Sales promotions are marketing strategies that businesses use to temporarily increase sales or interest in a product or service. They can be used to attract new customers, encourage existing customers to buy more, or clear out excess inventory. There are many different types of sales promotions, but some of the most common include: Discounts: Discounts are reductions in the price of a product or service. They can be offered in a variety of ways, such as a percentage off, a flat dollar amount off, or buy one, get one free. Coupons: Coupons are certificates that can be redeemed for a discount on a product or service. They can be distributed to customers through direct mail, email, or social media. Rebates: Rebates are partial refunds that customers receive after purchasing a product or service. They are often used to promote new products or to encourage customers to switch to a new brand. Contests and giveaways: Contests and giveaways are opportunities for customers to win prizes, such as free products or services. They can be a great way to generate excitement and buzz around a brand or product. Loyalty programs: Loyalty programs reward customers for repeat business. They can be in the form of points that can be redeemed for discounts or rewards, or they can be tiered programs that offer customers exclusive benefits as they move up the tiers. Sales promotions can be a very effective way to boost sales and increase customer engagement. However, it is important to use them strategically and to track their results to ensure that they are having the desired effect. Here are some tips for using sales promotions effectively: Have a clear goal. What do you want to achieve with your sales promotion? Do you want to increase sales, attract new customers, or clear out excess inventory? Once you know your goal, you can choose the right type of promotion and target it to the right audience. Make your promotion easy to redeem. Customers should not have to jump through hoops to take advantage of your promotion. Make sure that the terms and conditions are clear and easy to understand, and that the redemption process is simple and straightforward. Track your results. It is important to track the results of your sales promotions so that you can see what is working and what is not. This will help you to improve your future promotions and make sure that you are getting the most out of your investment. Sales promotions can be a valuable tool for businesses of all sizes. By using them strategically, businesses can boost sales, increase customer engagement, and achieve their marketing goals.

1. CHAPTER 8
SALES PROMOTION
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Learning Objectives
L01. Know definition and reasons for importance of
sales promotion.
L02. List benefits, drawbacks, and objectives of sales
promotion.
L03. Describe different types of sales promotions.
L04. Discuss the effects of sales promotion on sales and
profits.
L05. Integrate sales promotion with other elements of
communication mix.
L06. Check evaluation of sales promotion.

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Definition of Sales Promotion
According to Philip Kotler:
“Sales promotion consists of a diverse collection of
incentive tools, mostly short-term, designed to stimulate
quicker and/or greater purchase of particular products or
services by consumers or the trade.”

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Reasons for Importance of Sales
Promotion
The amount and the percentage of money spent on sales promotion
has gone up, out of the total promotion or communication budget.
The major reasons are :
(i) Growing Power of Retailers. Large retail chains put pressure on
manufactures to provide more discounts and allowances.
(ii) Sales Managers’ Focus on Short-term Sales. Sales managers
are under pressure to achieve short-term sales goals and sales
promotion is more effective method to create short-term sales.
(iii) Increasing Competition. To gain competitive advantage
manufacturers create innovative sales promotions to meet the
needs of customers and intermediaries better than competition.
(iv) Consumers’ Price Sensitivity. Consumers respond positively to
price reductions because they save money in growing inflationary
environment.

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Benefits of Sales Promotion
To Manufacturers
• Gives higher short-term sales.
• Can introduce price differences of products / services.
• Induces trials for new products.
• Helps to build a database.
• Is easy to design and implement.
• Is less expensive – even for small manufacturers.

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Benefits of Sales Promotion
To Consumers
• Helps brand switchers who pay lower prices.
• Useful for price–sensitive customers.
To Traders
• Allows many retailers / wholesalers to do forward
buying.
• Makes new brands / products less risky.
• Increases customer visits to the retail stores.
(continued)

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Drawbacks of Sales Promotion
To Manufacturers
• Reduces brand value, if it is used too often.
• Dilutes quality image of the brand, if sales
promotion is used continuously.
To Consumers
• Consumers are confused, if all brands of a product
category offer sales promotion deals.
To Traders
• Frequent use makes traders price-sensitive.
• Permits manufacturers to put pressure on resellers
for carrying new items and higher stocks.
• Increases competition from other intermediaries.

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Sales Promotion Objectives
• Marketers have different objectives for consumer–oriented and
trade-oriented sales promotions.
(I)Objectives of Consumer-Oriented Sales Promotions
(i) To increase sales.
(ii) To encourage trial and repurchase.
(iii)To support integrated marketing communications approach.
(iv) To target specific market segments.
(II)Objectives of Trade-Oriented Sales Promotions
(i)To encourage retailers/dealers to participate in displays and
promotion of a brand.
(ii) To encourage retailers to stock and promote new products or
brands.
(iii)To build inventories of intermediaries so that they will push those
products/brands.

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Types of Sales Promotions
Types of sales promotions used by manufacturers
are:
(I) Consumer promotions,
(II) Trade promotions,
(III) Business promotions, and
(IV) Sales force promotion

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(I) Major Consumer Promotion Tools
(1) Samples or Sampling.
(2) Coupons or Couponing.
(3) Premiums or Gifts.
(4) Contests and Sweepstakes (or Prizes).
(5) Refunds and Rebates.
(6) Price-offs or Price-cuts.
(7) Bonus-packs
(8) Frequency / Loyalty Programs.
(9) Event Marketing or Event Sponsorship.
(10) Point-of-Purchase (POP) Displays.

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(1) Samples or Sampling
• Used for stimulating trials for new products and for
increasing sales. Normally, provided free of charge.
• Benefits: (a) Effective way to persuade trial of a new
product; (b) Consumers experience the new product or
brand directly, which helps in better recognition.
• Drawback : Very expensive method.
• Different Ways of Sample Distribution
(i) In-store sampling.
(ii) Direct or door-to-door sampling.
(iii) Response sampling.
(iv) Media sampling.
(v) Selective sampling.

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(2) Coupons or Couponing
• It’s price reduction offer to consumers, redeemed on subsequent
buying
Methods of Coupon Distribution
(a) Print media, (b) Direct mail, (c) On/in package, (d) Through
retailers.
Types of Coupons:
(i) Instant redemption coupons.
(ii) Bounce-back coupons.
(iii) Scanner-delivered coupons.
(iv) Cross-ruff coupons.
(v) Response offer coupons.
Advantages: (a) Coupons can persuade consumers to try an
existing or a new product; (b) Coupons encourage repeat purchase;
(c) A large number of prospects can be reached in a short time;(d)
Coupons encourage brand switching.
Disadvantages: Possibilities of mistakes, imitations, frauds as
a large number of coupons are redeemed by supermarkets.

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(3) Premiums / Gifts
• A Premium / gift is a reward given to a consumer for
purchasing a product or service.
• Advantages: Can improve brand image, add value to a
product, and attract new customers.
• Disadvantages: High cost and short lifespan.
• For success of premium programs, the gift should
match target audience and quality should be good.
• Types of Premiums
• In / on-package
• Free in-the-mail
• Self-liquidating
• Retail store / manufacturer

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(4) Contests and Sweepstakes (or Prizes)
• Contests require participants to
• buy the product.
• send proof of purchase (barcode / product wrapper).
• perform some activities.
Winning is based on appropriate answers.
In sweepstakes, participants
• don’t have to buy the product.
• have one entry per visit to the retail store.
Winning is based on probability factor or chance.
Success Factors for Contests / Sweepstakes:
• Attractive prizes and immediate payment.
• Use of the internet.
• Integration with advertising, POP, and other elements of IMC.
Drawbacks: High costs, and less effective due to other gambling
opportunities.
Advantages: Create enthusiasm and excitement in consumers.

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(5) Refunds & Rebates
• They provide price reductions, given by a manufacturer to customers,
against proof of purchase sent by customers.
• Refunds are on soft goods with smaller value.
• Rebates are on hard goods and software services with large value.
• Advantages: Can be used to (i) introduce new products, (ii) reward
loyal consumers, (iii) increase purchase frequency, and (iv) encourage
brand switching.
• Disadvantages:(i) Consumers have difficulties in redemption
process. (ii) Retailers are unhappy with burden and cost of
administration work.

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(6) Price-Offs or Price-Cuts
• Manufacturers offer temporary price-offs on the regular prices to
consumers, ranging 10-50 percent.
• Effective if given to product items with high profit contributions.
• Increases sales, but reduces manufacturers’ profits.
• Advantages:(i) Immediate and direct benefits of price
reduction to consumers;(ii) Manufacturers have flexibility in
selecting market areas and product items for discount offer.
• Disadvantages: (i) Can cause a price war; (ii) Can make
customers suspicious about product quality.

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(7) Bonus Pack
• Offers consumers extra quantity of a product at the regular price. It is
also know as price-pack.
Advantages:
(i) Rewards customer loyalty.
(ii) Provides more value to consumers in a direct way.
(iii) Can prevent a competitor’s promotion of a new brand.
Disadvantages:
(i) Sometimes, consumers have doubts about bonus pack offers.
(ii) Bonus packs may need additional shelf space for which retailers
don’t get extra profit margins.

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(8)Frequency / Loyalty / Continuity Programs
• One of the popular methods designed to motivate consumers to make
repeat purchases.
• Suitable for products / services with little difference between brands.
• Commonly used in travel, hospitality, & retailing sectors.
• Objectives / Reasons for Popularity are:
 Develop loyalty among existing customers.
 Develop databases of customers, which can be used for cross-selling.
 Preempt/match competitor’s frequency program.
Advantage : Retaining existing customers.
• Disadvantages:(i) Lack of customer excitement;(ii) No immediate rewards.

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(9) Event Marketing & Event Sponsorship
In event marketing, a company or brand is linked to a specific
event. This includes physical presence like display or booth
at the event.
• Events can be sporting, musical concert, film star
award.(e.g. Femina Miss India Contest)
• Event marketing agencies plan, execute, and evaluate
events.
• In event sponsorship, a firm develops sponsorship
relations with an event.
• A company gives financial support to the event and gets
opportunity for free publicity like display of brand name,
logo, or advertising message.
In practice, both terms are used interchangeably.

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(10)Point-of-Purchase (POP) Displays
• POP displays take place in retail stores at the point of
purchase or sales to provide information to consumers.
• It includes posters, banners, danglers, etc.
• POP displays influence buying decisions, as 70%
decisions on brands are made by consumers in retail stores.
• Firms develop customized, reusable, easy to stock displays.
• POP displays should be integrated with advertising and
promotional messages.
• Effectiveness of POP displays should be measured. One
method is to tie-up with point-of-sale cash register.
• Retail stores measure sales before and during a POP
display program.

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Trade Promotions
• Trade promotions are directed at resellers, like distributers,
wholesalers, retailers, and dealers.
• These promotions are part of a manufacturer’s “push
strategy.”
• Manufactures spend more on trade promotions than
consumer promotions. Why?
Objectives of Trade Promotions
• Persuade resellers to carry and push the company’s
products / brands.
• Build inventory levels of intermediaries.
• Stock and display new products.
Challenges faced by manufacturers with trade promotions:
(1) Forward buying, (2) Diverting.

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Types of Trade Promotions
(1)Trade allowances.
(2)Trade contests.
(3)Training programs.
(4)Trade Incentives.
(5)Trade shows.
(6)Cooperative advertising.
These are also called “trade promotional tools”.

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Types of Trade Promotions (Continued)
(1)Trade Allowances
• Offered to wholesalers and retailers as incentives to buy
& promote a manufacturer’s products.
Types of Trade Allowances
(i)Off-invoice / Buying allowance / Free goods
(ii)Slotting allowance
(iii)Promotional / Merchandising allowance
(iv)Drop-ship allowance
(v)Exit fees

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Trade Allowances (Continued)
(i) Off-Invoice / Buying Allowance / Free Goods
• Offered as allowance to resellers to buy a
manufacturer’s products.
• This Allowance or incentive is given by methods like:
• A discount on ordered cases or
• A percentage deduction from the invoice or
• Free goods on purchase of specific number of
cases.
• Advantages: Effective and easy to implement.

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Trade Allowances (Continued)
(ii)Slotting / Stocking Allowance or Fees
• Also called ‘Introductory allowance’ / ‘street
money’.
• Paid by a manufacturer to retailers for handling
a new product.
• Manufacturers feel slotting allowance / fees as
unfair and high.
• But retailers justify the allowance – How?

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Trade Allowances (Continued)
• Given by a manufacturer to retailers / dealers / distributors for
advertising, displaying and promoting products or brands.
• Given as a discount on list price or deduction of an amount per
case. Also called as ‘ display ‘ or ‘ advertising ‘ allowance.
(iv)Drop-Ship Allowance
• Paid by a manufacturer to a retailer for bypassing a wholesaler /
distributor for order placement.
• Should be handled with care to avoid unsatisfactory relations
with the wholesaler/distributer.
(v)Exit Fees
• Offered by a manufacturer to retailers for accommodating a new
size of an existing product by removing an existing product item
from shelves / inventory.
(iii)Promotional / Merchandising Allowance

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Types of Trade Promotions (Continued)
(2)Trade Contests
• Manufacturer–sponsored contests, directed at salespeople of
retailers, distributers or wholesalers.
• Monetary rewards are given to salespeople, known as spiffs or push
money, for selling the manufacturer’s brands / products.
• Work well for exclusive dealers.
(3)Training Programs
• Some manufacturers conduct training programs for retailers’,
dealers’ or distributors’ salespeople.
• Due to more knowledge, these salespeople sell such manufacturers’
brands more than other brands.
(4) Trade Incentive
• It is a cash payment to retailers’ salespeople who sell the
manufacturer’s brand.
• Many retailers/dealers do not allow participation of their salespeople.

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(5)Trade Shows / Exhibitions
• Industry associations (e.g. IMTMA, IEEMA) organize trade
shows, trade fairs or exhibitions every year.
• Participating suppliers buy space, set up their booths, arrange
displays and demonstrations of their products.
Benefits of Trade Shows / Exhibitions
• Identifying prospective customers.
• Generating sales leads and sales.
• Introducing new products.
• Meeting customers and booking orders.
• Gathering competitive information.
• Developing relationships with key customers and
intermediaries.
• For selection of right trade shows out of a large number of
trade shows, ask customers which trade-shows they visit.

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(6) Cooperative Advertising
Here, the cost of advertising is shared by two or
more organizations.
Three Types of Cooperative Advertising:
• Horizontal corporative advertising.
• Vertical cooperative advertising.
• Ingredient–sponsored cooperative advertising.
Only the vertical cooperative advertising is
categorized as trade oriented promotion.

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(III) Business Promotions
Objectives of sales promotion in B2B marketing:
• Gather sales / business leads.
• Reward and impress business customers.
• Contact prospective customers.
• Build relationships with key customers.
• Introduce new products.
Major Business Promotions Tools
(i)Trade shows / Exhibitions .( Covered in slide 28 )
(ii)Promotional novelties / gifts.
(iii)Seminars.
(iv)Demonstration.
(v)Catalogues.

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(ii)Promotional Novelties / Specialty
Advertising/Gifts
• These are gift items (e.g. calendars, pens), bearing
advertisement message / brand name.
• Given free to customers and other stakeholders.
• Advantages : Low cost, creates a goodwill
(iii)Seminars
• Technical seminars for customers.
• Objective: Create a favorable image, and establish
contacts with technical people who are key influential
members of buying centers.

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(iv) Demonstration
• In demonstration, a product / service is shown in
actual use. Effective for high cost equipment.
• Effective in convincing prospects about benefits and
performance of the product.
(v) Catalogues
• Printed / online catalogues are promotional support.
Online catalogues save printing and mailing costs.
• Types of catalogues : general or specific .
• Important to update customer mailing list or
database. Also, catalogues need to be updated.

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(IV) Sales Force Promotions
• Sales promotions directed at salespeople.
Main Objectives
• Improve sales force performance.
• Increase sales volume & reduce selling cost.
• Develop prospective customers’ list.
• Build sales force moral and enthusiasm.
• Promote new products.
Major Tools of Sales Force Promotions
(i)Sales contests,(ii) Incentive schemes,
(iii)Sales meetings, (iv) Training programs, and
(v)Sales manuals.

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(i) Sales Contests
• Meant for the company salespeople.
• They win prizes, if sales targets or quotas achieved.
• Typically held for a short period.
(ii)Incentive Schemes
• Part of sales force compensation package.
• Linked to sales force performance.
• Objectives: Encourage salespeople for more
efforts and to achieve / exceed sales targets / goals

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(iii)Sales Meetings
• Important for communication, education, and
motivation. It gives a salesperson a break from
routine and to identify with a larger group.
• Held at the location of district, branch or region.
(iv)Training Programs
• Objective: Improve sales force performance.
• Given to both new and experienced salespeople.
(v)Sales Manuals
• Include technical and product information.
• Useful to salespeople during negotiations with
customers and sales presentations.

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Effects of Sales Promotion on Sales & Profits
•Many sales and marketing managers use sales promotion tools/methods
when sales stagnates or are lower than targets.
•Effects of sales promotions on sales can be analyzed by the following
factors:
(i)Increased purchase of a product category.
(ii) Quick or delayed purchase by consumers.
(iii) Sales promotions inducing brand switching.
(iv)Repeat brand purchasing depends on customer satisfaction.
•Studies have found that sales promotion is not necessarily profitable to
manufacturers in all situations, but is effective at generating sales.

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Integration of Sales Promotion with Other
Elements of Communication-Mix
• Major changes taking place in marketing due to
acceptance of “integrated marketing
communications”(IMC) approach. These are :
(i)More marketing budget allocation to sales promotion.
(ii)Firms are using targeted communication tools like the
internet, sales promotion, and event sponsorship.
(iii)Companies are using computers to build customer
databases to determine target customers and
communication tools.
• Studies show that achievement of sales targets and cost
effectiveness would be possible with integration of
various elements of communication mix.

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Evaluation of Sales Promotion
• Sales promotion evaluation is done at three stages:
• Pre-testing
• Concurrent testing
• Post-testing
• Evaluation done by comparing the objective with
actual sales figures (a) before, (d) during, and (c)
one month after sales promotion.
• Sales promotion is successful, if the objectives
of sales promotion are achieved.

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End of Notes – Chapter 8
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