens.

Products and solutions

HCL Infosystems' portfolio of products covers the entire spectrum of the

information technology needs of its customers. By virtue of the immense diversity

of markets and customers that it addresses, HCL Infosystems' products offerings

include everything from high-end enterprise level servers for mission critical

applications to multimedia home computers.

The product portfolio consists of:

Business

PCs Home PCs

Infiniti Powerlite Notebooks

HCLI has 6 manufacturing facilities with an annual capacity of over

300,000 PCs, plus production of Servers, Color monitors, Terminals, Keyboards,

racks and cabinets. Some of these facilities enjoy tax benefits for another 2-3

years. The company augments this backward integration with India’s largest

network of sales and service locations – more than 5 times its nearest MNC

competition. With basic customs duty down to zero on microprocessors, hard

disks etc., the price gap between organized and unorganized segments has shrunk,

benefiting HCLI. 59% of the commercial market is still gray, and hence there

remains immense potential for growth.

PC Manufacturing:

PC manufacturing plants are located at Pondicherry, which gives following

strategic advantages:

• Proximity to Chennai port and proximity to vendors

• Tax benefits

• Established outward transport network

21

• Economical & skilled labour

Having an annual capacity of over 300,000 units, it is more than geared up

to meet the company’s current & future demand for Desktop PCs & Servers. Its

manufacturing facilities are versatile & adaptable, and can very quickly scale up

the production or shift the emphasis from one model to another.

The manufacturing facilities were first in India to get ISO 9001-2000

certification, validating the excellent quality processes that go in the design &

manufacturing of its Desktop PCs & Servers. Relationships & Base of Executed

projects Strong relationships with customers, principals and associates have helped

HCLI attain the leadership status that it enjoys today. The company gets access to

global best practices and a head start in technology due to strong relationships

with its principals. They use this strategic edge to launch new technology ahead of

competition in India. Some recent examples are – Pentium 4 based Desktop PC at

sub Rs.40, 000 price, Media Center PC in partnership with Microsoft and currently

Rs.10000 Pc.

HCLI enjoy considerable market share in segments like Government,

Banking & Finance and Education & Research. It has created credibility with its

customers that have consistently resulted in repeat business. It has rate contracts

with– NIC, Punjab National Bank, DGS & D, NICSI, ONGC, Punjab & Sind

Bank. Some recent large orders bagged by us on the enterprise front are from

Canara Bank, Asian Paints, Andhra Bank, South Central Railways, BSNL, ITC

and Assam Electronics Development Corporation LTD (AMTRON), Dept. of

Posts - DGS & D, SBI, Corporation Bank, Syndicate Bank, State Bank of

Maharashtra, Indian Overseas bank, High Court (Madras), Sahara India Parivar,

Asian Paints, Hindustan Aeronautics LTD, Institute of Chartered Accountants of

India and Andhra Bank.

Distribution Network:

HCLI recognized early the advantages of having a distribution network.

Their channel is a balanced mix of retail outlets, resellers & distributors.

22

.

CHAPTER 4

ANALYSIS

AND

INTERPRETATION

23

Profile of the Respondents:

The pie charts and bar graphs below indicates the profile of the 150

respondents that were surveyed:

Age wise profile of the respondents

20.0%

46.7%

33.3%

40-60 Years

25-40 Years

18-25 Years

Gender wise profile of the customers

24

33.3%

66.7%

Female

Male

Income profile of the respondents

Family Income

40K and Above20K-40K10K-20K8K-10K

70

60

50

40

30

20

10

20

40

60

30

Occupation profile of the respondents

25

Occupation

Student

Own Business

Working in Pvt Sec

Government Job

70

60

50

40

30

20

10

2020

60

50

Total market share of different PC/Laptop brands

26

9.1%

36.4%

9.1%

45.5%

Others/Assembled

HCL

IBM/Lenovo

HP

From the pie chart it is very clear that majority (45.5 percent) of the total

respondents own a computer from Hewlett Packard, followed closely by HCL

Infosystems (36.4 percent). Thus, HP was found to be a leader in consolidated

market share of PC and Laptops in Meerut city.

Satisfaction level of the customers of different brands:

27

Satisfaction level of Customers

Others/AssembledHCLIBM/LenovoHP

Co

un

t

100

90

80

70

60

50

40

30

20

10

0

Satisfied

No

Yes

1007520

25

100

80

As is evident from the graph HP and IBM top the charts in terms of

customer satisfaction. IBM leads the market in terms of customer satisfaction with

100 percent, followed by HP, which had 80 percent satisfied customers.

Major reason of dissatisfaction

28

Reason for Dissatisfaction

Poor performancePoor Service

Per

cent

70

60

50

40

30

20

10

0

40

60

The major reason for dissatisfaction is as shown in the graph above. The

major reason for dissatisfaction is poor service (60 percent) and poor performance

(40 percent).

Company offering best sales promotion offer

29

User/Non User

Non UserUser

100

90

80

70

60

50

40

30

20

10

0

HCL

Acer

IBM/Lenovo

Zenith

HP

2536

25

18

509

36

From the bar chart it can be ascertained that majority of the users believe

that HCL gives best offers (36 percent) whereas majority of non-users believe that

IBM offers best sales offers. This can be attributed to the aggressive sales

promotion strategies adopted by HCL in the PC segment and in laptop and server

segment by IBM.

Sales promotion offers best communicated through

30

User/Non User

Non userUser

100

90

80

70

60

50

40

30

20

10

0

Television

Magazine

Newspaper

50

25

36

25

64

As is evident from the graph majority of users (100 percent) and non-users

seek Magazines and Newspapers for getting information about latest sales

promotion offers. This gives an insight that the media that can be effective in

conveying sales promotion offers is print media (magazines and newspapers). If

we look at another feature that has been brought out by the survey is the fact that

majority of people buy by looking at a feature in newspaper. This can be

concluded from the fact that 64 percent of the buyers are those who seek

information from Newspaper while purchasing a PC/Laptop.

Test of Hypotheses

31

For the first hypothesis it is very evident from the graph that majority of

those who bought did so during a sales promotion offer

Prompted By Offer

NoYes

Pe

rce

nt

80

60

40

20

0

27

73

Prompted By Offer

NoYes

100

90

80

70

60

50

40

30

20

10

0

Awareness gained thr

Television

Magazine

Newspaper

6738

33

63

Majority of those who were prompted by the sales offers did were either

prompted by a Newspaper ad (63 percent) or an ad in the magazine (38 percent).

32

This is also the hypothesis of the study, which can be proved through the

following chi-square statistics.

Z0: Null Hypothesis: Majority of buyers, do not get information regarding

the sales promotion offers through newspapers or magazines

Za: Alternate Hypothesis: Majority of buyers, do get information regarding

the sales promotion offers through newspapers or magazines

Count

50 30 80

10 20 30

60 30 20 110

1.00

2.00

PromptedBy Offer

Total

1.00 2.00 3.00

Awareness gained through

Total

Prompted By Offer * Awareness gained through Crosstabulation

67.986a

2 .000

74.842 2 .000

33.369 1 .000

110

PearsonChi-Square

Likelihood Ratio

Linear-by-LinearAssociation

N of Valid Cases

Value df

Asymp.Sig.

(2-sided)

Chi-Square Tests

0 cells (.0%) have expected count less than 5.The minimum expected count is 5.45.

a.

From the statistics it is clear that the null hypothesis can be rejected and the

alternate hypothesis can be selected. This proves the hypothesis that majority of

buyers; do get information regarding the sales promotion offers through

newspapers or magazines. This is a true occurrence and not a chance occurrence.

33

The most successful offer

Offers availed

FreebiesPrice Discounts

Pe

rce

nt

60

50

40

30

20

10

0

45

55

From the bar chart we can ascertain that majority (55 percent) of those who

bought a computer/laptop when there was a sales promotion offer did so by getting

attracted to “Price Discounts”. Freebies or free gift offers were also quite

successful in raking in customers to buy. Thus it can be said that price discounts

are a hot favourite amongst buyers of IT products and services as an incentive to

buy.

34

The most effective sales promotion tool for potential customers

Price Discounts

NeverCan't SaySometimesAlways

Pe

rce

nt

50

40

30

20

10

0

1313

47

27

74 percent of the respondents were positive about buying when there was a

price discount offer, whereas 72 percent were positive about buying when there

was a freebie attached to the offer.

35

Freebies

NeverCan't SaySometimesAlways

Pe

rce

nt

40

30

20

10

0

18

9

3636

Dealer Influence while buying computer/IT products

Dealer Influence

NeverSometimesAlways

Pe

rce

nt

70

60

50

40

30

20

10

0

13

20

67

From the graph we can interpret that 67 percent of the total respondents feel

that the dealer always influences them when they buy a computer or IT product.

Again from the next graph we can say that majority of those who bought during

36

sales offer (63 percent) believe that their purchase decision was influenced by the

dealer.

Prompted By Offer

NoYes

Co

un

t

100

90

80

70

60

50

40

30

20

10

0

Dealer Influence

Sometimes

Always

38 100

63

Reason why computer/laptop/IT product is bought/upgraded

Change in Technology

37

User/Non User

NoYes

Cou

nt

100

90

80

70

60

50

40

30

20

10

0

Change In Technology

Disagree

Cant Say

Agree

Strongly Agree

36 25

25

36

50

27

From the graph we can say that IT product users are divided over whether

Change in technology is a reason for them to upgrade their computers. On the

contrary, for the first time buyers, change in technology is a definite reason to buy

(50 percent strongly agree). This shows that change in technology is a factor

highly considered by non-users who are planning to buy soon.

On Requirement Basis

38

User/Non User

NoYes

Cou

nt

100

90

80

70

60

50

40

30

20

10

0

On requirement basis

Strongly Disagree

Disagree

Cant Say

Agree

Strongly Agree

25

50

45

27

259

18

Majority of users and non-users (45 percent and 50 percent) disagree to the

fact that mandatory requirement is a reason to by or upgrade the PC/laptop. This

ascertains that mandatory requirements at workplace for upgrading or buying are

not a strong reason to buy/upgrading a PC/laptop at home.

Promotional offers an incentive to buy

39

User/Non User

NoYes

Cou

nt

100

90

80

70

60

50

40

30

20

10

0

Promotional Offers

Cant Say

Agree

Strongly Agree

25

50

36

25

64

As evident from the graph both users and non-users find “Promotional

Offers” a strong reason to buy a computer/laptop. Thus it is quite clear that

promotional offers are a definite incentive to buy for the customers.

40

Discriminant Analysis for the most important attribute

Standardized Canonical Discriminant Function Coefficients Function 1

Importance of Good and Timely Service -1.035193899Importance of Sales Offers and Discounts 1.680696063

Importance of Upgradability -0.185269039Importance of Configuration 0.350950629

Importance of Ease of operation 1.513428467

Importance of low entry price -1.310721451

Functions at Group Centroids

User/Non user Function

1 -1.180252757

2 3.245695081

Perceptual Map for the most important attribute for a computer/laptop

From the Discriminant Analysis and Perceptual map we can say that for the

User group the most important attribute is “Good and timely service” and for the

non user group the most important attribute is “Sales offers and discounts”.

41

Discriminant analysis for Brand Image

Standardized Canonical Discriminant Function Coefficients Function1

Increases Awareness About the Product -0.15095213Increases Sales 0.880789241Increases Visibility of the Brand -1.28495582Makes it easier to choose one Brand from other 0.53772549Increases Confidence -0.05717728Makes you buy more 0.703468368

Functions at Group Centroids FunctionUser/Non User 1

1 -0.48004462 1.320122651

Unstandardized canonical Discriminant functions evaluated at group means  

Perceptual Map for Brand Image

From the Discriminant analysis and the subsequent perceptual map we can

say that Users attribute “Increase in sales” as the impact of the Sales Promotion

offers. Whereas the non-users attribute “Increase in the awareness of the Product

42

offerings” as the new impact of the Sales promotion offers from a company. This

makes it clear that none of the groups consider Sales promotion as a factor that

improves the brand image of a Brand.

43

CHAPTER 5

FINDINGS

AND

CONCLUSION

44

From the Analysis of the results and based on the objectives of the study

the following findings can be ascertained:

Major Findings

Impact on purchase decision

Majority of those who have bought a PC/laptop and are planning to buy

consider “Promotional offer” as a definite incentive to buy.

People who have already bought a PC/laptop have done so during a

“Promotional Offer

Non-users consider sales and promotion offer as the most important

attribute for buying a computer/laptop

Impact on Brand Image

Majority of users believe that the only impact Promotional Offer has on the

Brand is “Increase its sales”

Majority of the non-users believe that Promotional Offers increase the

“Awareness about the product offering” of the brand.

The Brand Image is not enhanced by using “Promotional Offers” and they

only serve as a tool for increasing the awareness or sales of a brand as

ascertained from the survey

45

Minor Findings

The market share of the Hewlett Packard (HP) brand of computers/laptops

is the highest in Meerut, followed closely by HCL Infosytems in retail

segment.

IBM (International Business Machines) leads the pack in terms of customer

satisfaction followed by Hewlett-Packard (HP).

Major reason for dissatisfaction among existing customers is “Poor

Service”.

Majority believes that HCL Infosystems has the best “Promotional Offers”

among all the players existing in the market.

The most successful offers are “Price discounts” and “Freebies”, thus

people look for monetary incentives are most sought after deals while

buying an IT product.

Majority of those who buy in a sales promotion offer do so by looking at a

featured advertisement in a magazine or a newspaper.

People look for information on what to buy (IT Products) from newspapers

and magazines the most

46

Conclusion

From these findings it can be ascertained that Sales promotion offers

provide a definite incentive to buy, but their impact on the Brand Image of an IT

product is still debatable. These findings give an indication that “Promotional

Offers” can be used for increasing the short-term gain but their application in

building brand image over a long term is limited.

Promotional tools that are most successful are hence those which

incentivise the customer immediately like price discounts. Again from the minor

findings we can ascertain that Print Media the best media for communicating

promotional offers, as this is the medium in which people seek information while

they are in the “Information Search” mode of the consumer buying process.

For the companies who seek to increase customer satisfaction can do so by

improving their “After Sales Service” or else there might be some amount of

dissonance in the mind of the customer.

47

CHAPTER 6

SUGGESTIONS

AND

RECOMMENDATIONS

48

From the survey many vital points were bought out in the forefront which if

implemented can help companies to improve their brand image. Many companies

have used promotional offers over the last decade and the proportion of

promotional offer budget as a percentage of the total combined budget has been

ever rising.

This can be attributed to the short-term performance pressure on the

product managers. But this tool should be used with caution as Promotional Offers

do little to build the brand image of the product or the company in the long term.

Thus, more long-term approach to marketing is Advertising and not Promotional

Offers.

Again as can be ascertained from the survey, most sought after promotional

offers are those in which the customer gets instant incentives like Price discounts

or Freebies. This can have its positives and negatives. This gives the manufacturer

the ability to experiment with different price bands to ascertain price flexibility of

the customers and also to deal with demand supply fluctuations effectively on the

positive side. But on the negative side of it the customer will start discounting the

product as inferior in quality, and also this increases the dissonance of the

customers who have already bought from the manufacturer.

Thus, price discounts can be effective tool for raking in the moolah but it

has to be used with a word of caution and not excessively as it has many a flip

sides attached to it.

Information search stage for a customer buying an IT product is very

extensive and serious search takes place before buying. The information regarding

such products should hence are better placed in media which has higher amount of

involvement. Thus print media is best suited for placing advertisements or features

for the products of this nature.

49

CHAPTER 7

APPENDIX

50

QUESTIONNAIRE

Dear Respondent,

We are conducting a survey on Sales Promotional Offers in IT products. This survey would help us in serving you better. Please fill the questionnaire with due care and attentiveness and to the best of your knowledge to help us gauge your likes and dislikes. The questionnaire has instructions to facilitate you while filling up the questionnaire. Please feel free to ask though, wherever necessary.

1) Do you own a computer/notebook?Yes [ ] No [ ]

If No then go to: Qn No 9

2) Which brand of computer/notebook do you own?HP [ ] Zenith [ ] IBM/Lenovo [ ]Acer [ ] HCL [ ]Others [ ]

3) Was there any offer which prompted you to buy a computer?Yes [ ] No [ ]

4) How did you know about the type of computer you are using right now?Newspaper [ ] Magazine [ ]Television [ ] Radio [ ]Friends and Family [ ] Others [ ]

5) What was the offer that you got when you bought your computer?Price discounts [ ] Extended Warranty [ ]Freebies [ ] Others [ ]

51

6) Do you think that you get influenced by sales offers while buying computers?Always [ ] Sometimes [ ]Never [ ] Can’t Say [ ]

7) Are you satisfied with the computer you are using right now?Yes [ ] No [ ]

8) if not satisfied what is the cause of your dissatisfaction?Poor service [ ] High maintenance costs [ ]Poor performance [ ]Unwanted features [ ]Other reasons [ ]

9) Are you planning to buy one?Yes [ ] No [ ]

10) What according to you is most important attribute for a computer?

10.1 Low entry priceNot Important [ ] Less important [ ] Important [ ] Very Important [ ]

10.2 Good and timely serviceNot Important [ ] Less important [ ] Important [ ] Very Important [ ]

10.3 UpgradationNot Important [ ] Less important [ ] Important [ ] Very Important [ ]

10.4 ConfigurationNot Important [ ] Less important [ ] Important [ ] Very Important [ ]

10.5 Ease of operationNot Important [ ] Less important [ ] Important [ ] Very Important [ ]

10.6 Sales offers and discountsNot Important [ ] Less important [ ] Important [ ] Very Important [ ]

11) What sort of sales offers would you generally go for?

11.1 Price Discounts

52

Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ]

11.2 FreebiesAlways [ ] Sometimes [ ] Never [ ] Can’t Say [ ]

11.3 Extended WarrantyAlways [ ] Sometimes [ ] Never [ ] Can’t Say [ ]11.4 Unrelated OffersAlways [ ] Sometimes [ ] Never [ ] Can’t Say [ ]

12) The basis of buying or upgrading your computer is

12.1 Change in Technology Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

12.2 On requirement basis Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

12.3 Sales and promotional offers Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

12.4 Predefined timeframes Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

13) Does this increase while there are offers?Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ]

14) Where do you get the information about the latest offers?Newspaper [ ] Magazine [ ]Television [ ] Radio [ ]Friends and Family [ ] Others [ ]

15) Does the dealer have influence while buying any type of computer or IT products?Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ]

16) Do you think that sales promotion offers has following impact on the brand you use?

16.1 Increases awareness about the productStrongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

53

16.2 Increases its salesStrongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

16.3 Increases the visibility of the brandStrongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

16.4 Makes it easier to choose one brand from the otherStrongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

16.5 Makes you more confident about selecting the brandStrongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

16.6 Makes you buy more than what you wantStrongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]

17) Which company do you think has the best sales offers?HCL [ ] HP [ ] IBM/Lenovo [ ]Acer [ ] Zenith [ ] Others [ ]

18) Personal Details

18.1 Age18-25 [ ] 25-40 [ ]40-60 [ ] 60 and above [ ]

18.2 GenderMale [ ] Female [ ]

18.3 Family Income8 K - 10 K [ ] 10K - 20 K[ ]20K - 40K [ ] 40K and above [ ]

18.4 OccupationGovernment Job [ ] Working in private sector [ ]Own Business [ ] Retired [ ] Student [ ]

Thanks for filling up the questionnaire and for your valuable time.

Have a great day!!!!

54

BIBLIOGRAPHY

1. From Robert C Blattberg and Scott A. Neslin, Sales Promotion

Concepts and Methods, and Strategies, (Prentice Hall, 1990).

2. Roger A. Strang, Sales Promotion: Fast Growth: Faulty Management,

Harvard Business Review (July-August 1976) 116-19.

3. Paul W. Farris and John A. Quelch, In defense of Price Promotion,

Sloan Management Review (Fall 1987): 63-69.

4. Robert George Brown, Sales Response to Promotions and

Advertising, Journal of Advertising Research (August 1974) 36-37.

Also see Carl F. Mela, Sunil Gupta, and Donald R Lehmann, The

Long-Term Impact of Advertising and Consumer Brand Choice,

Journal Of Marketing Research (May 1997):248-61; Purushottam

Papatla and Lakshman Krishnamurti, Measuring the Dynamic effects

of Promotions on Brand Choice, Journal of Marketing Research

(February 1996); 20-35; Kandel Jedidi, Carl F. Mela, and Sunil Gupta,

Managing Advertising and Promotions for Long-Run Profitability,

Marketing Science, 18(1), (1999): 1-22.

5. F. Kent Mitchel, Advertising/Promotion Budgets: How did We get

Here, and What do We Do Now, Journal of Consumer Marketing (Fall

1985): 405-47.

55

6. David B. Jones, Setting Promotional Goals: A Communication

Relationship Model, Journal of Consumer Marketing 11, no.1 (1994):

38-49.

7. John C. Totten and Martin p. Block, Analyzing Sales Promotion: Text

and cases, 2nd Ed. (Chicago: Dartnell, 1994) pp. 69-70.

8. Paul W. Farris and Kusum L. Ailawadi, Retail Power: Monster or

Mouse, Journal Of Retailing (Winter 1992): 351-69.

56