Sales Promotion and Its Effectiveness in a Longer Term Assignment

Sales Promotion and Its Effectiveness in a Longer Term Assignment Words: 2339

Introduction: Marketing Communications is an activity which is always ‘audience-centered’ and organisations or people who are thinking of Marketing Communications should always give the first and foremost preference to the audience (Fill, 2006) There are theoretical frameworks and models which persuades individuals, managers to create and present the brand to end consumers (Rossiter & Bellman, 2005).

With new insights, tools, opportunities and ever increasing challenges, marketing communications mix is changing in this 21st century. (Smith & Taylor, 2004). Some of the promotional mix includes advertising, sales promotion, personal selling, direct marketing, sponsorship, exhibitions, packaging, point-of-sale, merchandising, publicity, public relations, word of mouth etc. Marketing Communications Strategies and Objectives:

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Generally, there are many applications to build a marketing communications plan with no single approach, but there are elements and components like SOSTAC which helps to create a plan within major sectors like marketing / marketing, corporate communications. SOSTAC cane be described in a graphical manner: |S |Situation Analysis |Where are we now? | |O |Objectives |Where do we want to go? |S |Strategy |How do we get there? | |T |Tactics |The details of strategy. | |A |Action |Implementation | |C |Control |Measurement, monitoring, reviewing and modifying. | Source ??? Smith & Taylor, (2004)

A Contemporary perspective of IMC’s strategies: Increased competition and with supply exceeding demand; there is an alteration in power towards distribution channels which has taken place now (Kitchen & Burgmann, 2010). So, a long term relationship with the customers is very important for any business in today’s marketplace. In a world like this now strategies like relation with the intermediaries are interdependent but not integrated to create customer oriented communication messages within the related distribution channels.

Also, to provide the manufacturer the possibility to create and develop customer-specific products (Pickton and Broderick, 2005; Schultz and Schultz, 2003; Schultz, 1993c). To determine communicational objectives there are different theories which are categorised depending on different communications models. Different models in this process has different stages. Discussed below are a) Cognitive stage ??? Customer awareness stage towards the product. b) Affective stage ??? Gathering information and opinions about the product. ) Behavioural ??? Purchasing situation or taking action depending on the first two stages But the best known model is AIDA ( Attention, Interest, Desire, Attention) where it reflects a clearer picture about the different stages and shows the different phases of a product until its consumed (Rowley, 1998). Sales Promotion ??? Contribution, Objectives, Roles: Sales Promotion can be defined as a temporary or short term period offer like incentives provided by marketers to prospective customers and intermediares (Raju, 1995).

It constitutes different marketing approaches tactically to add value to an offering. Its objectives are to accelerate sales and collect information by data mining techniques. Its attributes to add value to future sales are strong, thereby complementing it to a macroeconomic need and focussing on short term financial performance (Fill, 2009). There are different techniques that are used for promotional purposes such as BOGOF (Buy-One-Get-One-Free) offer, Customer Relationship Management (CRM) ncentives, Using of new media like websites and mobile phones to send a unique code to win a prize, Merchandising, Free Gifts, Discounted Prices, Joint promotions, Free samples, Coupons and Vouchers, Competitions and Prize draws etc. These are mostly customer centric (Joseph, 2011). So, promotions directed towards consumers are known as ‘Consumer Promotions’ and those offered to trade are known as ‘Trade Promotions'(Raju, 1995). Sales promotion functions covers diverse segments such as consumer programs, trade and sales force where consumer programs takes one-third of its total sales.

In overall, it helps the IMC and organisation as it can be targeted at the important audiences and intermediaries to improve shelf positions, displays and market share but also there are negative repercussions associated with it which needs to be analysed and evaluated (Hartley & Cross, 1988) In IMC, Sales Promotion contributes by increasing volume, trial, repeat purchase, loyalty, create interest about the product, deflect attention from price, discrimination amongst users to achieve organisational success (Cummins & Mullin, 2002).

The functions of Sales Promotion is diverse and is conceptualized with domain specific sensitivity as generalized, behavioural and cognitive (Laroche, Pons, Zgolli, Cervellon, & Kim, 2003). The generalized functions will represent a kind of strong inducement that offers an extra incentive to purchase the product (Schultz and Robinson, 1982) which is a key element in a promotional programme. Promotional programmes also provides an ‘added value’ to a ‘core product’ where the brand value and perceived prices gets changed, according to the consumers (Strang, 1983).

It maximizes sale volume and meets the immediate targets to boost up the market shareholder value and selling process (Nelsin et al. , 1984). There are functions which deals with cognitve and behavioural dimensions supporting the presence of the mental process that goes through the consumers at the initial stages of responses to Sales Promotion (Shimp and Kavas, 1984; Mittal, 1994; Burton et al. , 1998).

Sales Promotion’s becoming more important for the attainment to achieve Marketing Communications objectives as there has been a power transfer balance from manufacturers to retailers for which meant that the cost savings happened due to ‘below the line’ promotion. It helped to target the middle class consumer segment base to opt for a price sensitive deal than a brand specific one in a cheaper manner thus boosting sales in a shorter period of ime thereby helping the overall IMC’s success. It is more effective becuase it is much more simpler than advertising where there is a need of ‘Advertising effectiveness ‘ towards the product and which is expensive (Laspadakis, 2006). The short run profitability of Sales Promotion has attributes with added value benefits which supports the acceleration of sales volume. It is visible when conducting the cost-benefit analysis of the promotional activities.

Fine tuned and tailor made offerings made successfully motivates the target audience to purchase a product or a service which generally means an action without incurring unproductive costs which is profitable for the company and also for the consumer thus creating a win-win situation for that time. To epitomize this we can contemplate coupons which has a higher face value for a short period of time for which the customers will likely to redeem them.

It then helps to boost the sales tactically but everything depends on the redemption rate sensitivity, brand sales and profitabilty where if coupon promotions are provided at an optimum face value (Srinivasan & Anderson, 1998). So, overall Sales Promotion helps to pave the way to attain Marketing Communication objectives with the process of informing (creating attention), persuading (creating and retaining the attraction towards the product) and finally behavioural (action taken depending on the first two process / consumer purchasing decision) in the different stages. Evaluation of Sales Promotion: Effectiveness, Advantages and Limitations:

Sales Promotion is percieved as a ‘short term result oriented’ activity as it gives great short term results with a persuasive cause link effect. It gives the product a measurable boost in a short period of time to help the organistaion meeting its targets. Its very useful when compared to high expenses of advertising because on a cost benefit basis it provides better results, as it has a wide range of promotional methods available on any budget with a relevant programme. Generally its effectiveness has grown from ‘tangible packaged goods’ to the ‘intangible service sector’ due to its immediate success.

For example, British Airways offers sweepstakes by offering free seats, rolls royce tours, use of london townhouse due to the fear of loosing US customer base because of terrorism. It is also important when targeted at the intermediaries- a very important audience to improve market share, shelf positions and displays (Hartley and Cross, 1988). There are different methods/techniques to evaluate the effectiveness of the promotional activities. A particluar product is measured with its base line of sales without promotion compared to its actual sales during a promotional period.

The best known method to analyse this would be SPAR (Sales Promotion Analysis Research) model where there are parameters related with the seasonality of demand, product modifications, adjustments in price, competitive deal activity and other variables (Kimball, 1989). Sometimes the effectiveness are more when promotions are implemented jointly than seperately because there needs to be a synergy between types of promotions, profitabilty and brand sales to develop an optimum value creation of the product (Kumar and Leone, 1988).

One of the common problems though in evaluating the value of sales promotions is to quantify the benefits of promotions to that of the cost of promoting products (Srinivasan and Anderson, 1998). According to a report from ‘Fix-a-form International’ a label specialist research agency, found out that one-fourth of food and drink purchases are mostly influenced by traditional sales promotion methods like direct mails or handling a competition form. Promotions offering added value gained much more importance than branding, competitions and prize draws, survey reports says (Sales Promotion has more influence than ads, says report, 2007).

Promotional activities involve and generate certain product/service related benefits by certain methods and strategies to accelerate sales such as offering an alternative option to alter the core product to an augmented one, creating a differentiation opportunity, adding a tangible importance to a service, Quality cue appeal. There are clutters which contributes to sales promotions limitations and disadvantages as well, the prevalent one is the impact on ‘brand equity’ when promotion is used in the longer term.

The post promotion period has more influence over sales promotion where its been observed that promotion can spoil the brand’s equity even if its been raised by advertising (Jedidi, Mela, & Gupta, 1999). Some of the limitations that can be well understood would be its expensive sampling, lack in precision. The discussing factors towards the adverse effects comprises certain issues with price degradations where continuous usage of price oriented promotions can reduce the lowest acceptable price under a consumer’s consideration while repeated promotion can degrade the perceived value of the product.

It also cannibalizes future sales as the consumers purchases more than they need, holds back the inventory and thereby change the product’s demand. It can lead to misusage as misredemption, theft can happen with coupons and premiums (Hartley and Cross, 1988). A good example of promotion’s diverse effect can be seen in germany where liberalised laws is taking a toll on product purchases where promotions can’t be levied to some specific products and cash discounts can only be till 3% and lifetime gurantees are generally forbidden.

Other European countries like Belgium, France and Austria have tough trading limitations too (Handcuffs on the high street, 2000). Sales Promotion in the longer term: There are mixed reactions over the effects of sales promotion in the long run where it has been seen that it can damaged the brand’s equity. According to (Winer, 1986) promotion gives birth to more future expectations over the product thus forcing the marketer to cut down even more of its prices. On the other hand (Davis et al. , 1992; Ehrenberg et al. 1994) suggested that there are no negative effects over price promotions (Raju, 1994). Long term promotion can also change the consumer’s purchasing behaviour because it only impacts when the process is for a short term period (Jadidi, 1999). The effects in the long run or post promotional period would be tough and it is suggested that a company who has diverse range of products can strategise more on developing a new product to play a monolply game in the market till the competitor comes.

Or, they can slash the prices but not for too long if the product is above ‘High Involvement’ because then the brand value can be ‘devalued’ to certain audiences. This two strategies will help the organisation to cope up with the post promotional period when the sales drops due to ‘Inventory Hold’ by the consumers. On a conclusion it is difficult to measure and quantify the impact of sales promotion to that of price so there should be more empirical researches to find out how effective can sales promotion be, both in the short and the long run. References List:

Cummins, J. , & Mullin, R. (2002). Sales Promotion – How to create, implement and integrate campaigns that really work. London: Kogan Page Ltd. Fill, C. (2006). Simply Marketing Communications. Harlow: Prentice Hall. Fill, C. (2009). Marketing Communications – Interactivity, Communities and Content. Harlow: Prentice Hall. Handcuffs on the high street. (2000, May 11). Retrieved May 1, 2011, from The Economist: http://www. economist. com/node/333673? story_id=333673 Hartley, S. W. , & Cross, J. (1988). How sales promotion can work for and against you.

The Journal of Consumer Marketing , 5 (3), 36-37. Jedidi, K. , Mela, C. F. , & Gupta, S. (1999). Managing Advertising and Promotion for Long Run Profitabilty. Marketing Science , 18 (1), 1-22. Joseph, C. (2011). Sales Promotion. Retrieved May 1, 2011, from marketing teacher: http://www. marketingteacher. com/lesson-store/lesson-sales-promotion. html Kimball, R. (1989). An exploratory report of sales promotion management. The Journal of Consumer Marketing , 6 (3), 66-73. Kitchen, P. J. , & Burgman n, I. (2010). Integrated marketing communications.

Wiley International Encyclopedia of Marketing , 5-6. Laroche, M. , Pons, F. , Zgolli, N. , Cervellon, M. -C. , & Kim, C. (2003). A model of consumer response to two retails sales promotion techniques. Journal of Business Research , 56, 513-522. Laspadakis, A. (2006). The dynamic role of sales promotion . In P. J. Kitchen, Marketing Communications: Principles and Practice (pp. 293-300). Singapore: Thomson . Peattie, K. , & Pettie, S. (1995). Sales Promotion – a missed opportunity for service marketers? International Journal of Service Industry Management , 6 (1), 22-39.

Peattie, S. (2002). Applying Sales Promotion competitions to nonprofit contexts. International Journal of Nonprofit and Voluntary Sector Marketing , 8 (4), 354-363. Raju, J. S. (1995). Theoretical models of Sales Promotions: Contributions, limitations, and a future research agenda. European Journal of Operational Research , 1-17. Rossiter, R. J. , & Bellman, S. (2005). Marketing Communications: Theory and Applications. Australasian Marketing Journal , 13 (2), 77. Rowley, J. (1998). Promotion and Marketing Communications in the information marketplace.

Library Review , 47 (8), 383-387. Sales Promotion has more influence than ads, says report. (2007, December 19). Retrieved May 1, 2011, from Promotional Marketing: http://www. promomarketing. info/? PAGEID=003142=sales%20promotion Smith, P. R. , & Taylor, J. (2004). Marketing Communications- An integrated approach (4th ed. ). London: Kogan Page. Srinivasan, S. S. , & Anderson, R. E. (1998). Concepts and strategy guidelines for designing value enhancing sales promotions. Journal of Product and Brand Management , 7 (5), 410-420.

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