MARKETING ASSIGNMENT SALES PROMOTION By SHASANKA SEKHAR NANDA Regd.

No: 1271333008

SALES PROMOTION
Sales promotions can be directed at the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumer are called consumer sales promotions. Sales promotions targeted at retailers and wholesale are called trade sales promotions. Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or purchase. Examples of devices used in sales promotion include coupons, samples, premiums, point-of-purchase (POP) displays, contests, rebates, and sweepstakes. The various research papers provided as assignment discuss about sales promotion and its various aspects regarding its effects on consumer behavior and other factors. Since promotion is an important part of the marketing strategy, marketers and researchers are particularly engaged to further their understanding of how sales promotions affect consumers with varying degrees of loyalty. Loyalty to a particular brand refers to a characteristic of customers who will only buy products of that brand rather than switching to an alternative brand (Lin et al., 2000). Jacoby and Chestnut (1978) provide with the most elaborate and widely used. Brand loyalty refers to the biased behavioural response expressed over the time by some decision making unit with respect to one or more alternative brands out of a set of such brands and is a function of a psychological decision making process. Brand loyalty is therefore a composite of both the behavioural and psychological aspects of consumer behaviour. Marketers often pay attention to consumers degree of brand loyalty so that they can effectively focus their marketing strategies on these consumers. Two categories of consumers can be distinguished according to brand loyalty: hardcore loyal consumers and brand switchers (Evans et al., 1996). A consumer who repeatedly purchases a particular brand regardless of the premium price of that brand is considered as hardcore loyal consumer (Evans et al., 1996). In case of such consumers, price variation (discounts, cents-off etc.) may only affect their purchase quantity but not their brand choice decision. They continue with their brand rather than switch to a promoted brand. Brand switchers refer to consumers who use two or more brands when a single brand does not satisfy all their needs (Evans et al., 1996). A consumers decision to repeat purchase a single Brand or switch around several brands may be influenced by the factors such as brand name (Aaker, 1996); product quality (Garvin, 1988); price (Cadogen and Foster, 2000); style (May, 1971); store environment (Evans et al., 1996); service quality (Mittal and Lassar, 1996) and promotions (Evans et al., 1996). Marketers wanting to attract and retain customers must pay attention to the right mix of brand loyalty factors, of which sales promotions is a very small part. Marketing strategies for promotions can probably be improved in many companies by new kinds of market research. There are both loyal and non-loyal consumers within each product class. Thus, learning more about the characteristics of such groups ought to be very helpful in making better strategy decisions. Promotional actions should be accountable for the net positive results during the dust-settling period. This accountability has two components. First, a promotion must not initiate a permanent price or margin drop. After the promotion period, prices must return to their normal levels lest they cause permanent erosion of profit margins without offsetting volume increases. Second, a promotion must generate a net surplus (incremental revenue and profit over baseline) for the promoter over the dust-settling period. The Indian consumers are known to be price-sensitive and retailers have to manage with razor thin margins in order to compete for the share of wallet of the grocery consumer. Consumer spending on food constitute

around just under 50 per cent and margins on food retail is around 12 to 15 percent with a post-tax margin of 2 per cent (Vijayraghavan, 2007). The entry huge grocery format of Reliance and proposed venture of Bharati Wal-Mart is expected to further kick up competition in the business and put pressure on margins (Daftari, 2007). The study shows that retail sales promotion plays a limited role on consumer buying behavior. Only a small percentage of the customers are attracted to such sales promotion and wait for it. Store loyalty may not play a role in sales promotion. Retail sales promotion has to depend on others factors to positively impact buying behavior. Promotion is the most visible element of the marketing mix (Govoni, Eng and Galper, 1986; Guiltinan and Paul,1994; Lamb, Hair and McDaniel,1992; Pride and Ferrel,1989). There is a growing emphasis on designing the best marketing promotional strategies for targeting and maintaining consumers. A good promotional strategy encompasses advertising, sales promotion, public relations, and personal selling in order to communicate with their present and potential consumers Kotler, 1994). Promotions is responsible for moving the demand curve upward and to the right by utilizing some or all of the elements of the promotion mix- advertising, personal selling, and publicity along with sales promotion (Ward and Hill, 1991).The various types of consumer oriented sales promotion are sampling, coupons, premiums, price off, bonus packs, refunds and rebates, contests and event promotions. In the sales promotion response model, price-off and event sponsorship were key predictors of consumer spending and repeat visits. The empirical results suggest that in order to increase consumer spending and repeat visits, department store should invest in mechanisms that enhance price-off and event sponsorship even programs. Surprisingly, the study shows that some sales promotion elements such as coupons and sweepstake do not have a significant effect on consumer spending and repeat visits. Most classifications of customer value and the different types of consumer benefits start with the distinction between utilitarian (extrinsic) and hedonic (intrinsic) benefits (Furse and Stewart 1986; Holbrook 1994). Utilitarian benefits are primarily instrumental, functional, and cognitive; they provide customer value by being a means to an end. Hedonic benefits are non instrumental, experiential, and affective; they are appreciated for their own sake, without further regard to their practical purposes (Hirschman and Holbrook 1982). The benefits of sales promotions can be classified as utilitarian when they help consumers maximize the utility, efficiency, and economy of their shopping and buying and as hedonic when they provide intrinsic stimulation, fun and self-esteem. In India, sales promotions expenditure by various marketing companies is estimated to be Rs 5000 crores and the emphasis on sales promotion activities by the Indian industry has increased by 500 to 600 percent during the last 3 to 5 years (Economic Times, June 15, 2003). In the year 2001, there were as many as 2,050 promotional schemes in the Rs 80,000 crores FMCG Industry (Dang et. al, 2005). Research evidence suggests that sales promotions positively affect shot-term sales (Priya, 2004). Research on price promotion has consistently reported high sales effect and high price elasticity for brands which are on promotion (Blattberg, Briesch and Fox, 1995). Studies have shown that price promotions enhance brand substitution within a product category (Dodson et al, 1978), affect aggregate sales (Gupta, 1998), and significantly affect stock piling and purchase acceleration (Blattberg, Eppen and Lieberman, 1981, Neslin, Henderson and Quelch, 1985). However, there have also been studies that suggest that sales promotion affects brand perceptions. Researchers have found out that promotions, especially price promotions, have negative effect on brand equity (Mela et al, 1997). In another study, Schultz (2004) argues that over dependence on promotions can erode consumers price-value equation. The results of a

study by Jedidi et al (1999) indicates that in the long term, advertising has a positive effect on brand equity where as price promotions have a negative effect. The study finds ample evidence to conclude sales promotion schemes are not perceived favorably by respondents and there is no differential effect between two types of promotional schemes like cash discount and free gifts. Marketers use price oriented promotions such as coupons, rebates and price deals to increase sales and market share, to entice trial, and to encourage brand switching. Gupta (1988) suggests that 84% of the sales increases due to promotion come from brand switching, while purchase acceleration accounts for less than 14% and stockpiling/consumer loading accounts for less than 2% of sales increases. Davis, Inman, and McAlister's (1992) research rejects previous findings which suggested that the use of price promotion would eventually lower a brand's evaluation. Instead they find that there is no negative effect of sales promotion on brand evaluation or on repurchase probabilities which are consistent with both low involvement and behavioral learning theory. Huff and Alden (1998) found that non-price promotions such as contests and premiums add excitement and value to brands, which may actually encourage brand loyalty. Simonson (1999) suggests that, in order to be successful, such non-price promotions must add value to the transaction or else risk a significant decrease in the sales of the core product once the promotional offer has ended. Married and non-married consumers are both equally likely to use coupons and rebates, the two sales promotion techniques included in this study that require some degree of planning. The greater use of bonus packs, loyalty programs, price deals and samples by single shoppers suggests that single consumers are more price and value conscious than are married ones. The only gender difference in reported behavior is that women are more inclined toward coupon usage than are men, which makes sense in terms of traditional targeting of women by marketers with coupons. Nonwhite consumers report being more likely than white consumers to use all types of sales promotion incentives. Impulse buying is a tendency to buy on whim or an action with less rational decision making (Rook and Hoch, 1985; Rook, 1987; Gardner and Rook, 1988; Rook and Fisher, 1995; Wood, 1998). Stern (1962) proposed a classication framework of impulse purchases, the impulse mix, indicating that pure impulse buying is made for variety or novelty and breaks a normal decision-making rule. That is, before consumers make an impulsive purchasing decision, they often do not have a list of which products or brands to buy. Therefore, the objects that consumers purchase on pure impulse buying are unplanned. Reminder impulse buying occurs when the shopper enters the store and sees an item or recalls an advertisement or other information about the item and remembers that the stock at home is exhausted. The consumer is reminded of the need to buy an item upon seeing it. Pure impulse buying is distinguished from reminder impulse buying in that the shopper has no buying experience or knowledge of the product to assist him/her in the purchase. Reminder impulse buying is almost universal and exists in the daily life of most consumers. Most people have the experience of buying products without planning to do so because they are reminded of the need to buy an item upon seeing it on sale. Consumers who engage in reminder impulse buying have more rational motivation, more utilitarian goals and less regret response than those who participate in pure impulse buying do. When using reminder impulse promotions, marketers should use instant-reward promotion tools rather than delayed reward promotion tools. Some countries have regulations that impose restrictions on the use of sales promotions in retail markets. The main motivation of these policies has been the protection of small retailers. Most countries of Europe like Belgium, Germany, France, Italy, etc. impose restrictions on the use of sales promotions.

Relative and referent thinking play a vital role in buying decision of the consumers. The willingness to seek a bargain depends not only on the absolute value of the bargain but also on the price of the product. The relative thinking effect holds when the actual price is the same as expected, it reverses when the actual price deviates from the expected price, but it emerges again when deviation from the expected price becomes extreme. Sales promotion which is unique and offer immediate benefit like price cut is likely to appeal all the segments of consumers. The sales promotions should be targeting the right consumers at the right place and right time. These factors must be kept in mind by the marketers before going for the sales promotions.

REFERENCES:
Komal Nagar: Evaluating the effect of consumer sales promotions on brand loyal and brand switching segments. Gopal Das, Dr. Rohit Vishal Kumar: Impact Of Sales Promotion on Buyers Behaviour: An Empirical Study Of Indian Retail Customers. Pierre Chandon, Brian Wansink, & Gilles Laurent: A Benefit Congruency Framework of Sales Promotion Effectiveness. Dr. James Manalel, Jose M. C., Siby Zacharias: Sales Promotions Good or Bad? Michael J. Dotson, Eva M. Hyatt: Sales Promotion Preferences: A Demographic Analysis. Shu-Ling Liao , Yung-Cheng Shen and Chia-Hsien Chu: The effects of sales promotion strategy, product appeal and consumer traits on reminder impulse buying behaviour. Victor Aguirregabiria (2002): Sales promotions in supermarkets - Estimating their effects on profits and consumer welfare. Ritesh Saini, Raghunath Singh Rao & Ashwani Monga: Is That Deal Worth My Time? The Interactive Effect of Relative and referent Thinking on Willingness to Seek a Bargain. Lin Yu-Jen, Lin Chiu-hui: A Empirical Study of Sales Promotion and Consumption Patterns in the Department Store Setting. Preeta H. Vyas (2005): Measuring consumer preferences for sales promotion schemes through conjoint design in FMCG sector.