IMPACT OF ADVERTISING ON SALES PROMOTION

IN INDIA AND ABROAD

Literature Survey
Sales Promotion has not received as much attention as advertising by researchers in India as well as
abroad. However, considerable amount of literature exist in foreign context. A brief review is presented
in this section.
Russell Bowman (1901) Report of Association of National Advertisers (1974) and Donnely Annual
Survey (1906) try to estimate size and growth in sales promotion expenditures in US industry. All
studies conclude that it is extremely difficult to measure exact magnitude of expenditures on sales
promotion activities, however,
i) sales promotion expenditures have outgrown expenditures of advertising
ii) rate of growth in sales promotion expenditures (12% p.a. ) is more than that of advertising (9%
p.a.) during 1975 to 1982 period.
iii) in case of frequently purchased packaged goods, expenditures on sales promotion activities
account for about 64% of total promotional budget.
Likewise Martin Christopher (1972)* has also concluded that in UK expenditures on below the line
promotion has varied in the range of 500 million between 1964 and 1966. The expenditure on
advertising also has followed similar trend.
In India, study conducted by Economic Times (June 1993) also concludes that in case of 217
companies the advertising and sales promotion expenditure together has accounted for 2,7% of sales
in 1989-90 and 1990-91 and 42% of gross profit for the same period.
From above, studies it can be deduced that over the years sales promotion has grown to a great
magnitude par-icu1ar1y in consumer goods industry. The companies have realised its important role
in marketing mix and efforts are made to manage these activities in a systematic and planned
manner.
Martin Christopher (1972) * has reported The Bradford/ Horniblow, CoxFreeman study conducted to
understand below the line promotion in UK in 1968. This study was conducted in two phases. In the
first phase, preliminary desk research investigation into the state of knowledge of be Iow-the-1ine
promotion was done. Then in next phase three substudies were conducted. They involved
i) study- of consumer attitudes toward below the line involving survey of 1000 housewives.
ii) opinion of 423 retailers on types and effectiveness of various promotions, and
iii)experiences of 15 manufacturers of consumer goods.
The major findings of these three substudies were the following:

1)All manufacturers interviewed were using below the line promotion,and majority of them were using
them defensively,
2)the allocation of budget "between advertising and sales promotion was fixed arbitrarily.
3)the retailers were exercising their power to demand more below the line promotions.
4)the' most common objectives cited for below the line promotion were:
a) , to increase market share
b) to support a flagging product
c) to motivate salesmen, and
d) to improve distribution.
5)most companies relied heavily on specialist promotional agencies to execute promotions.
6)The retailers favoured promotions on brands which was a leader, was heavily advertised on TV and
the scheme had pulling power of its own.
7)The retailers gave higher ranks to money off offers to consumers, coupons to consumers and extra
quantity in packs and lowest ranks to dealer and consumer contests and premium promotions.
8) The housewives viewed promotions on those brands favourably, which enjoyed leadership in the
market, and to which they were loyal. In case of less known brands she held negative attitude towards
promotions offered by such brands and was skeptical towards them.
Thus the above study gives us an idea about below the line promotional activities as it prevailed in
later 60s and early 70s in UK.

ANA( Association of National Advertisers) study D by Frey & Dixon t1984] tries to find out the
assignment of responsibility for various sales promotional functions among different areas in the
companies like advertising, sales, public relations, promotion and others. The study of only ANA
members indicated that there was no clear pattern emerging as to the assignment of planning and
execution responsibilities of various sales promotion activities among various areas across
companies.
Another study by National Industrial Conference Board(1968) focussed on how companies organised
its promotion and communication functions. A survey, of 267 members of Conference Boards panel of
senior marketing executives from small, medium and large firms engaged in manufacturing,
insurance, transportation, public utilities and banking industries was conducted by David Hurwood and
Earl L. Bailey. It was published in Experiences in Marketing series of NICB publications, The study
illustrates how advertising, sales promotion and public relations are interrelated and managed by
different companies.
The major findings are:
i) sales promotion activities have a close link with sales organisation of company.

ii) the study compares and contrasts sales promotion activities across consumer, industrial and
service companies.Reporting relationships of sales promotion activities in organisations are
explained. How responsibilities of sales promotion are split between headquarter and division are
illustrated.
iii) the study points out possible conflicts that may arise in coordinating sales promotion activities with
other activities of organisation.
Both surveys provide information regarding organizational aspects of sales promotion. As these
studies were confined to their respective members only, while generalising the inferences, care should
be taken.
Marketing Science Institute (1964) has published a study by Luck and Robinson on "Promotional
Decision Making: Theory and practice". The study presents facts on how promotional decisions are
taken in an organisation. It is descriptive in nature, and portrays promotional practices and compares
it with theoretical framework "APACS" Adaptive Planning and Control System. It is based on case
studies of eight organisations in consumer and industrial companies. The study also points out
detterents to systematic promotional planning in. an organisation. As the study involves total
promotional planning, sales promotion is only one of the elements hence to that extent sales
promotion would receive relatively less importance. Besides only new product introduction situations
were considered hence promotional decisions in managing ongoing products had not been
considered.
John A. Q.uelch (1989) has compiled case studies on sales promotion covering variety of consumer
goods and services in his book "Sales Promotion Management". These cases give us an idea about
complexity in management of sales promotion setting objectives and strategy, selecting promotion
tactics, designing individual promotion calendars, organising effective implementation of promotions
and evaluating the results. These case studies are based from discussions with managers.These
managers have expressed a concern that sales promotion design has been the neglected area of
researchers which is most crucial and that is where managers find difficulty in deciding the type and
scope of sales promotion activities. These case studies provide substantial -background information
on sales promotion policies and programmes which are generalizab1e across different business
situations. They also portray complexities involved in varied product market situations.

Marketing Science Institute study (1967) on usage of mathematical models in promotional decisions
have illustrated varied uses of models. Four studies ara reported. The first study pertains to analysis
of the relative effectiveness of various deals in terms of trial and conversion, based on brandswitching
from purchase to purchase. The model analysed variables of quantity, time between buying
occasions, size, colour and flavour of the product purchased. The important finding was that
consumers have a high degree of size loyalty than brand loyalty. The second study measures sales

promotion impact upon consumers. The market is segmented by household purchasing patterns and
socio-economic characteristics. A surprising finding of- the study is that loyal customers of a brand
react in about the same way as non-loyal customers to price, dealing and advertising activity. The
third study concentrates on situations of new product introductions. ,It assumed differential response
rates in innovation process. The study provides a framework which describe adaptors and
nonadaptors in terms of demographic, socio-economic and personality characteristics. The fourth
study showed thac both the promotional medium and advertisement size were highly significant in
explaining response rates and conversion ratios for coupon replies to print media advertisements.
Reviewing articles in the area of sales promotion, following
relevant articles are presented. In terms of decisions pertaining to split between advertising and' sales
promotion cost from the view point of manufacturers, following contributions are reviewed.
Vincent J. Blasko and Charles M. Patti ^ (1984) have analysed advertising budgeting practices of
industrial goods marketers. Top 100 industrial advertisers in US were surveyed to understand
budgeting process and methods/approaches used. They were compared with those of consumer
products. The study provides potential improvement in advertising budgeting process and areas of
future research.
Paul W. Farris and Robert D. Buzzel1 (1979) have explained reasons of advertising and promotional
cost variations by looking at the data of 1500 business firms. Independent variables which are related
to advertising, promotional costs are categorized into product variables, market variables and pricecost variables. Using multiple regression, relationships are established and guidelines are provided for
spending money on advertising and promotion.

Siva Bala Subramanian and V. Kumar (1990) have also studied variations in advertising and
promotional expenditures across consumer, industrial and service markets. The study has shown
associations and interactions between marketing communication intensity, market share and market
growth. Industry norms are given and rationale is provided.
Thus all the three above mentioned studies try to understand as to how allocations are made, what
are the norms in various industry, and rationale is given. However, effectiveness of spending in
advertising and promotional activities are measured by Robert George Brown(1974). The study tries
to find out sales response to advertising and promotional spending. It is assumed that both advertising
and promotions appeal to different types of consumers or different buying motives of the same
consumer. So the author argues that there is a need to measure effect of both advertising and
promotion on expected short and long run sales and profits. Thus the company should know the

market in which it is competing and type of customers and segment it is catering to otherwise the
money spent on both will not fetch adequate returns.
The emerging new concepts in the area of sales promotion which have gained importance recently
are cause related marketing, horizontal cooperative sales promotion, joint sales promotion and
globalization of sales promotion. P. Rajan Varadarajan and Anil Menos (1988) has discussed cause
related marketing and shown that this concept is very closely related to sales promotion. They have
discussed the evolution of the concept, given its differentiation and scope and discussed managerial
and social dimensions of cause related marketing and have proposed directions of future research.
Various illustrations of cause related marketing activities are given.
P. Rajan Varadarajan (1906) and (1965) has studied joint sales promotion or cooperative sales
promotion by analyzing newspaper advertisements announcing joint sales promotion schemes. It
provides framework for classifying various joint promotion schemes. Likely issues which may arise in
planning and managing joint sales promotion schemes are discussed. Small survey was conducted by
the author to gain additional insights into the practice of joint sales promotion. Indepth telephone
interviews were conducted and open-ended questions were asked.
Kenneth G. Hardy (1986) has identified key success factors for manufacturers sales promotions in
packaged goods industry. In an exploratory study of 27 Canadian packaged goods companies 216
sales.promotion schemes were analysed to identify key success factors for successful sales
promotion for consumers and retailers. Some of these factors are nature and extent of media support
given, support given by trade and sales force, support by POP and other materials etc. are identified.
Kamran Kashani and John Quelch(1992) have addressed a question as to can sales promotion go
global? The article explores forces challenging traditional thinking about promotion among
multinationals. Also factor responsible for difficulty in standardising sales promotions across nations
are identified and illustrated.It gives conditions in which globalisation is possible.
Roger Strang has done considerable research in the area of sales promotion and his studies are
quoted in many books. In his article (1976) sales promotion; fast growth, faulty management, he has
found out reasons for growth of sales promotion expenditures. He has shown a concern that the sales
promotion function is not getting adequate management attention compared to magnitude of
expenditure involved. There is a need for devoting sufficient time for planning these activities need to
focus on long term rather than too short term view need to pretest sales promotion programmes and
need for research in this area.
In another,study of 54 executives from 17 leading consumer goods manufacturers and advertising
agencies, Roger Strang has concluded that research on effectiveness of sales promotion schemes
has been a neglected area. Those who have done they have only measured sales before, during and

after promotion. There is a need for systematic research in the area of sales promotion to be
successful and more acceptable.
John Philip Jones^ (1980) has raised an alarm to those who are using excessive sales promotions.
He reveals that sales promotion has disasterous effect on share and long term costs and unless
properly balanced, it may erode manufacturers profits. By using mathematical technique the author
has demonstrated uses in enhancing marketing efficiency. Too much emphasis on sales and short
term gain in market share may lead to long term erosion of profits and brand franchise. Thus proper
balance need to be kept.
Advertising Age22 (March 22, 1993) has reported a survey of 100 marketing executives of companies.
62% of the executives have said that they expect promotion to gain importance within their companys
marketing mix in next 3 to 5 years. However, managers have expressed their concern that excessive
emphasis on short term bribes cannot build long term brand loyalty. Daily deals, continuous short term
price promotion signal to consumers that brands are neither fairly priced nor worth the original price.
In case of sales promotion for consumers, different schemes and their impact, consumer behaviour in
response to various schemes etc. are the areas in which substantial work is done.
Michael Rothschild and William Gaidis (1951) explain relevance of Behaviourial Learning Theory to
marketing and promotion. Various promotion tools like sample, coupon, deal used for trial,
reinforcement, extinction, control ard purchase are explained. Peter S, Fader and Leigh McAlister
(1990) measured consumer response to promotions using UPC scanner data for a ground coffee. The
important finding of the study was that typical low involvement, repetitive choices in supermarket
settings are powerfully influenced by promotional offers. Sunil Gupta (1988) measured impact of sales
promotion on when, what and how much to buy from the view point of consumer from scanner
panel data for coffee for two year period. The study tries to answer the questions raised.

Effect of specific sales promotion schemes on consumer brand choice behaviour are studied by many
authors. Robert Blattberg,Garry D. Eppen and Joshua Lieberman (1981) studied price deals on
consumer non-durables both from trade and consumer point of view. Inventory holding at both levels trade and consumer are explained.
James M Lattin and Randolph E. Buck 1 in (1989) have studied reference effects of price and
promotion on brand choice behaviour of a consumer. It is based on the assumption thet customers
form expectations about future marketing activities of a brand from their past exposure to such
activities. Consumers use these reference points in evaluating a brand while purchasing. The
response to a brand is influenced by the disparity between their reference points and actual price and

promotional status of a brand.The author concludes that too many promotion and price discounting
may adversely affect brand choice behaviour.

Aradhana Krishna, Imran Currim and Robert Shoemaker <1991) have studied consumer perceptions
of promotional activity. It was found that recall on deal frequency and deal price is higher for consumer
with larger family sizes. Aradhana Krishna (1991) has studied effect of dealing patterns on consumer
perceptions of deal frequency and willingness to pay. The study brought about very important finding
that deal perception is more important than actual deal frequency.

Scot Neslin and Robert Shoemaker (1989) have attempted to find out reasons of lower repeat rates
after promotion is over. He has explained that promotion do not necessarily lead to subsequent repeat
purchase rates but it may attract a disproportionate number of buyers with low purchase probabilities
for promoted brand.
Coupons are the most widely used consumer promotion, its impact is studied indepth by Kapil Bawa
and Robert Shoemaker(Oct. 1987, Nov. 1987 and 1989) October 1987 study tries to find out couponprone behaviour across different product classes like coffee, tissue, soaps etc. 1989 study tries to
analyse incremental sales from a direct mail coupon promotion and November 1987 study tries to find
out effect of a direct mail coupon on brand choice behaviour. These studies haa implications on
profitability of coupon promotion.
Point of Purchase materials and its impact on elderlyconsumers are measured by Alan J. Gesco and
Linda E. Swayne and John'A. Quelch (1983) . They have studied POP and advocated it to be a better
marketing tool. Essentially study, tries to identify reasons of importance of POP, role of each element
of POP and advised as to how consumer goods marketer can improve management of POP.
Impact of promotion from the point of view of retailers are studied by Peter S. Fader and Leonard M.
Lodi sh 33 (1990). The study tries to see impact of promotional activity by retail store on cross section
of grocery, products. Structural characteristics like household penetration, purchases per household,
purchase cycle, average purchase etc-. are examined and related to frequency and type of
promotions like features, displays, price offs, coupons etc. which are offered by manufacturers and
retailers. The study exploratory in nature develops hypothesis and gives areas of future research.
V. Kumar and Robert Leone (1988) measure effect of retail store promotion on brand and store
substitution. Geographic proximity is very. important variable which affect store substitution.
Charles Ingene and Michael Levy^ (1982) have tried to examine marketing and financial implication of
giving a discount to retailers who give cash or cheque which is an alternative to credit sales.

Rockney G, Walters and Scott B. Mackenzie (1906) have analysed impact of price promotions on
sales of stores. Various categories of promotions are examined e.g. loss leader promotion, advertised
or unadvertised instore promotion. Rockney G. Walters(1991) has analysed impact of retail price
promotions on product substitution, purchase of complimentary products and instore sales.
Albert C. Bemmaer and Dominique Mouchoux (1991) have studied through factorial experiment
impact of instare promotion and retail advertising on sales of a brand.
Ness Reiar (1904) in his Ph.D. thesis on "Price- Advertising Relationships: An empirical investigaticn"
concluded that for price promotions the results supported the theory that the response would be
higher for brands with a high level of national advertising and that local advertising at the time of
promotion would further enhance consumer response.
Michael Chevalier(1975) has tried to study increase in sales due to instore display by conducting an
instore display during price cut. The impact of growth rate, advertising to sales ratio, competitive
structure and brand status within product category was tested. it was hypothesised that deep price cut
would lead to higher sales increase during display than the threshold price cut. Factorial design was
used and it was found that no differences in display effectiveness were found for two levels of price
reduction. The study makes an attempt in the direction of a better analysis of display effectiveness.
Eventhough all the above studies are carried out abroad, where complexity, environmental context is
quite different from India, they definitely give an idea about range of sales promotion activities,
problems and likely conflicts in an organisation, etc. In India not many studies are available on sales
promotion.
Nalin Bhatt (1970) has published a study on incentive merchanding. The study has analysed schemes
announced in the Times of India, Bombay edition over a period of eleven years (1957-67). The study
concludes that magnitude of sales promotion activities has increased in eleven year period which is
evident from the fact that as against 7 incentive offers advertised in TOI, 1957, there were 28 such
offers in the same paper in 1967, it was also found that tooth pastes, detergents, soaps and toiletries
were the major users of sales promotion schemes. Of all incentive schemes, use of consumer
premiums - direct and conditional was most widely used. E.g. in 1967 there were 20 premium offers
as against 1 in 1957. Thus the above study tried to analyse consumer promotion schemes as
announced in a daily. Times of India, Bombay edition. It has not considered retail sales promotional
offers which are not usually announced through press.. Also study has shown number of schemes
offered, However, it does not give any idea about the expenditure incurred for such activities. Besides,
it is an old study, and recent market conditions has drastically changed where in a month more than

100 consumer schemes on different product categories are offered if we analyse advertisement from
daily newspaper.
Pran Choudhury, Ricky Elliott and Alan Toop(1990) have compiled case studies of successful sales
promotion schemes announced in late 80s. They have compiled 25 such schemes. Scheme details as
they appeared in advertisement are given. At the end, comments about the schemes are given.
Majority of case studies concern fast moving consumer goods such as food, drink and other
household staples. Out of 25 cases, 17 schemes are for premium offers which reinforce the finding of
Nalin Bhatt C1970).
J.D. Singh (1985) has studied trade deals in India. He has made an attempt to find out history of trade
deals in India He has reported a magazine - flowinformation a monthly periodical published from
New Delhi which carried data on schemes offered to trade by various manufacturers. The data is
based on the response received from a chain of select dealers located Delhi and New Delhi. The
period covered is from 1978-79 to 1982-83.. From the data, the author has reported that number of
schemes offered to trade varied between 3 and 7 per week during the time period1978-79 to 1982-83.
In order to understand the practices of trade deals, the author conducted a survey of large sized
companies of which there were 37 companies dealing in consumer non durables, 10 in
pharmaceutical and 23 in industrial goods. Through mailed questionnaires and personal follow-ups
data was compiled. Following were the main findings of the study.
1) The reasons for increased use of sales promotion were growing power of channel members and
changes in retailing scene.
2) The most important objective for promotions at dealer level was "inducing dealers to keep and sell
larger stock".
3) Most widely used trade promotion schemes were merchandise deals, buying allowance, buy back
allowance, gift to dealers and dealers sales and display contests.
4) Trade influenced considerably in deciding type of scheme;
5) Problems of coordination and realisation of marketing objectives are highlighted.
6) The companies surveyed believed that they should keep good relations with retailers.
Thus, the study gives us a good idea about trade deal practices followed by Indian companies. It does
not present comparison across different groups of companies like consumer durables, non-durables
and industrial goods. It gives a good overview of trends and problems in managing trade level sales
promotion activities.
Business India had published a special report on sales promotion. The article explores role of sales
promotion in overall marketing mix of the company. It was reported that still much is desirable from
promotion. Lack of creativity and applicability has restricted its role to a limited extent. Various issues
are raised such as difficulty in determining cost of promotional efforts, PLC stage and role of sales
promotion, lack of coordination between brand objectives, communication objectives and sales

promotion objectives. It is also stressed that in order to make sales promotion effective there is a need
for careful planning. Also effective control and pretesting in actual market conditions are needed.
From all the above studies it is clear that sales promotion activities have definitely gained momentum
in India too. Indian market conditions are fast changing. Due to liberalization move, many
multinational companies have entered many markets. Particularly consumer non-durable market has
become over crowded. Urban markets have attained maturity hence fight for market share has led to
heavy advertising and sales promotion activities by the companies in frequently purchased packaged
goods industry. With rising costs of mass media, many companies have diverted their total
promotional budgets to sales promotion. How an organisation carries out sales promotion activities?
How are they planned? What decisions are taken? Who are involved in planning and execution of
activities? How are the activities monitored and controlled? What are the levels of sales promotion
expenditures, how budget is apportioned to advertising and sales promotion? Such questions are not
addressed in any of the studies from manufacturers view point in India. Thus, the present study
exploratory in nature tries to address itself above questions keeping in mind the changing marketing
conditions and increasing usage of such activities in recent years.