SDM-Ch.

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 Learning Objectives
• To understand what is sales promotion
• To know benefits and drawbacks of sales
promotion
• To learn different types of sales promotions
• To know how sales promotions support sales
• To understand coordination between sales
promotion, advertising, and personal selling
• To learn about evaluation of sales promotion

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 What is a Sales Promotion?

Sales promotion consists of a diverse collection

of incentive tools, mostly short-term, designed to

stimulate quicker or greater purchase of particular

products or services by consumers or the trade.

- Philip Kotler
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 Benefits of Sales Promotion

To Manufacturers
• Gives higher short-term sales
• Can introduce price differences of products /
services.
• Induces trials by prospects
• Helps to build a database
• Is easy to design and implement
• Is less expensive – even for small
manufacturers.

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 (continued)

Benefits of Sales Promotion

To consumers
• Helps brand switchers pay lower prices
• Useful for price – sensitive customers.
To Traders
• Allows many retailers / dealers do forward
buying
• Makes new brands / products less risky
• Increases customer traffic

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 Drawbacks of Sales Promotion
To manufacturers
• Reduces brand value, if used often.
• Dilutes quality image, if used continuously.
To consumers
• Confuses consumers, if all brands offer sales
promotion deals.
To traders
• Makes traders price-sensitive
• Permits manufacturers put pressure on resellers
for higher stocks.
• Increases competition from other intermediaries.
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 Types of Sales Promotions

Tools / types of sales promotions used

by manufacturers

• Consumer promotion

• Trade promotion

• Business promotion

• Salesforce promotion

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 Major Consumer Promotion Tools
• Samples / Sampling
• Coupons
• Premiums / Gifts
• Contests & Sweepstakes (or Prizes)
• Refunds & Rebates
• Price-offs
• Frequency / Loyalty Programs
• Event marketing & Event sponsorship
• Point-of purchase (POP) displays
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 Samples / Sampling
• Used for stimulating trials for new products and for
increasing sales
• Normally provided free
• Disadvantage – Very expensive method
• Different ways of sample distribution
• In – store
• Direct sampling
• Response sampling
• Media sampling
• Selective sampling
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 Coupon
• It’s price reduction offer to consumers
• Redeemed on subsequent purchase
• Methods of coupon distribution:
(1) Print media, (2) Direct mail, (3) On/in package,
(4) Free standing inserts
• Types of coupons:
• Instant redemption
• Bounce-back
• Scanner-delivered
• Cross-ruff
• Response offer
• Disadvantages: Possibilities of mistakes,
imitations, frauds
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 Premiums / Gifts / Bargain offers
• Premiums / gifts should match target audience

• No price reduction
• Pet-jar free with Bru coffee
• Free skipping rope signed by Sachin Tendulkar with
Boost.
• Advantages: Improve brand image, add value to
a product.
• Drawbacks: High cost, short lifespan.

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 Contests
In contests, participants
• Buy the product
• Send proof of purchase (barcode / wrapper)
• Perform some activity
Winning based on appropriate answers

Success factors for contests / sweepstakes:

• Attractive prizes, paid immediately
• Use of the internet
• Integration with advertising, POP, other elements
Problems: High costs,

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 Refunds & Rebates
• Price reductions given by a manufacturer against
proof of purchase

• Refunds are on soft goods, smaller value

• Rebates are on hard goods / software services,

large value

• Consumers have difficulties in redemption process

• Retailers unhappy with administration work

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 Price-offs
• Manufacturers give price-offs to consumers,
ranging 10-50 percent

• Effective if given to products with high

contributions

• Advantages: immediate and direct benefits of

price reduction to consumers.

• Increases sales, but reduces profits

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 Bonus Pack
• Offers extra quantity of a product, at the regular
price

Advantages:
• Rewards customer loyalty
• Provides more value to consumers

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 Frequency / Loyalty / Continuity Programs
Objectives

• Develop loyalty among existing customers

• Develop databases for cross-selling

• Preempt / match competitor’s program

Suitable for products / services with little difference

between brands

Commonly used in travel, hospitality, & retailing

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 Event Marketing & Event Sponsorship
In event marketing, a company supports an event.
• Events can be sporting, musical concert, filmstar
award.(e.g. Femina Miss India Contest)
• Event marketing agencies plan, execute, and
evaluate events.
In event sponsorship, a firm pays money to
sponsor a group participating in an event.
• A company gives financial support and gets
opportunity for free publicity (e.g. Sahara group
sponsor Indian Cricket team)
In practice, both terms are used interchangeably.
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 Point-of-Purchase (POP) Displays
• POP displays take place in retail stores at the point
of purchase or sales.
• It includes posters, banners, danglers, etc.
• POP displays influence buying decisions, as 70%
decisions on brands are made in retail stores.
• Firms develop customised, reusable, easy to stock
displays.
• POP displays should be integrated with advertising
and promotional messages.
• Effectiveness of POP displays should be
measured.
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 Trade Promotions
• Are directed at resellers
• Part of a manufacturer’s “push strategy”
• Manufactures spend more on trade promotions
than consumer promotions. Why?
Objectives
• Persuade resellers to carry and push the
company’s products / brands.
• Display POP materials
• Build inventory levels of resellers
• Stock and display new products.
Challenges: (1) Forward buying, (2) Diverting

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 Types of Trade Promotions
• Trade allowances

• Trade contests

• Training programmes

• Trade shows

• Cooperative advertising

These are also called ‘trade promotional tools’.

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 Trade Allowances
• Offered to wholesalers / retailers as incentives
to buy & promote a manufacturer’s products.
Types of trade allowances:
• Off-invoice / buying allowance / free goods
• Slotting allowance
• Promotional / merchandising allowance
• Drop-ship allowance
• Exit fees
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Off-Invoice / Buying Allowance / Free goods
• Offered as allowance to resellers to buy a
manufacturer’s products.
• Allowance or incentive given by methods like:
• A discount on ordered cases, or
• A percentage deduction from the invoice, or
• Free goods on purchase of specific cases
• Advantages: Effective & easy to implement.

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 Slotting / Stocking Allowance / Fees
• Also called ‘Introductory allowance’ / ‘street
money’.
• Paid by a manufacturer to retailers for handling
new products
• Manufacturers feel these allowances / fees as
unfair and high.
• But retailers justify these allowances– How?

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 Promotional / Merchandising Allowance
• Given by a manufacturer to retailers / dealers for
advertising, displaying, promoting products.
• Given as a discount on list price, or deduction of an
amount per case.
Drop-ship Allowance
• Paid by a manufacturer to a retailer for bypassing a
wholesaler / distributor for order placement.
• Should be handled with care – why?
Exit Fees
• Offered by a manufacturer to retailers for
accommodating a new size of an existing product by
removing a product item from shelves / inventory
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 Trade Contests
• Manufacturer – sponsored contests, directed at
retailers / retailers’ salespeople.
• Monetary rewards given to retailers’ salespeople,
known as spiff money or push money.
• Works well for exclusive dealers - Why?
Training Programmes
• Manufacturers conduct training programs for
retailers’ / dealers’ sales people
• Due to more knowledge, salespeople sell the
manufacturer’s products more than other brands.

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 Trade Shows / Exhibitions
• Industry associations (e.g. IMTMA, IEEMA)
organise.
• Participating suppliers buy space, set up booths,
arrange displays / demonstrations of products.
Benefits of trade shows / exhibitions:
• Identifying prospective customers
• Generating sales leads
• Introducing new products
• Meeting customers & booking orders.
• Gathering competitive information.
• For selection of right trade shows, ask customers
which trade-shows they visit.
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 Cooperative Advertising
Here cost of advertising is shared by two or more
organisations.
Three types of cooperative advertising:
• Horizontal corporative advertising
• Vertical cooperative advertising
• Ingredient – sponsored cooperative
advertising
Only vertical cooperative advertising is categorised
as trade oriented promotion.
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 Business Promotion
Objectives of sales promotion in B2B marketing:
• Gather sales / business leads
• Reward business customers
• Contact prospects
• Build relationships with key customers
• Introduce new products
Major business promotions tools
• Trade shows / Exhibitions
• Promotional novelties / gifts
• Seminars
• Demonstration
• Catalogues

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 Promotional Novelties / Specialty
Advertising

• These are gift items (e.g. calendars, pens),

bearing advertisement message / brand name.
• Given free to customers and other stakeholders.
• Advantages : Low cost, strengthen relationship
Seminars
• Technical seminars for customers.
• Objective: Create a favourable image.

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 Demonstration
• In demonstration, a product / service is shown in
actual use.
• Effective in convincing prospects.

Catalogues
• Printed / online catalogues are promotional
support.
• Types of catalogues : general or specific .
• Important to update customer mailing list /
database.
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 Sales Force Promotions
• Sales promotions directed at salespeople.
Main objectives
• Improve sales force performance
• Increase sales & reduce selling cost
• Develop prospects
• Build sales force moral and enthusiasm.
Major tools of sales force promotions
• Sales contests & incentive schemes
• Sales meetings & training programms.
• Sales manuals
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 Sales Contests
• Meant for the company salespeople.
• They win prizes, if targets achieved.
• Typically held for short period.

Incentive Schemes
• Part of sales force compensation package.
• Linked to sales force performance.
• Objective: Encourage salespeople for more
efforts, to achieve / exceed targets.

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 Sales Meetings
• Important for communication, education, and
motivation.
• Held at the location of district, branch, or region.
Training Programmes
• Objective: Improve sales force performance.
• Given to both new and experienced salespeople.
Sales Manuals
• Include technical information
• Useful to salespeople during negotiations, and
presentations.

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 Effect of Sales Promotion on Sales
• Marketers spend 60-75 percent of IMC budget on

sales promotion.

• Consumers make 70 percent of purchase decisions

in retail stores

• Sales promotions offer attractive incentives to

consumers, resellers, and salespeople.

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 Coordination of Sales Promotion with
Advertising & Personal Selling
• Coordination is needed to increase effectiveness.
• Consistency achieved by communicating same
message from different media.
• Combining ads. with samples / coupons for a new
product gives good results.
• Coordination improves when sales / marketing
people work with ad. agency.
• Sales promotion & personal selling support each
other.
• Targets achieved when IMC components have good
coordination.

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 Evaluation of Sales Promotion
• Sales promotion evaluation done at three stages:
• Pre-testing
• Concurrent testing
• Post-testing
• Evaluation done by comparing the objective with
actual sales figures (a) before, (d) during, (c) one
month after sales promotion.
• Sales promotion is successful, if the objective is
achieved.

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 Key Learnings
• Sales promotion consists of short-term tools
used for quicker /greater purchases of products /
services by consumers and resellers.
• Sales promotion has certain benefits and
drawbacks for manufacturers, traders,
consumers.
• Types of sales promotions used by
manufacturers are: consumer, trade, business, and
salesforce.

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 Key Learnings (Continued)
• Major consumer promotion tools: samples,
coupons, premiums, contests, sweepstakes,
refunds, rebates, price-offs, frequency programs,
event marketing, event sponsorship, POP displays.
• Trade promotions are a part of manufacturer’s
push strategy and directed at resellers.
• Types / tools of trade promotions : Trade
allowances, trade contests, training programmes,
trade shows, co-operative advertising.

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 Key Learnings (Continued)
• Main objectives in business promotion:
gather sales leads, reward customers, contact
prospects, build relationships, introduce new
products.
• Major business tools: trade shows, promotional
novelties / gifts, seminars, demonstrations,
catalogues.
• Main objectives of Salesforce promotions:
Improve performance, increase sales, reduce selling
cost, develop prospects, build salesforce moral &
enthusiasm.

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 Key Learnings (Continued)
• Major sales force promotion tools: sales
contests, incentive schemes, sales meetings,
training programs, sales manuals.
• Marketers spend 60-75% of IMC budget on
sales promotion.
• Coordination of sales promotion with other
functions increases marketing effectiveness.
• Evaluation of sales promotion is done to find if
objectives are achieved.

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 Thank you

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