Impact of Sales Promotions on FMCG Consumer Behavior

International Research Journal of Business and Management – IRJBM ISSN 2322-083X

IRJBM – ( www.irjbm.org ) November – 2013 - Volume No – V
© Global Wisdom Research Publications – All Rights Reserved. 128
Impact of Sales Promotion Techniques on Consumers towards FMCG
B. Karthikeyan
Assistant Professor, Department of Business Administration
Annamalai University,Tamilnadu, India.
Dr. N. Panchanatham
Professor and Head, Department of Business Administration
Annamalai University, Tamilnadu, India.
Abstract
Sales promotions are generally looked at as tools that undermine the brand; yet a tool
that is necessarily meant to speed up sales. Consumer sales promotion take up a large share of
the total marketing expenditure despite which it remains an area that still attracts attention as
an essential component of the promotion mix meant to increase short term sales. It is
therefore not surprising that most of the marketers resort to sales promotions to attract the
competitor's market share. The present paper reports the results of the impact of consumer
sales promotions on 579 consumers. This study has attempted to explore which sales
promotional techniques going to be dominate on personal care products in Fast Moving
Consumer Goods.
Defining of Sales Promotion
Sales promotion has been defined as ‘a direct inducement that offers an extra value or
incentive for the product to the sales force, distributors, or the final consumer with the
primary objective of creating an immediate sale’ (Haugh 1983). Belch and Belch (2003) have
proposed a similar definition. The many definitions of sales promotion have a common
viewpoint: they all involve a temporary and tangible modification of supply, for the ultimate
goal of direct impact on the behaviour of the consumer, retailer or sales force. Within the
marketing mix, sales promotion has one of the strongest impacts on short-term consumption
behaviour (Laroche Et al . 2003). It is an ‘action-focused’ marketing event (Blattberg &
Neslin1990).
Introduction
Sales promotion as a pivotal component of marketing mix has been heavily used as a
major incentive tool to pull consumers to stores and increase short-run sales volumes. Since
1980s, researchers have constantly proposed a variety of concepts to illustrate how sales
promotion might affect consumer purchase behavior via overcoming "consumer entropy"
(Beem & Shaffer 1981), inviting consumers to engage in transactions (Kotler 1988),
heightening the psychological value associated with the transactions (Thaler 1983), or by
providing consumers with a script of purchase behavior (Gardner & Strang 1984). No matter
what effects of sales promotion would be, all the convictions alleged by the preceding studies
indicate that sales promotion may activate or facilitate certain consumer psychological
mechanism based on the notion that sales promotion "affects consumer by acting on basic
mental processes common to all decisions" (Schindler & Rothaus 1985). Although sales
promotion has become a ubiquitous element of consumer marketing, large portions of


ineffective promotional activities indicate a great need of refining and redirecting the focus of
the impact sources. Numerous studies have focused on consumer attitudinal and behavioral
responses to price promotion and its utilitarian benefits (see Dobson et al. 1978, Gupta 1988).
Sales Promotion for FMCG
Sales promotion in FMCG industries is used to create a temporary stimulus on the
sales of a brand by making consumers a special offer. This promotional stimulus is part of the
marketing offer made up of factors such as product features and benefits, price, availability,
customer service and quality. Consumers are expected to act on this offer, which, in turn, has
an immediate effect on the sales rate of an organization.
The fast moving consumer goods sector (FMCG) is witnessing growing use of
sales promotion activities all over the world. The sector is characterised by products having
low unit value, requiring frequent purchases, consumer behaviour reflecting less loyalty,
impulse buying, and low involvement on the part of a consumer. As the risk of
purchase is relatively less compared to high involvement buying situation, consumers
do not mind experimenting different brands while availing sales promotion. A
consumer's decision of which brand to buy and how much quantity of that brand to buy
depends on brand-specific factors (e.g. price and promotion of various brands) and consumer-
specific factors (e.g. consumer's brand loyalty, consumption rate, product inventory, and
sensitivity to price and promotion). Further, long-term marketing activities of brands
may alter consumers' sensitivity to short-term marketing actions. For example,
extensive advertising over the years may make consumers less sensitive to short-term
price discounts. Also frequent promotions of brands make it unnecessary for loyal
consumers to switch brands (as it becomes increasingly likely that a deal on the
favoured brand will be forthcoming) but makes them more likely to stockpile when
their favourite brand is on promotion (because they fulfill a greater portion of their
demand in promoted periods). But if there are several brands in a consideration set a buyer
does not mind switching among these brands. Blattberg and Neslin (1997) show that majority
(more than 60 percent) increase in sales owing to sales promotion comes from brand
switching when incremental sales are decomposed into brand switching, stock-piling, and
purchase acceleration.
The FMCG category is also witnessing severe competition like Indian markets.
A number of sales promotion offers are made ranging from simple price-offs to innovative
contests and gift offers to lure deal-prone consumers. All kinds of brands (international,
national, regional and local) in a given category design innovative sales promotion
offers to attract consumers. For example: in toilet soap category Lux International,
Hamam (national), Tulsi Neem (regional) and local brands (unbranded) fight for
market share through innovative sales promotion efforts. It would be of interest to both
practitioners as well as academicians to find out what incentives are offered to consumers and
how much outlay is expected from consumer depending on the terms and conditions of the
offer, what kind of relationships exist between size of incentive and brand, its market
share, whether a brand is newly introduced in the category or not.


Techniques of Consumer Sales Promotion
Consumer sales promotions encompass a variety of short-term promotional
techniques designed to induce customers to respond in some way. The most popular
consumer sales promotions are directly associated with product purchasing. These
promotions are intended to enhance the value of a product purchase by either reducing the
overall cost of the product (i.e., get same product but for less money) or by adding more
benefit to the regular purchase price (i.e., get more for the money).
While tying a promotion to an immediate purchase is a major use of consumer sales
promotion, it is not the only one. As researchers noted above, promotion techniques can be
used to achieve other objectives such as building brand loyalty or creating product awareness.
Consequently, a marketer’s promotional toolbox contains a large variety of consumer
promotions. The following techniques are followed in general that are
Coupons
Free gift offer
Saver packs offer
Sampling and free trials
Free extra product
Premiums
Contests and sweepstakes
Review of Literature
Consumer promotions are now more pervasive than ever. Witness 215 billion
manufacturer coupons distributed in 1986, up 500% in the last decade (Manufacturers
Coupon Control Center 1988), and manufacturer expenditures on trade incentives to feature
or display brands totalling more than $20 billion in the same year, up 800% in the last decade
(Alsop 1986; Kessler 1986). So far, not much work has been done to identify the purchasing
strategies that consumers adopt in response to particular promotions, or to study how
pervasive these strategies are in a population of interest. Blattberg, Peacock and Sen (1976)
define a purchase strategy as a general buying pattern which "incorporates several
dimensions of buying behaviour such as brand loyalty, private brand proneness and deal
proneness." A greater understanding of the different types of consumer responses to
promotions can help managers to develop effective promotional programs as well as provide
new insights for consumer behaviour theorists who seek to understand the influence of
different types of environmental cues on consumer behaviour.
Blattberg, Eppen, and Liebermann (1981), Gupta (1988), Neslin, Henderson, and
Quelch (1985), Shoemaker (1979), Ward and Davis (1978), and Wilson, Newman, and
Hastak (1979) find evidence that promotions are associated with purchase acceleration in
terms of an increase in quantity purchased and, to a lesser extent, decreased inter purchase
timing. Researchers studying the brand choice decision-for example, Guadagni and Little
(1983) and Gupta (1988)-have found promotions to be associated with brand switching.
Montgomery (1971), Schneider and Currim (1990), and Webster (1965) found that
promotion-prone households were associated with lower levels of brand loyalty. Blattberg,
Peacock, and Sen (1976, 1978) describe 16 purchasing strategy segments based on three
purchase dimensions: brand loyalty (single brand, single brand shifting, many brands), type
of brand preferred (national, both national and private label), and price sensitivity (purchase


at regular price, purchase at deal price). There are other variables that may be used to
describe purchase strategies, examples are whether the household purchases a major or minor
(share) national brand, store brand, or generic, or whether it is store-loyal or not. McAlister
(1983) and Neslin and Shoemaker (1983) use certain segments derived from those of
Blattberg, Peacock, and Sen but add a purchase acceleration variable to study the profitability
of product promotions. Throughout the world, consumer sales promotions are an integral part
of the marketing mix for many consumer products. Marketing managers use price-oriented
promotions such as coupons, rebates, and price discounts to increase sales and market share,
entice trial, and encourage brand switching. Non-price promotions such as sweepstakes,
frequent user clubs, and premiums add excitement and value to brands and may encourage
brand loyalty (e.g., Aaker 1991; Shea, 1996). In addition, consumers like promotions. They
provide utilitarian benefits such as monetary savings, added value, increased quality, and
convenience, as well as hedonic benefits such as entertainment, exploration, and self
expression (Chandon, Laurent, and Wansink, 1997).
Research and Analysis
Regression Measurement Model-Overall Sales Promotional Impact-PCP


The below portion of the output shows how Amos arrives at degrees of freedom as the
difference between the number of distinct sample moments and the number of distinct
parameters that have to be estimated.
Notes for Model (Overall Impact-PCP)
Computation of degrees of freedom (overall Impact-PCP)
Number of distinct sample moments: 36
Number of distinct parameters to be estimated: 16
Degrees of freedom (36 - 16): 20
Result (overall impact PCP)
Minimum was achieved
Chi-square = 344.303
Degrees of freedom = 20
Probability level = .000
The regression factor model contains the following variables
Observed, endogenous variables
Free extra Quantity offer PCP
Price Discount offer PCP
Consumer Contest PCP
Free gift offer PCP
Saver pack offer PCP
Sweepstakes PCP
Free samples PCP
Discount coupons PCP
Variable counts
Number of variables in the model: 17
Number of observed variables: 8
Number of unobserved variables: 9
Number of exogenous variables: 9
Number of endogenous variables: 8


Regression Weights: (Male - Overall impact PCP)
Sales Promotional Techniques Estimate S.E. C.R. P
Price Discount offer PCP <--- overall .707 .029 24.202 ***
Consumer Contest PCP <--- overall .674 .028 23.896 ***
Free gift offer PCP <--- overall .765 .027 27.947 ***
Saver pack offer PCP <--- overall .747 .029 26.002 ***
Sweepstakes PCP <--- overall .806 .032 25.451 ***
Free samples PCP <--- overall .604 .043 14.052 ***
Discount coupons PCP <--- overall .654 .031 21.042 ***
Free extra Quantity offer PCP <--- overall .672 .029 23.190 ***
The above table displays the un-standardized estimates, were the path between
promotional offers and the overall sales promotional impact got supported significantly, its
standard error (abbreviated S.E.), and the estimate divided by the standard error (abbreviated
C.R. for Critical Ratio). In the probability value P column, all of the regression coefficients
in this model are significant at .01 level. Hence, it is concluded that the overall sales
promotion got significantly impacted by price discount offer, Consumer contest,
sweepstakes, saver pack offer, free gift offer, free samples ,discount coupons and free extra
quantity offer.
Standardized Regression Weights: (Group number 1 - overall impact PCP)
Sales Promotional Techniques Estimate
Price Discount offer PCP <--- overall .829
Consumer Contest PCP <--- overall .825
Free gift offer PCP <--- overall .907
Saver pack offer PCP <--- overall .870
Sweepstakes PCP <--- overall .856
Free samples PCP <--- overall .554
Discount coupons PCP <--- overall .759
Free extra Quantity offer PCP <--- overall .809
The above Standardized estimates allow you to evaluate the relative contributions of each
predictor variable namely promotional offer dimensions towards outcome variable namely
overall sales promotional impact. It is observed that the free gift offer estimates the overall
sales promotional impact to the greatest extent with the standardised regression weight of
0.907 followed by saver pack offers and sweepstakes.


Conclusion
Based on the regression measurement model, researchers were tested for personal care
products which reveals that free gift offer dominate among other sales promotional
techniques for consumers followed by saver pack offers and sweepstakes.
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