Sales promotion

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  • 1. 1 Sales promotion Presentation by Sempungu Godfrey Sempungu Godfrey Introduction  Sales promotion is the process of persuading a potential customer to buy the product. It can be part of the personal selling process.  Sales promotion is one of the four aspects of promotional mix. (The other three parts of the promotional mix are advertising, personal selling, and publicity/public relations.) Media and non-media marketing communication are employed for a pre- determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Sempungu Godfrey Cont--  Sales promotion is the use of short term incentives to encourage the purchase or sale of a product or service.  Sales promotion is any initiative undertaken by an organisation to promote an increase in sales, usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of the marketing communications or promotions mix). Sales promotions are varied. Often they are original and creative. Sempungu Godfrey Types of sales promotion Sales promotions can be directed at either the customer, sales staff, or distribution channel members (such as retailers).  Sales promotions targeted at the consumer are called consumer sales promotions.  Sales promotions targeted at retailers and wholesale are called trade sales promotions. Some sale promotions, particularly ones with unusual methods, are considered gimmick by many. Sempungu Godfrey Cont--  If the promotion is targeted at business customers it is business promotions.  If it is directed at members of the sales force it is sales force promotion. In general sales promotion should be consumer relationship building rather than creating only short term sales or temporary brand switching, they should help to reinforce the products position and build long-term relationships with consumers. Sempungu Godfrey Reasons for sales promotion  Increasing competition: The air of change is gaining momentum after the introduction of economic liberalization. Due to increase in competition, companies are finding it increasingly difficult to compete on quality. They are therefore resorting to more innovative methods of sales promotion. In order to have a competitive advantage over its competitors like mobile phone companies in Uganda.
  • 2. 2 Sempungu Godfrey  Customers Have Become More Price Sensitive: This increased price sensitivity is a direct result of rampant inflation. Economic recession is likely to fuel this trend further, as consumers and dealers become more sensitive towards prices. If the customers get branded jeans at half the actual price, then they are definitely going to make huge purchases of Spykar Jeans because they want value for their money, as they are price sensitive. Sempungu Godfrey  Sales Promotions Generally Create An Immediate Positive Impact On Sales: Advertising, personal selling and other methods of promotion produce slower sales response compared to sales promotion. Sales promotions are mostly for short duration, for a specified period, leading to a sense of urgency in consumers to buy now. This creates an immediate positive impact on sales. Sempungu Godfrey  Products have become more standardized:In many product categories, there is a proliferation of brands; many of them are line extensions and me-too brands. Most brands are being perceived by consumers to be more or less similar within a given price range because of the inability of manufacturers to develop truly differentiated products. Under these circumstances, advertising messages are unable to strongly influence the consumers’ perceptions and create brand franchise. Sempungu Godfrey Cont--- As a result of these perceptions of similarity among brands, marketers have no way but to compete on the basis of extra benefit offered through sales promotion. Competing companies struggle to capture market share by using every tool likely to bring sales success.  Consumer Acceptance: As competition intensifies and promotions proliferate, consumers have learnt to earn the rewards of being smart shoppers. Over a period of time, they have also learnt that brands on promotion are not necessarily of lower quality. Sempungu Godfrey  Advertising Has Become More Expensive And Less Effective: All the advertising media have become quite expensive. Audio-visual medium, which is considered as the most effective for short-duration ads, may cost millions. In many cases, consumers have reached a point of boredom due to excessive advertising on TV. Some consumers even consider advertising as an intrusion into their privacy, leading to zapping (surfing channels). Firms with small budgets cannot compete with big companies, which spend huge sums of money on advertising. For these small budget firms, sales promotion is a more cost-effective promotion method to produce sales results. Sempungu Godfrey  Trade Has Become More Powerful: Retailers and wholesalers have become powerful and find themselves in a position to demand extra facilities from the companies. They Channel members demand more incentives to get the desired results. Manufacturers do not seem to have any alternatives but to concede to their demands, keeping in view the competitive market conditions. In shopping malls like Uchumi & shoprite, decent margins have to be paid to them in order to have shelf visibility for your brand.
  • 3. 3 Sempungu Godfrey  Emphasis On Sales Volumes: Towards achieving the long-term profit goals, manufacturers try to attain high sales volume. Brand managers and product managers find themselves under pressure to achieve short-term sales results for the sake of their careers. Compared to any other promotional method, sales promotion is a more effective method to generate short-term sales volume. Sempungu Godfrey  Sales Promotions Maximizes Profits: A number of economic theories conclude that a company can maximise profits by using sales promotion. Such promotions can permit price discrimination by allowing the brand to compete in 2 or more different market segments. Sales promotion may allow a premium brand to compete with a lower tier brand among price sensitive consumers. For example, a premium brand of toilet soap may be on promotion in some price sensitive markets, while in the remaining markets it is sold at its normal price. Sempungu Godfrey  Impulse Buying Is Increasing: The number of marginal customers is increasing. Displays at the point of purchases lead to impulse buying by consumers, more so if the items on display are not expensive. Impulse Buying Is Increasing.  Sales Promotion Specialists Are Available: number of marginal customers is increasing. Displays at the point of purchases lead to impulse buying by consumers, more so if the items on display are not expensive. Sempungu Godfrey  Excess stocks: Because of increasing number of brands, it is difficult for manufacturers and dealers to anticipate future sales. This, at times, leads to excessive inventories, and the quickest way to clear that is to go for sales promotion. Sempungu Godfrey  Introducing An Element Of Interest: There are a number of promotions, which are often called interest promotions. Some of the more popular interest promotion techniques are samples, contests, and sweepstakes, free premiums and mail-in premiums. These promotions create an element of interest and excitement, and consumers enjoy these and respond enthusiastically to such contests and sweepstakes, etc. Sempungu Godfrey Tools of sales promotion  Buy-One-Get-One-Free (BOGOF) - which is an example of a self-liquidating promotion. For example if a loaf of bread is priced at $1, and cost 10 cents to manufacture, if you sell two for $1, you are still in profit - especially if there is a corresponding increase in sales. This is known as a PREMIUM sales promotion tactic.law  Customer Relationship Management (CRM) incentives such as bonus points or money off coupons. There are many examples of CRM, from banks to supermarkets.
  • 4. 4 Sempungu Godfrey  Free samples (sampling) e.g. tasting of food and drink at sampling points in supermarkets. For example Red Bull (a caffeinated fizzy drink) was given away to potential consumers at supermarkets, in high streets and at petrol stations (by a promotions team) and coca cola’ Burn energy drink.  Vouchers and coupons, often seen in newspapers and magazines, on packs. These are certificates that are given to buyers. They can stimulate the sales of a mature brand or promote early trial of a new brand. Sempungu Godfrey  Cash refund offers or rebates, are like coupons except that the price reduction occurs after the purchase rather than at a retail outlet. The consumer gives the proof of purchase to the manufacturer. E.g. “Bifunilawo ku shell”.  Price packs (cents off deal) offer consumers savings off the regular price of a product. The reduced prices may be marked directly by the producer on the label or package. The packs can be single packages sold at reduced price (such as two for the price of one) or two banded products. E.g. toothbrush and tooth paste Sempungu Godfrey  Premiums are goods offered either free or at a low cost as an incentive to buy a product, ranging from toys included with kids products to phone cards, compact disks e.t.c. A premium may come inside the package (in pack), outside the package (on pack) or through the mail.  Free gifts e.g. Subway gave away a card with six spaces for stickers with each sandwich purchase. Once the card was full the consumer was given a free sandwich. Sempungu Godfrey  Advertising specialties are useful articles imprinted with an advertiser’s name and they are given as gifts to consumers. They could include pens, T-shirts, caps, coffee mugs, calendars, key rings, shopping bags e.t.c.  Patronage rewards are cash or other awards offered for the regular use of a certain company’s products or services. E.g. Airlines offer frequent flier plans, awarding points for miles traveled that can be turned in for free airline trips. Sempungu Godfrey  Point-of-purchase (POP) or point of sale (POS) promotions include displays and demonstrations that take place at the point of purchase or sale. They could include signs and posters of manufacturers and the products that they offer.  Sponsorships that could be in various fields such as education sports, e.t.c can be used. Companies will sponsor programs such as health programs. E.g. MTN marathon, football leagues, Madhivani scholarship e.t.c Sempungu Godfrey  Contests, sweepstakes and games give consumers the chance to win something, such as cash, trips, or goods, by luck or through extra effort. A contest calls for a consumer to submit an entry, a guess, suggestion to be judged by a panel that will select the best entries. A sweepstakes calls for consumers to submit their names for drawing. A game presents consumers with something -bingo numbers, missing letters every time they buy, which may or may not help them win a prize. A sales contest urges dealers or the sales force to increase their efforts, with prizes going to the top performers.
  • 5. 5 Sempungu Godfrey  Joint promotions between brands owned by a company, or with another company's brands. For example fast food restaurants often run sales promotions where toys, relating to a specific movie release, are given away with promoted meals. E.g Uchumi super market and Unilever promotions.  Loyalty cards have recently become an important form of sales promotion. They encourage the customer to return to the retailer by giving them discounts based on the spending from a previous visit. Sempungu Godfrey  Advertising allowance that manufactures may give retailer s for advertising their products.  Manufactures may also offer free goods to retailers and whole sellers. And these are extra cases of merchandise to resellers who buy buy a certain quantity.  Manufacturers may also offer push money in form of cash or gifts to dealers or their sales forces to push the manufacturers goods. Sempungu Godfrey End