JAGAN INSTITUTE OF MANAGERMENT STUDIES

MARKETING MANAGEMENT – II
SALES PROMOTION

- Annu Sahu (FIB2210)

- Gurnish Singh Dhodi (FIB2219)
- Gulab Chhabra(FIB2218)
 Sales Promotion

Sales Promotion is a key ingredient in Marketing campaigns, consists of collection of incentive

tools, mostly short term, designed to stimulate quicker or greater purchase of particular products
or services by consumer or trade. Advertising offers a reason to buy but sales promotions offers an
incentive to buy. Sales Promotion includes tools for consumer promotion (Samples, coupons, cash
refund offers, Price offs, Premiums, prizes, patronage rewards, free trials, warranties, tie in
promotions, cross promotions, POP displays, and demonstration ; Trade Promotion (Prices offs,
Advertisingand display allowances and free goods) and Business and sales force promotion(Trade
shows and conventions, contest for sales representatives and specially advertising). Sales
promotions can be directed either at the customer, sales staff, or distribution channel members
(such as retailers). Sales promotions targeted at the consumer are called consumer sales
promotions where as Sales promotions targeted at retailers and wholesalers are called trade sales
promotions.
Sales Promotion, which is the fourth major component of the promotion mix, is direct and instant
inducement aimed at an immediate increase in sales. In a competitive market, sales promotion
comes handy to a marketer in meeting the short term sales requirements. It serves a supportive
activity to advertising and personnel selling. The primary elements in the promotional mix are
advertising, personal selling, direct marketing and publicity/public relations. Sales promotion uses
both media and non-media marketing communications for a pre-determined, limited time to
increase consumer demand, stimulate market demand or improve product availability. Examples
include contests, coupons, freebies, and loss leaders, point of purchase displays, premiums, prizes,
product samples, rebates and sweepstakes. Sales promotion includes several communications
activities that attempt to provide added value or incentives toconsumers, wholesalers, retailers, or
other organizational customers to stimulate immediate sales. These efforts can attempt to
stimulate product interest, trial, or purchase.
Sales Promotions are announced both by manufacturers and retailers. Manufacturers’ announced
promotions might be direct at consumers, resellers or both. Manufacturers may also announce
sales promotion for its sales force. Sales promotions may also originate from retailers aimed at
consumers. The
retailer originated promotions’ main objective is to increase store traffic rather than sell any
specific brand.Manufacturer announced consumer promotions constitute “Pull” strategy and
retailers’ promotions are based on “Push” strategy. Sales promotions are more effective when
combined with advertising and “pull- push” strategy are used at the same time. Sales promotion is
implemented to attract new customers, to hold present customers, to counteract competition,
and to take advantage of opportunities that are revealed by market research. It is made up of
activities, both outside and inside activities, to enhance company sales.
Outside sales promotion activities include advertising, publicity, public relations activities, and
special salesevents. Inside sales promotion activities include window displays, product and
promotional material display and promotional programs such as premium awards and contests.
Sale promotions often come in the form of discounts. Discounts impact the way consumers think
and behave when shopping. The type of savings and its location can affect the way consumers
view a product and affect their purchase decision.
The two most common discounts are price discounts (“on sale items”) and bonus packs (“bulk
items”).
Price discounts are the reduction of an original sale by a certain percentage while bonus packs are
deals in which the consumer receives more for the original price. Many companies present
different forms ofdiscounts in advertisements, hoping to convince consumers to buy their

products.
DEFINE SALE PROMOTION:
According to American Marketing Associations, Sales promotion is defined as, “those marketing
activities, other than personal selling, advertising and publicity that stimulates consumer
purchasing and other dealereffectiveness measures such as displays, shows, expositions,
demonstrations and various other non- recurrent selling efforts not in ordinary routine”.

It may also be defined as “any steps taken for the purpose of obtaining or increasing sales.
Sales promotion may also be defined as all the marketing and promotional activities other than
advertising,personal selling and publicity that motivate and encourage the consumer to purchase
by means of such inducements as premiums, refunds, rebates, displays and demonstrations.

OBJECTIVES OF SALE PROMOTION:

Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial,
where as free-management advisory service aims at cementing a long term relationship with a
retailer. Sellers use incentive-type promotions to attract new users, to reward loyal customers and
to increase the repurchase rates of occasional users. Sales promotions often attract brand
switchers, who are primarily looking for lowprice, good value or premiums. If some of them would
not have otherwise tried the brand, promotion can yield long term increase in market share. Sales
promotions in markets of high brand similarity can produce a high sales response in the short run.
Sales promotions induce consumers to try new products and lead to more varied retail formats,
such as everyday low pricing and promotional pricing. For retailers, promotions may increase sales
of complimentary categories as well as induce store switching. They promote greater consumer
awareness of prices.

The main objective of sales promotion is to bring about change in the demand pattern of products
and services. The specific objectives of sales promotion are as follows:

a) To introduce new products or services: Sales promotion is often used to motivate

prospective consumers to try new products and services. Dealers are also induced to
 introduce new products and services in the market. Usually free samples are provided
through dealers during such introduction. Similarly, discounts in cash or goods may also be
offered to the dealers to stock new products or deal with new services. Free samples, trade
discounts, cash discounts are basically sales promotion measures.

b) To attract new customers: Sales promotion measures also play an important role in
attracting new customers for an organization. Usually new customers are those persons that
are won away from other firms. Samples, gifts, prizes etc. are used to encourage consumers
to try a new brand or shift their patronage to new dealers.
c) To induce existing customers to buy more: Sales promotions devices are most often
used to induce the existing customers of a firm to buy more. Product development offering,
three products at the cost of two, discount coupons are some of the sales promotion
devices used by the firms to motivate the existing buyers to buy more of a specific product.
d) Helps the firm to remain more competitive: Most of the companies undertake sales
promotion activities in order to remain in the competitive market. Therefore in the modern
competitive world no firm can escape the responsibility of undertaking the sales promotion
activities.
e) To increase the sales in off season: Many products like air coolers, fans ,refrigerators,
air-conditioners, cold drinks, room heaters etc. have seasonal demand. Manufacturers and
dealers dealing with such types of goods make every effort to maintain a stable demand
throughout the year. In other words, firms try to encourage the purchase of such goods in
off season also. That is the main reason behind discounts and off season price deductions of
such items in the market during slack season.
f) To add the stock of the dealers: Dealers like wholesalers and retailers usually deal with
a variety of goods. Their selling activity becomes easier when the manufacturer
supplements their efforts by sales promotion measures. When a product or service is well
supported by sales promotion, dealers are automatically induced to have more of such
items.
ADVERTISING VERSUS SALES PROMOTION :
A decade ago, the advertising –to- sales promotion ratio was about 60:40. Today, in many
consumer-packaged-goods companies, sales promotion accounts for 75 % of he combined
budget(roughly 50 % is trade promotion and 25 % is consumer promotion). Several factors
contributed tothis rapid growth, particularly in consumer markets. Promotion became
more accepted by top management as an effective sales tool; the number of brands
increased; the competitors used promotions frequently; consumers became more prices
oriented, the trade demanded more deals from the manufacturers and advertising
efficiency declined.

TYPES OF SALES PROMOTION:

1. CONSUMER Promotions:
Sales promotions directed at end users are called consumers sales promotions.
Usually, consumer’s promotions are either “same or less” type and may get
translated into a straightprice-cut or added value.” Interest promotions” may or may
not require the purchase of anything such as free samples, free premiums, contests
and sweepstakes. The objectives of such promotions are to stimulate consumer’s
interests in products, services, activities and
special events. “Consumer franchisee building” promotions are those which reinforce
consumerbrand preference and include a product related selling message, such as in
case of free
premiums, free samples, coupons and patronage awards. “Non-franchisee building
“promotionsinclude price discounts, price packs, premiums not related to the purchased
product, contests and sweepstakes etc.
 Price Discounts (Also called cents-off): The customers pay certain amount
less than the regular price of the product or service if purchased within a
specified period. This can yield short term sales increase, can serve as an
incentive to try a new product, and can also help product sales during off
season. Broadly there are three types of price-off promotions such as :
I. Reduced Price Pack: Reduced Price pack is usually single product
offered at a reduced price.
II. Multiple Packs: Multiple packs are two or more packs of a product sold
at a reduced price.
III. A bonded pack is asset of two products bonded together at reduced
price. For example a pack containing toothpaste and tooth brush, soap
along with soap case etc. This device is generally used to attract
consumers for a particular period and in a particular occasion. The main
objective is to increase sales.
 Bonus–Pack: An additional quantity of the purchased product is offered free
with standard pack. The producer may develop special large sized pack
containing more product quantity but the price is proportionately low. A
variation of this offer is “buy two, take one free” These offers
are generally limited to low, bulk items or ready- to- wear dress, and sometimes
footwear. There are stray cases when a buyer would get a 14 inch-TV free with the
purchase of a 21-inch TV.

 Samples: It is an offer of some amount of a product or service free or at a

nominal price. The main objective of sampling is to induce initial product trial
and let the customer have the first hand experience with the product or
service. Sampling is most probably successful approach when the product is
new. The consumer is given small samples of the products free of cost or
allowed to use the product during a specified period. The distribution of
samples can be undertaken as:
I. Through retail stores.
II. As premium products.
III. Door to door distribution and
IV. Through mail Such distribution of free samples attempt to influence the
consumers in favour of purchasing the product. However, sampling is an
expensive technique as it involves huge amount both for preparation
and distribution of sample.
 Premiums: A premium (gift) is a reward given to the consumers for
performing a particular act, generally purchasing a product or service. The
premium may be free or available to the consumer by paying a price a well
below the regular market price. Getting a printer free with the purchase of a
computer or getting a Swiss knife well below the market price when the
consumer purchases a microwave oven are typical examples of premium.
Premium offers are introduced to attract new customers, improve off-
season sales, introduce new product or discourage price competition.
Premiums are of four types:
1. An In-Pack/on-Pack premium: It is a gift of low value article kept
inside the packet or outside or distributed along with the purchase.
2.A free in the mail premium: It is a gift usually sent to the buyers by mail
after the receipt of the proof of purchase.
 Self liquidating premium: It is a method of sending the item by mail
below the cost of the retail price to the consumers who send request for the
same. It is called self liquidating because the company usually covers the
cost of sales promotion. Reusable-container premiums are those which
have reusable value for the consumers. It should be noted that the items
offered as premiums are really useful for the consumers. To make primary
scheme operative, promotional information needs to be printed on the
pack and the premium as well.
 Refund or Rebate (the terms are used interchangeably): Rebate offer
refers to some amount of money repaid to customers sometime after the
purchase when the customer submits the special proof of purchase to
manufacturers. The manufacturer “refunds “part of the price paid by the
customers via mail.
 Frequent-user reward: These are incentives to reward those who
frequently purchase the products or service such as frequent flier incentives
to air passengers. The purpose is to encourage repeat purchases or repeated
visits to a particular retail stores. Locally grocery and general stores use this
approach on an ongoing basis for their customers to encourage store loyalty.
Usually such programs cover a fairly long period to offer customers ample
opportunity to respond favourably.
 Coupons: Coupons can be viewed as certificates offered by the
manufacturers or retailers that entitle the owner to some stated savings or
claim on the specified thing. Coupons bear the date of expiry and cannot be
redeemed after that date. Coupon is a versatile tool and can be used to
accomplish many different sales promotion objectives.
 Contests: Contest offers are made to consumers to participate in contests
and win cash prizes, holiday tours or goods. Under such sales promotion
schemes, consumers are requested to submit the evidence of their
purchases either in the form of cash memos, wrappers, and box tops along
with entry forms. Similarly contest calls are also made without any such
conditions. Sometimes participants are asked to answer some puzzles or
write a slogan about the product. Contests calls are also received by
telephones, fax or emails. All such contests generate considerable interest
amongst the consumers and ultimately lead to increased demand of the
product.
 Sweepstakes: Sweepstakes are adopted to increase the demand of a
product by creating consumer interest. It is some sort of a lottery. In this
device, consumers are provided with coupons containing serial numbers.
They are asked to fill up such coupons. All the coupons received from the
consumers are collected, lots are drawn among them and the winners are
selected for prizes both in cash and kind.
  Games: A game offers something to consumers such as missing numbers or
letters to complete a certain numbered digit or product or brand. A
consumer, who does it within the promotion period, wins the prize.
 Money return offer: Under this promotional scheme, the consumers are
provided with the option of money back, if they are not satisfied with the
product. This sales promotion device is usually adopted at the time of
introduction of a new product in the market or when the manufacturer does
not have enough goodwill in the market.
 Demonstration: This is one of the important sales promotion devices most
frequently used by the sellers of products and services. Through
demonstration, the potential buyers are provided with the experience of the
benefits and utilities of products and services. Such demonstrations are
undertaken at the time of the distribution of the samples or without the
same. At the time of demonstration of the product or service, consumers are
able to experience the merits, using process, nature and quality of the
product or services
personally. Usually bulky goods are demonstrated either at the dealer’s level
or at the workshop level where as light goods is demonstrated at the dealer’s
or consumer’s premises. The main aim of demonstration type sales
promotion is to propagate the technical aspects, merits and various usages of
the products and services among the consumers. Products like cosmetics,
new beverages, home appliances are usually promoted through this method.
 Buy more save more: This kind of deal entices the customer to buy more of
your stock, so it is a kind of a win, win. There will be plenty of potential
customers visiting your store that want to buy, but feel guilty because of the
price. Giving them a discount if they spend more, may just give them a little
shove in the right direction. You don’t have to offer a huge
discount, but make sure it’s attractive enough to convert visitors.

2. TRADE PROMOTION/ DEALER PROMOTION:

Trade promotions are directed at the resellers (Distributors, wholesalers and the
retailers). Trade sales promotions are part of “Push” strategy of
producers. The objectives of trade sales promotions are different from consumer’s sales
promotions. Producers realize the importance of retailers support. They are in the final
contact in distribution chain and can influence customers in more ways. Consumers
sometimes seek retailer’s suggestions before making a purchase and retailers in many
cases can influence the product choice. In fact dealers act as a vital link between the
producer and the ultimate consumer. Therefore a number of sales promotion devices
are adopted by the manufacturer to motivate the dealers from time to time. Following
are some of the important dealer’s aid for sales promotions.
 Trade allowance: The purpose of trade allowance is to offer
financial incentives to resellers in order to motivate them to make a
purchase. A trade allowance can be offered in a variety ways.
 Buying allowance: A producer pays a reseller some fixed amount or
money or discount for purchasing a certain minimum quantity of
 product within the specified period of time. The payment may be
given in the form of a cheque from the producer or the discounted
invoice. This sales promotion tool is frequently used for launching new
products as well as disposing off old ones.
 Free goods: Reseller is required to buy a certain number of product
cases and for each case purchased, a certain amount of free quantity
of the same product is offered. For example, the offer might be,
“one pack containing one dozen of product free on purchase of 12
packs. “ Thus the middlemen get some goods free of cost. This
method of sales promotion can be quite effective to counter
competition.
 Buy-back allowance: The buy-back allowance is paid at the first
purchase of the goods by the dealers. The dealer may utilize the
allowance of first purchase at the time of second purchase and the
allowance of the second purchase at the third purchase and so on.
Thus buy-back allowance becomes a continuous process and
provides momentum to the selling activities by the dealers.
 amount of agreed upon money to advertise the producer’s products.
This amount can be fixed rupee amount or a percentage of gross
purchase during a specified time period.
 Display allowance: This is a direct payment of money or free goods to
the retailers for each item purchased, if the party agrees to setup a
POP display, or running in- store promotional program as specified by
the marketer. The marketer requires the retailer to sign an agreement
specifying the activity to be performed before the allowance is given.
 Contests and incentives: Manufacturers sometimes use trade contests
and special incentives to stimulate greater support and selling effort
from dealers and salespeople and achieve the sales targets and other
objectives. The prizes might include items such as TV, Stereo and a trip
to exotic places etc. Sometimes these contests and incentives are
offered to salespeople of the distributors, dealers, wholesalers or
retailers. These rewards involve cash payment to sales people to
specially sell the producer’s products. This type of cash payment is
called push money or SPIFF/SPIF i.e. Sales Promotion incentives fund
formula / Sales promotion incentives fund.
 Co-operative advertising: When a producer agrees to pay advertising
allowance to the dealer for the product purchased, it is known as co-
operative advertising. Usually a long contract is made between the
manufacturer and the retailer whereby the manufacturer agrees to
pay an advertising allowance. Such advertising allowance stimulates
dealers to purchase more and more goods. The deal is usually based
on product quantity purchased. The dealer must show proof that the
Ads were released then only the payment is made. Most of these ads
appear in the newspapers.
 Sales contests: In this sales promotion device, the dealers are invited
to participate in sales contests which are specially conducted for
them. The main aim of conducting such sales contests among dealers
is to induce the dealers to increase sales at their level. Cash allowance,
Type of strategy :
free products supply, gifts and incentives of different kinds are offered
 ertising o dealers through such sales promotion programs.
Allowance:  Free foreign tours: Wholesalers and retailers who are able to
The achieve a specific volume of sales within a stipulated period are
manufacture offered free foreign tours as an incentive. Such offer motivates
r pays the dealers to sell the product aggressively.
dealer or  Training program: Manufacturers impart training about their own
retailer a brands to the sales staff of the wholesalers or the retailers at their
certain (wholesaler’s or retailer’s) locations.

1. Push strategy : A push promotional strategy is a marketing strategy that

sees companies take its products to its consumers. The goal of this strategy is to
get the product directly in front of the customers, in the form of trade shows and
point of sale displays. These are the most common push promotion strategies used
today:
  Direct selling to customers in showrooms
 Point of Sale (POS) displays
 Trade show promotions
 Package or display design

2. Pull Strategy A pull promotional strategy also called a pull marketing strategy,
is the opposite of a push strategy. Instead of directly attempting to get products in front
of customers, a pull strategy aims to get the customers to come to the product (hence
the term “pull”).

A pull strategy is all about getting the customer to come to you. There are six widely
used pull marketing strategies employed today:

 Advertising and mass media production

 Word-of-mouth referrals
 Customer relationship management
 Sales promotions and discounts
 Social media coverage
 Email marketing

Pull marketing strategies have gained momentum in the mobile-based world. With
geofencing, geotargeting, and similar technologies, pull strategies are becoming
increasingly easier and more reliable.
 Advantages of Sales promotions:
 Sales promotion activities generally stimulate the purchasing activities of
consumers.
 Sales promotion devices get direct and immediate response as it is
undertaken at the point of sale.
 Sales promotions can be utilized to boost sales at any stage; new
product Introduction stage, existing product improvement stage, old
product sales improvement stage and so on .
 Sales promotional activities help the organizations to increase
sales in intense competitive situations.
 Sales promotion necessarily supplements the personal selling
and advertising activities undertaken by and organization.
 The manufacturer with the help of sales promotion activities can easily
achieve a rapid turnover of stocks.

Disadvantage of sales promotions :

 The success of sales promotion activities largely depends on the
nature of the prospective buyers and product characteristics.
 Many promotional measures have limited and short-run impact on the
consumers. The benefits of these activities for the seller in most cases
are limited and short lived. Sales promotion is a costly form of
enhancing sales. It requires a heavy promotion budget. Hence it is not
feasible for small organizations.
 Sales promotion activities become counter-productive when they
are used to promote defective and poor quality of goods and
services.