Sales promotion ppt 01 apr2014

Sales Promotion

Vinod Kaul01 April 2014

Whereas advertising gives a reason to buy, SP gives an incentive to buy

It is part of the Marketing spend of all companies and these days SP spends in

many companies exceed that of the adspends

Why?

• Internal

• External

Internal reasons

• Top management is more conducive to spending on promotions

• Line managers under greater pressure to achieve targets

• Justification of expenditure is easy

External reasons• Increase in number of brands• Consumer is more price savvy• Greater pressure from trade to liquidate

stocks• Add effectiveness declining owing to rising

costs, media clutter and legal constraints

SP is a push strategy

• Since it is at the last point where the consumer is often at the point of buying, the additional incentive makes a last ditch effort to convert the customer on to the incentivised brand

SP is of two types

• Trade

• Consumer

Trade promotion

• Liquidating heavy inventories

• Persuade retailers to carry stock, carry more than usual stock, promote brand franchise

Consumer promotion

• Stimulate purchase

• Induce trial

• Create new users

• Increase repurchase from occasional customers

• Reward loyal customers

Forms of trade promotion

• Bulk discounts• Free materials• Display windows

– Live windows

• Shelf hiring• Lucky draws• ‘Mystery’ customer• Redistribution incentives• Shop salesmen incentives

Forms of consumer promotion

• Free samples• Free gifts• Coupons• In-packs• Price packs• Price-offs• Cross Offers• Sweepstakes• Bundling offers

SP spurs action because they are supposed to run

for a limited time While the advertising budgets are controlled by the brand managers, SP budgets usually are controlled by the sales managers

The 365 Day Sales Promotion

The more the product’s quality and its advertising persuasiveness fail to meet competition, the greater is the need for promotion to improve the

price – value relationship

Promotion at different stages of

the PLC

• Introduction – wise to use heavy promotion to induce trials and promote brand franchise

• Growth – promotion should be limited ,if any• Maturity – Higher promotions required since the brand is

under attack from competitors or product quality or advertising effectiveness is tapering off

• Decline – Heavy promotions. Used only to retain a set of loyal customers. Prior to withdrawal of the product, it could be used as a one time stock clearance from the trade

Essential elements for an effective SP programme

• Significant value before promotion is effective (Bata Ambassador)

• Promotions must be part of an overall plan (annual budget)

• Every brand must have a promotion objective and a strategy statement

• A written tactical plan – time frame, costs, evaluation yardsticks

• Factual knowledge must be gathered to plan• Specialised professional skill and

knowledge must be applied to every promotion operations

Final considerations

• Don’t promote if the product is not good• Promotions rarely stop a declining sales

curve• It is very easy to lose the promotional

gains made if your promotion has not been effective in retaining new customers. So the product has to speak for itself.

• The objective of the promotion is to wean away users from competition and create new users.

• Excessive promotions lead to diminishing returns and may devalue the brand

Cont’d• Promotions may be used in conjunction with

advertising and other marketing communication tools

• It should be novel and attractive (Red Dot sale)• Ensure supply lines are good and adequate stock

is available right through the promotion• Cater for contingencies. Have escape routes built

into the plan (limited quantities)• Trade has to be handled tactfully• Reimburse incentives/ rewards/ gifts promptly• Must be within the legal boundaries

– Rain cheques