This document discusses sales promotion as a marketing tool. It begins by explaining that developing a good product, price, and availability is not enough - a company must also promote the product commercially in each market. Sales promotion involves determining the right quantity, timing, message, and communication channels to use. The document then discusses different forms of sales promotion, including promotions to encourage consumer purchases and support from retailers. It also discusses how companies determine their sales promotion budgets, including percentage of sales, competitive parity, and objective-based methods. Finally, it notes other factors like customer predisposition and product lifecycle that influence promotional mix decisions.

1. Author: Javier Molina Acebo
Theme: Profesor y miembro del consejo de la Escuela de Ventas de ESIC.
Y Socio Director de Gesvelice.
Article Title: Sales promotion
Contextualisation
The current market situation requires one more step to develop a good product, set an
attractive price and make it available to target customers: it must be expedited
commercially and specifically in each of its various markets.
To do this, the most important thing is to determine in what quantity, when to do it,
with what message and by which means, given that the company manages a complex
system of communication with their intermediaries or channels, consumers, and sales
network, each group giving feedback to the others.
This complex system, known as the promotional mix, is formed by the specific mixing
of advertising tools, sales promotion, public relations and personal sales.
Specifically, the promotion of sales is the entire set of marketing activities covered in
the framework of the general promotion policy, and whose primary objective is to
encourage or promote the sale temporarily through a concrete and tangible benefit.
The sales promotion tool can take on different forms:
 Promotion of consumption: sales promotions to stimulate consumer purchases.
In turn, they promote the product positioning at the point of sale by including
temporary benefit messages.
Consumption promotion instruments:
 Samples: a small quantity of a product for consumers to try.
 Coupons: certificates that can be used as savings for buyers of certain
products.
 Cash Back (or discounts): repayment of part of the purchase price of a
product when customers send 'proofof purchase' to the manufacturer.
 Promotional packages (or discounts): reduced prices directly from the
manufacturer on the label or package.
 Prizes: products that are given for free or at a low cost as an incentive to
buy them.
 Rewards for customers: cash rewards for the regular use of products or
services from a particular company.
 Promotions at the point of sale: exhibitions and demonstrations at the
point of sale or purchase.
 Contests, raffles and games: promotional events that give consumers
the chance to win something for making an extra effort.
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2.  Commercial promotion: sales promotions to get the support of the retailer /
channel so as to improve their efforts by aligning their interests with those of
the company. Commercial promotion instruments:
 Coupons: certificates that result in savings for the seller on certain
products that are generally not linked to their business.
 Cash & non cash prizes: cash rewards and other incentives.
 Contests, raffles and games: participatory elements based on an extra
effort which give greater opportunities to win something by chance or
draw.
 Promotion of the sales force: sales promotion designed to motivate the sales
force and make the team's efforts more effective and conclusive for the
purposes of the organisation at any one time.
Commercial promotion instruments:
 The same as in commercial promotion.
How do companies decide their budget?
It is no wonder that there are massive differences between what is spent or invested in
promoting the various sectors and, in turn, different companies within a sector in
Spain. This accounts for between 20% and 30% of sales within the cosmetics industry,
but only 5% to 10% for industrial machinery.
There are four main methods that rely on their calculation:
 the permissible method: defines the budget in terms of the absolute amount of
promotion that the company can afford. This method completely ignores the
effect of promotion on sales volumes, i.e static. In addition, in this way, the
annual budget for promotion is uncertain, which makes long‐term planning
difficult. This may cause excessive spending but more commonly it is the
amount that is insufficient.
 Sales percentage method: defines the advertising budget as a percentage of
current or expected sales. Determines a percentage of the selling price. In the
automotive sector, for example, a fixed percentage based on the defined price
of the vehicle is usually budgeted. Breweries, in turn, establish the budget as a
fraction proximate to each hectolitre that is sold. Among the advantages of this
method is that promotional spending will vary depending on what the company
can "afford". It also facilitates those who always think about the relationship
between promotional spending, the sales price and profit per unit. Finally, it
supposedly creates a competitive stability,given that companies that are
competing tend to spend more or less the same percentage of their sales on
promotion.
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3. However, despite these alleged benefits, the percentage of sales method has
little justification. Indeed, the error is that it considers sales as the cause of
promotion, rather than its outcome. The budget is based on the availability of
funds rather than on opportunities. It may even prevent the increase of
expenditure required to reverse a fall in sales. Moreover, as the budget varies
each year with sales, it makes long‐term planning difficult. Finally, this method
provides no basis for choosing a specific percentage, aside from what has been
done in the past, or what competitors do at the time.
 Competitive parity method: causal analysis is done through monitoring their
own promotional activities contrasted with the observables of the competition
and determining parities to carry out promotion, segment and position cost
estimates in the sector, defining the budget according to the average of similar
companies.
There are two arguments that support this method. The first is that the
competitors’ budget represents the collective view of the sector and that
investing, with reference to competitors, promotional wars are avoided.
Unfortunately, none of them are valid. To start, there is no reason to believe
that the competition has a better criteria of what should be spent than the
company. Companies are very different from each other, and each has its own
promotional needs. In addition, there is no evidence that budgets based on a
competitive parity avoid promotional wars.
 Objective and action method: this is the most logical way to define the budget.
The promotional budget is calculated by defining a specific objective, defining
the actions to be carried out and calculating the cost involved in the set of tasks
that comprise each action. The goals may be well known, memory, sales
volume, new customers, etc ... they are therefore required to specify the
assumptions about the relationship between the amount that will be spent and
the results of the promotion to be achieved.
What other elements should be considered?
There are many factors that specifically determine the promotional mix, for which
each case will require a more specific analysis. While, in general terms, there are two
references to consider:
 Predisposition state: the effects of the tools vary according to various states of
purchase predisposition of the markets, customers and segments. Advertising,
along with public relations, plays an important role within the states of
awareness and knowledge. In contrast, the taste, preference and conviction of
the consumer are more influenced by personal sales, followed closely by
advertising. Finally, commitments and closings are obtained mainly by personal
selling and sales promotion.
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4.  Product maturity: the impact of different promotional tools also vary according
to the stage where the product is within its life cycle. Usually in the
introduction stage, advertising and public relations increase awareness. Sales
promotion is useful in promoting the immediate testing of a product. In the
growth stage, advertising and public relations remain strong, while sales
promotion can be reduced, as it requires fewer incentives. In the maturity
stage, sales promotion becomes relevant once again in relation to advertising,
as buyers are already familiar with brands and advertising products and
advertising facilitates memory or exhibits new uses alone or combined with
other products. In the declining stage, advertising is usually kept to only one
memory level, eliminating public relations and the commercial network pays
little attention to the product, devoting their efforts only in specific cases.
However, sales promotion in general remains strong.
Javier Molina Acebo
Professor and memberof the board of ESIC Sales School.
 Partner Director of Gesvelice.
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