Purpose of Sales Promotion

Purpose of Sales Promotion

Sales promotion tools vary in their specific objectives. For example, a free sample stimulates consumer trial­, a free management advisory service cements a long­ term relationship with a retailer. Sellers use sales promotions to attract Jiero triers, to reward loyal customers and to increase the repurchase rates of occa­ sional users.

There are three types of new trier: consumers of the product category, loyal users of another brand, and users who frequently switch brands. Sales promotions often attract the last group ­ brand switchers ­ because non­users and users of other brands do not always notice or act on a promotion. Brand switchers are

looking mostly for low price or good value. Sales promotions are unlikely to turn them into loyal brand users. Thus sales promotions used in markets where brands

are very similar usually produce a high short­run sales response, but little perma­ nent market­share gain. In markets where brands differ greatly, however, sales promotions can alter market shares on a long­term basis.

Many sellers think of sales promotion as a tool for breaking down brand loyalty and advertising as a tool for building up brand loyalty. Thus an important issue for marketing managers is how to divide the budget between sales pro­ motion and advertising. Ten years ago, marketing managers would typically first decide how much they needed to spend on advertising and then put the rest into sales promotion. Today, more and more marketing managers first decide how much they need to spend on trade promotion, then decide what they will spend on consumer promotion, and then budget whatever is left over for advertising.

There is a danger in letting advertising take a back seat to sales promotion, however. Reduced spending on advertising can result in lost consumer brand loyalty. And there are other dangers. For instance, when a company uses price promotion for a brand too much of the time, consumers begin to think of it as a cheap brand. Or many consumers will buy the brand only when there is a special offer. Marketers therefore rarely use sales promotion for dominant brands because it would do little more than subsidize current users.

Most analysts believe that sales promotion activities do not build long­term consumer preference and loyalty, as does advertising. Instead, they only boost short­term sales that cannot be maintained. Small­share competitors find it

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advantageous to use sales promotion because they cannot afford to match the large advertising budgets of the market leaders. Nor can they obtain shelf space

without offering trade allowances or stimulate consumer trial without offering consumer incentives. 32

Despite the dangers, many consumer packaged­goods companies have had to use sales promotion more than they would like. Recently, however, traditional brand leaders like Kellogg's, Kraft and Procter & Gamble have been putting more emphasis on 'pull' promotion and increasing their advertising budgets. They blame the heavy use of sales promotion for decreased brand loyalty, increased consumer price sensitivity, a focus on short­run marketing planning and an erosion of brand­quaiity image.

Some marketers dispute this criticism, arguing that the heavy use of sales promotion is a symptom of these problems, not a cause. They point to more basic causes, such as slower population growth, more educated consumers, industry overcapacity, the decreasing effectiveness of advertising, the growth of reseller power and business's emphasis on sbort­run profits. These marketers assert that sales promotions benefit manufacturers by letting them adjust to short­term changes in supply and demand and to differences in customer segments. Sales promotions encourage consumers to try new products instead of always staying with their current ones. They lead to more varied retail formats, such as the everyday­low­price store or the promotional­pricing store, which give consumers more choice. Finally, sales promotions lead to greater consumer awareness of prices, and consumers themselves enjoy the satisfaction of taking advantage of price specials. 33

Kales promotions are usually used together with advertising or personal selling. Consumer promotions are normally advertised and can add excitement and pulling power to ads. Trade and sales force promotions support the firm's

personal selling process. In using sales promotion, a company must set objectives, select the right tools, develop the best programme, pretest and implement that programme, and evaluate the results. We will examine each of these issues in turn.