Chapter 19 sales promotions budget and evaluation sales and distribution management (1)

Block Sales Promotion Management
: III Ch-19 Sales Promotions Budget and Evaluation

Chapter
19
Sales Promotions
Budget
and Evaluation

Copyright © 2010, S L Gupta

19-1 Sales and Distribution Management Text & Cases ( 2 nd Edition) S Excel Books


How are Sales Affected by Sales Promotions?
There are four basic mechanisms involved
1. Brand switching: The objective of some sales promotions is to induce
brand switching, which is encouraging consumers to purchase the promoted
brand instead of the regular brand that would have been purchased had there
been no sales promotion.
2. Repeat buying: Sales promotions influence the consumers in a manner
that increases the chances of purchasing the same brand again in future.
3. Purchasing more, or accelerating timings: Consumers purchase
more quantity than their immediate requirements, or the purchase timings are
changed.
4. Increasing category expansion and consumption: Consumption of
total product category is increased by the consumers as a result of sales
promotion. Copyright © 2010, S L Gupta



Sales Promotion Design Issues
 There are a number of internal and external factors that influence sales
promotions design. These factors include (1) place of sales promotion in
marketing strategy (2) allocation of budget (3) present and expected
competitive moves and (4) significant external macro environmental factors.

 The starting point in developing the promotional design is to specify the sales
promotion objectives. The range of sales promotion objective is fairly large
because the target groups involved can be consumers, trade and sales force.

Cont….



Confusion often may arise in determining what type of promotion will best produce
the desired result, and this is a key decision area concerning the promotion
design that must be taken up one after the other, in a sequential manner.
1. Promotion Choice
There are different types of promotions that can be used, singly, or
in combination:
a. Consumer promotion
b. Trade promotion, and
c. Sales force promotion.
There are two major approaches for consumer and trade promotions:
a. Same for less, and
b. More for the same
c. The type of promotions for consumers and the trade can be usefully put
under two headings— immediate value offer vs delayed value offer, and price-cut
vs extra value offer.
Cont…. Copyright © 2010, S L Gupta



2. Product Choice
 This step focuses on choosing the products for sales promotion, their
pack sizes, or models, and different variations of the product, etc.
 Sales promotion planners have to decide whether to run promotions on
the entire product-line, or only selected items in the line?
 Should the promotions be run on higher priced or lower-priced products,
the products that contribute more to the sales or those that contribute
less?
 In case of consumer non-durable products, would it be advantageous to
come out with special promotion packs, or the promotion should be run
on regular packs ?
 Answers to these questions are likely to be significantly influenced by
taking into account consumer and trade behaviour, competitive situation
Cont….
and coordination with advertising and personal selling. Copyright © 2010, S L Gupta



3. Choice of Market Areas

 Promotion planners have the option to select national or regional
markets. When promotion programmes are developed for regional markets,
they provide some degree of protection from competitive moves. However,
developing different regional promotional deals can complicate sales
forecasting, production scheduling and physical distribution; this may also
lead to cost escalation.

 Higher inventory risk would require that promotions be developed for
separate markets. Excess product stocks from one market can be shifted to
another market where the sales potential is more.

Cont….



4. Promotion Timing, Duration and Frequency
When the product or brand inventories are less than normal in trade channels, the
objective of the promotion would be to build inventories, but when the inventories
with the traders are high then the objective would be to clear the inventories. It is
inadvisable for the producer to announce a promotion when the retailer shelves
are full with the competitive brand because the promotion is quite likely to prove
unprofitable.
 Ideally, some manufacturers plan their promotions when annual marketing
plans are developed. However, sometimes marketers face compulsions like
unexpected moves by competitors
 The duration of consumer promotion should be such that a larger percentage
of customers get exposed to the promotion offer.
 Frequency of promotion depends on competitive situation, deal sensitivity of
customers, the interest of the trade, and the complexity of the promotion
offer. Cont…. Copyright © 2010, S L Gupta



Marketing objectives
Promotion Combined promotion
and advertising budget Company policy
Planning Marketing strategy

Process Promotion
Review of past objectives and Advertising
performance performance objectives
criteria

Promotion Advertising
strategy strategy

Decision on
Prepare detailed promotion
sales promotion tactics, generate
budgets and screen alter-
natives, design
the schedules Design
advertising

Review perfor-
mance criteria
(pretest if needed)

Implement
promotion

Evaluate
performance
(concurrent &
post-promotion
evaluation) Copyright © 2010, S L Gupta



Testing the Sales Promotion
Pre-testing
 How sales promotion is to be communicated and what would be
communicated to the target groups is important and can be pre-tested.
 To test consumers behavioural response, such as trial purchase, or repeat
purchase, etc., pre-testing consists of experimenting in certain markets or
individual stores in a market. All other factors remain the same, only the sales
promotion device being tested in the variable is manipulated.
 It is often quite helpful to evaluate the response of re-sellers before
implementing the promotions programme. The simplest way is to visit several
important retailers and wholesalers and discuss the programme and seek
their opinion and suggestions. This may prove to be quite favourable in case
the support of re-sellers is considered to be of paramount importance for
promotion results.
Cont…. Copyright © 2010, S L Gupta



Concurrent Testing

This testing is done when the sales promotion is in progress. Concurrent testing
may permit the promotion manager to modify the sales promotion, if needed. This
type of testing is conducted in terms of sales data, which can be obtained on a
weekly or monthly basis.

Post-testing
 Post-testing is done after the promotion period is over. To assess the change
in consumer awareness and attitude, telephone calls, questionnaires mailed
to consumers and personal interviews can be used.
 To measure the sales effect, sales figures before the promotion period can
be compared with figures at the end of the promotion, and one month after
the promotion ends. Cont….

19- Sales and Distribution Management Text & Cases ( 2 nd Edition) S Excel Books


Post-Testing Sales Effect

Sales, pre Sales, Pro- Sales just Sales in
Promotion motion after pro- the long
Period Period motion run
period



Types of Promotion
Promotion stands for personal selling, advertising, promotion mix., and customers
relations. All of these methods try to inform, persuade and remind the target large
no. of audience about your product or service. They are complementary to each
other and should be integrated with your profit. There are some other different
forms of these types of promotion such as broadcasting, printing, direct mail and
electronic devices advertising that offer many advantages, disadvantages, costs
and paybacks. The similar message may be evaluated based on the source of the
message in terms of reliability.
 Promotion Mix Decision: There is no any unique promotion mix (between
Personal Selling, Advertising, Sales Promotion, and Public Relations) for all
situations. The promotion mix for your company should be designed to fulfil
your overall objectives.
 Push, Pull or Push-Pull Strategy? There are three basic promotional
strategies or philosophies push, pull or push-pull.



Guidelines to Planning Sales Promotion
i. First step in promotion planning is situation analysis.

ii. Allocation of budget to sales promotion, out of the combined total budget for
advertising and sales promotion.

iii. Considering the objectives and the budget allocation, each promotion event
must be carefully created.

iv. There is vast choice of promotion tools, and the combinations of these tools
seem to be endless.

v. A clear understanding of various tools and techniques is essential for the
planners to make the winning choice from among alternatives.

vi. Next step relate to sales promotion design issues. Cont….



Pertinent Points to Considered for Effective Promotion

A. Promotion Choice

B. Product Choice

C. Choice of Market Areas

D. Promotion timing, duration and frequency

E. Rate of discount, terms and conditions

F. Protection from Competition



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