CHAPTER 3

THEORETICAL FRAMEWORK

Our marketing world is becoming more and more competitive day by day.In this

context,where “survival of the fittest” has become the keyword,the role of sales promotion is

indeed great,in boosting the sale of products.Else no product can survive in this competitive

world,no matter how high the quality of the product is.

3.1 MARKETING

Marketing is the process of understanding customer needs and fulfilling

them.Effective marketing not only assures a demand for the product but supplies the desired

product at a competitive price and makes it easily accessible.The essence of marketing is

providing desired value to customers. It includes the coordination of four elements called the

4 P's of marketing:

(1) identification, selection and development of a product,

(2) determination of its price,

(3) selection of a distribution channel to reach the customer's place, and

(4) development and implementation of a promotional strategy

MARKETING DEPARTMENT

The marketing department must act as a guide and lead the company's other departments in

developing, producing, fulfilling, and servicing products or services for their customers.

Communication is vital. The marketing department typically has a better understanding of the

market and customer needs, but should not act independently of product development or

customer service. Marketing should be involved, and there should be a meeting of the minds,

whenever discussions are held regarding new product development or any customer-related

function of the company. So, the marketing department studies the market and the

customers, determines the best way to reach those customers, and works with the rest of the

company to help determine the new product needs of the market and represent the company

in a consistent voice.

MARKETING STRATEGIES

A strategy is a plan of action designed to achieve long-term objectives.

RUBCO is a well-reputed company,having lots of competitors.The organisation

modifies its strategy based on the policies followed by its competitors.It has attained wide

market coverage in Kerala within a very short period.

Today Kerala market is dominated by RUBCO mattress industry.Its marketing

strategy is the reason behind its exclusive growth.It has started expanding its markets all over

south India to attain its target turnover.Planning for introducing new products into market and

entering untrapped segments is their innovative strategy.

MARKETING OBJECTIVES

Provision of quality products at reasonable price

Creation of demand

Customer satisfaction

Boosting the sale of products

Providing wide choice of goods to customers

PROMOTION

Any method of communication that a marketer may use to provide information to

different parties about the product is called promotion. Promotion comprises of

elements such as:advertising, public relations and sales promotion.

Advertising covers any communication that is paid for, from cinema commercials,

radio and Internet advertisements to print media and billboards. Public relations is

where the communication is not directly paid for and includes press releases,

sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word-

of-mouth is any apparently informal communication about the product by ordinary

individuals, satisfied customers or people specifically engaged to create word of

mouth momentum. Sales staff often plays an important role in word of mouth and

public relations.

SALES PROMOTION

Sales promotion describes promotional methods using special short-term techniques

to persuade members of the target market to purchase a product. It is an important component

of the marketing communications mix. It is essentially a direct and immediate inducement. It

adds extra value to the product and hence prompts the dealer/consumer to buy the product.

According to American Marketing Association, “These marketing activities, other

than personal selling, advertising and publicity that stimulate consumer purchasing and dealer

effectiveness such as display shows and exhibitions, demonstrations and various non-

recurrent selling efforts not in the ordinary routine”.

According to Philip Kotler, “Promotion encompasses all the tools in the marketing mix

whose major role is persuasive communication”.

Peattie points out the three ways that sales promotions can increase profit

margins, which are another reason for its growth:

*Attracting new customers

*Increasing consumption by consumers

*Switching consumers to goods with higher profit margins

Sales promotions are often confused with advertising. The key difference between advertising

and sales promotion is the nature of the appeal to the consumer. Advertising is emotional in

nature and the objective is to create an enduring brand image. Perfumes, makeup and

jewelery need imaginative advertising to create the allure needed to sell these products. Sales

promotions, on the other hand, are unemotional in their approach. A cents-off coupon for

cereal appeals to the consumer's rational mind and is a sales promotion. The consumer

weighs the price of one cereal brand versus others.The inclusion of a timing constraint and an

activity requirement are hallmarks of sales promotion.

In the words of P.T. Barnum,”something terrible happens without

promotion-nothing”

Sales promotions are used by a wide range of organizations in both the consumer and

business markets, though the frequency and spending levels are much greater for consumer

products marketers. One estimate by the Promotion Marketing Association suggests that in

the US alone spending on sales promotion exceeds that of advertising.

Objectives of sales promotion

The main objective of sales promotion is to bring about a change in the demand

pattern of products and services. Basically, sales promotion has three specific objectives.

First, it is meant to provide important marketing information to the potential buyers.The

second objective is to convince and influence the potential buyers through persuasive

measures. Thirdly, sales promotion is meant to act as a powerful tool of competition. 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 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

organisation.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 promotion 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 firms to motivate the existing buyers to buy

more of a specific product.

d. Helps the firm to remain 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 sales promotion activities.

e. To increase sales in off-seasons:

Many products like air-coolers, fans, refrigerators, air-conditioners, cold drinks, room

heaters, etc. have seasonal demand. Manufacturers and dealers dealing with such type 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-seasons also and that is the

main reason behind discounts and off-season price reductions of such items in the market

during slack seasons.

f. To add to 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.

BENEFITS OF SALES PROMOTION

RUBCO has been investing much in various sales promotional activities right since its

infant stage and the company has succeeded in gaining a huge market share as a

result.Following are the benefits of sales promotion:

1. Creates differentiation – When launching a new product or asking customers to engage

with the business in a new way, it sets the company apart from the competitors. 

Promotion planning compels the company to identify something new or different that

offers value to its customers.

2. Creates new content and communication opportunities  – One of the easiest way to

create new content for customers is to create news.  Promotion is nothing but ‘news’. 

3. Creates upsell opportunities  – When the company packages or bundles products

around a theme or solution, it can often generate sales of multiple items rather than a

single item. 

4. Drives customer decision making – Limited availability offers can create a sense of

scarcity in the company’s customer. By sales promotion, the company'll create a lot of

reasons for customers to buy.

5. Creates word-of-mouth opportunities – If the company operate a retail store, the

company’s regular customers are almost always in a routine to buy from the company. 

Promotions can often get the company’s regular customers a new reason to be surprised

and delighted by the company’s business which gets them to talk about the company  to

their friends.

6. Creates training opportunities for the company’s staff – Like regular customers, the

company’s retail sales staff (or any employees who have direct contact with customers),

can fall into a routine and lose the enthusiasm in their voice.  Promotions give the

company a chance to to train, prepare and reengage them in what’s new in the company’s

business.

7. Creates company focus on marketing – Developing a promotion calendar forces the

company to plan for new marketing programs focussed at specific times of year.  creating

a promotional mentality will give the company more experience to build on.

8. Creates testing opportunities  – Maybe the company has ideas that it thinks customers

will like but are unsure of the outcome.  Promotions give the company a limited time

window to test new ideas and new products and to measure them.  This will help the

company figure out whether they want,then make additional investment of time and

money to make them permanent products or services.

9. Grows revenue –Revenue is the lifeblood of the company’s business.  Sales promotions

are a great way to build year-over-year and month-over-month revenue growth.

 

DISADVANTAGES OF SALES PROMOTIONS

While sales promotion is a powerful and effective method to produce immediate short

term positive results, it is not a cure for a bad product or bad advertising. In fact, a promotion

will speed up the killing of a bad product. Disadvantages of sales promotion are:

• Increased price sensitivity

Frequently promoted brands in the product category, especially on the basis of price, make

consumers and traders more price sensitive not only for the promoted brands but for other

brands as well in the same product category.

Consumers wait for the promotion deals to be announced and then purchase the product. This

is true even for brands where brand loyalty exists. Customers wait and time their purchases to

coincide with promotional offers on their preferred brands. 

• Quality image may become tarnished

If the promotions in a product category have been rare, or the product happens to be of high

involvement category, the promotions could have a negative effect about its quality image.

Consumers may start suspecting that perhaps the product has not been selling well, whether

the quality of the product is true compared to the price or the product is likely to be

discontinued because it has become outdated. 

• Dealers forward buy and divert stocks

In case of deals for the trade, many dealers forward buy, in excess of their inventory

requirements. This particularly happens if a product is in bulk, much in demand and the

inventory holding costs are favourably low. This is true both for wholesalers as well as

retailers.

Wholesalers and retailers do not hesitate in selling these excess stocks in non- deal areas on

prices that are less than the list price, but keeping some reasonable margin for themselves.

This is likely to have a negative effect on price discrimination efforts of the company as

dealers and those areas would not be buying even the normal requirements from the

company.

• Merchandising support from dealers is doubtful

One of the trade promotions tool is to offer promotional allowances to trade people to

motivate them to provide merchandising support and to pass on some benefit to consumers.

This generally is the condition attached with such promotional allowances. In many cases, the

dealers do not cooperate in providing the merchandising support nor do they pass on any

benefit to consumers. The retailer might not be willing to give support because he does not

have the place, or the product does not sell much in his shop, or may be he thinks the effort

required is more than the commission/benefit derived. 

• Short-term orientation

Sales promotions are generally for a short duration. This gives a boost to sales for a short

period. This short-term orientation may sometimes have negative effects on long-term future

of the organization. Promotions mostly build short-term sales volume that is not maintained.

Heavy use of sales promotion, in certain product categories, may be responsible for causing

brand quality image dilution. 

The argument given in favour is that companies should develop superior products or services

which are better than competitors and consumer should be convinced through appropriate and

focused advertising about the superiority of the product and its image. This will result in

lasting brand identities reflecting consumer values. Then there will be no need to offer any

extra benefits; the lasting brand image will keep customers loyal to the brand.

SALES PROMOTION TECHNIQUES

Consumer Sales Promotions - target the end user or the customer such as coupons or

point of purchase displays.

Trade Sales Promotions - target organizational customers such as dealers, distribution

channels or sales teams that stimulate immediate sales such as sales incentive contests

or dealer wholesale price discounts.

Consumer Sales Promotions

Free samples

Advertising may tell the consumer how good, useful, reliable or tasty , a new product

is but they do not get to touch it, smell it or taste it. By using a trial via attaching to an

existing product or giving out in store ,the consumer gets to feel and get first- hand

experience . A free sample is a portion of a product given to consumers at no cost for

their trial with the aim of driving the product. It is also possible to purchase products in

small "trial size" containers. This is common with toiletries such as shampoo.

Key Points

The purpose of a free sample is to acquaint the consumer with a new product.

Small "trial size" containers of products are also classified as samples.

Rewards 

The consumer can be fickle and switch brands purely on the basis of price,

but they can also form relationships with a brand.If the company rewards

the consumer for buying their product or using their service they will feel

appreciated and the relationship will be closer. Gifts can re-enforce loyalty

and free samples can inform existing customers about new developments.

Coupons

Coupons are certificates that provide consumers with discounts on goods or services

when they are redeemed with retailers or manufacturers. Consumers are attracted to

coupons because they offer immediate value and savings. Coupons have historically been

fairly efficient at getting consumers to try new products by reducing the risk of trying

something new. Coupons are also issued to convert trial users into regular customers,

such as when a product sample includes a cents-off coupon. In addition, coupons can be

used to convince consumers to make purchases of new sizes, flavors, or forms of an

established product. There are several ways in which small businesses can distribute

coupons, including direct mail, in-store or central location, by electronic mail, print

media, in-pack and on-pack, and through retailer advertising.

On-line couponing: Coupons are available online. Consumers print them out and take

them to the store.

Mobile couponing: Coupons are available on a mobile phone. Consumers show the

offer on a mobile phone to a salesperson for redemption.

Advantages and Disadvantages

Like other sales promotion tools, coupons have their advantages as well as their

problems. On the positive side, they have the advantage of passing along savings directly to

consumers,who perceive coupons as a temporary special offer rather than a price reduction,

so the withdrawal of coupons usually does not have an adverse effect on sales.On the

negative side, excessive coupon distribution also increases the likelihood of fraud and

misredemption.

Premiums

Premiums are prizes, gifts, or other special offers consumer receive when purchasing

products.

Key Points

Premiums fall into one of two categories: free premiums which only require the

purchase of the product and self-liquidating premiums which require consumers to

pay all, or some, of the price of the premium.

Premiums can actually enhance an image and were, in fact, the basis of of the first

loyalty marketing programs.

To insure a successful program, match the premium to a target market by selecting

one that reinforces the firm's product and image. Integrate the premium with other

marketing tools such as advertising and POP displays.

In-or On-package Premiums : usually small gifts, such as toys in cereal or candy

boxes

Free In-The-Mail Premium

Such premiums are gifts individuals receive for buying a product.The marketing

objectives of such premiums are to:

Promote multiple brand(s) purchases;

Increase brand recognition and customer awareness;

Encourage new or additional brand use;

Make brands more user-friendly; and

Reward loyal consumers.

The benefits of Free-In-The-Mail Premiums are that:

They add value and are brand related;

There is no need for elaborate packaging; and

They allow larger premiums to be offered.

Loss leader:

The price of a popular product is temporarily reduced below cost in order to stimulate

other profitable sales

Price packs

Sales promotion technique that provide consumers with a reduced price that is marked

directly on the package by the manufacture. Here two or more products are given

together at the price of one or at discounted rates. A bonus pack is a special factory

pack that offers the consumer extra product at no additional cost .And if the customer

does not want this price pack individual product is also available at the same time.

Rebate /Refund offer

It is an amount paid by way of reduction, return, or refund on what has already been

paid or contributed,if customers are not satisfied with the product. Rebates are offered by

either the retailer or the manufacturer of the chosen product. In some cases, the rebate is

available immediately, in which case it is referred to as an instant rebate. Some rebate

programs offer several payout options to consumers, including a paper check, a prepaid

card that can be spent immediately without a trip to the bank. Unlike coupons, customers

must mail the rebate to the manufacturer to get their money back.

The information given in the rebate form, such as name, address, method of payment,

can be used for data mining studies of consumer behavior.

The information can be used as evidence of a pre-existing business relationship for

marketing purposes, such as 'do not call' lists.

Rebates offer retailers the benefit of giving customers a temporary discount on an

item, to stimulate sales, while allowing it to maintain its current price point.

Rebates allow companies to "price protect" certain product lines by being selective in

which models or brands to be discounted.

During the turnaround time, the company can earn interest on the money. New

companies that want to break into a market can offer substantial rebate savings on

their new product as a means of capturing a customer's attention.

Buy-back allowanceThis promotion offers channel partners price breaks for agreeing to stock the product.

In most cases the allowance is not only given as encouragement to purchase the

product but also as an inducement to promote the product in other ways such as by

offering attractive shelf space or store location, highlighting the product in company-

produced advertising or website display, or by agreeing to have the retailer’s sales

personnel “talk-up” the product to customers.

Allowances can be in the form price reductions and buy-back guarantees if the

product does not sell in certain period of time.

Trade sales promotion techniques Sales promotion aimed at wholesalers and retailers.

Trade allowances:

Short term incentives offered to induce a retailer to stock up on a product.

Dealer loader:

An incentive given to induce a retailer to purchase and display a product.

Trade contest:

A contest to reward retailers that sell the most no.of products.

Push money:

Also known as "spiffs". An extra commission paid to retail employees to

push products.

Trade fairs and Exhibitions

Trade fairs are massive, stage-set, and usually regular trade events at which a large

number of manufacturers from a particular industry present their products and show

their capabilities to distributors, wholesalers, retailers, and end-users. Some trade fairs

attract participants and visitors from all over the world and provide widespread

interactions and exposure. Trade fairs are a popular means of sales promotion because

their average cost of making a face to face contact is about 44  percent of a

personal sales visit.

Aided by their 'live' nature, exhibitions are the only promotional media offering the

following benefits:

Highly targeted - With their carefully focused profiles, and highly targeted audiences,

exhibitions allow to direct the sales and marketing effort accurately and cost-effectively,

with minimum wastage.

The buyer comes to you - Exhibition visitors are pro-active buyers. They make a

conscious decision to attend, and set aside valuable time to do so.

3D sales & promotion – Nothing beats the impact of a live demonstration. At an

exhibition buyers can see, taste, touch and try your product for themselves.

Face to face contact - The most persuasive form of selling, and of building customer

relationships.

Neutral sales environment – The buyer feels under no great pressure to buy, while the

seller is not intimidated by visiting the buyer on his home territory.

Fast market penetration – You can reach a large proportion of the market in a short space

of time, achieving more in four days than you might otherwise achieve in months.

A powerful combination - Exhibitions combine the mass reach of advertising, the

targeting of direct mail, the persuasive power of face-to-face selling, and the networking

benefits of the Internet, to create a unique environment in which a wide range of sales and

marketing objectives can be pursued, either singly, or side by side.

Risks

Trade shows require at least a day and probably more of your time.

Travelling to trade shows can be costly.

Displaying at a trade show can also be costly.

There will probably be quite a bit of competition at all shows.

Choosing the wrong trade show to exhibit the business's products or services can result in

displaying to the wrong audience. Poor promotion can mean the costs of attending the trade

show outweighing any revenue the company gains.

Point-of-sale display (POS) It is a specialized form of sales promotion that is found near, on, or next to

a checkout counter (the "point of sale"). They are intended to draw the customers'

attraction to products, which may be new products, or special offer, and are also used

to promote special events, e.g. seasonal or holiday-time sales. POS displays can

include shelf edging, dummy packs, display packs, display stands, mobiles, posters,

and banners.

Common items that may appear in POS displays year-round are batteries, soft

drinks, candy, chewing gum, magazines, comics, tobacco, and writable CDs and DVDs.

These displays are also useful in outlets with limited floor space, as there tends to be much

wasted space around counters..

TERMS

Light Box

A box like point of sale display using florescent bulbs to illuminate a poster inserted from

the side or rear of the box.

Impulse Buying

Buying prompted by an emotional reaction to an item that is strategically placed and

designed in such a way as to motivate and cause a consumer to take action. 

Disposable Displays

Displays made of cardboard or other inexpensive that can be discarded after use.