SALES PROMOTIONS:Involvement of sales staff, Effects of promotions, Duration should be short

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Brand Management (MKT624)

Lesson 35

SALES PROMOTIONS

Introduction

For communication to be effective, it is important that we do not rely on just one tool.

Experience shows that more then one tool should come into play to create the desired effect

the final action of consumer to buy. Promotions complement advertising and the objective of

this lecture is to see how that works!

Sales promotions

No matter how good is the copy and the response effects like awareness and comprehension,

they may still not actuate the target customers to go for the action. It is there that the role of

promotions comes in. It becomes essential, especially in case of new products, to have those

products tried by the customers so that they can know the benefits the brand offers. In other

words, advertising does its part by creating awareness and comprehension that form a level of

customer pull.

Having created the pull, you then have to create a push so that the pull-and-push effect results

in the desired action. To create that push, you have to involve intermediaries. Without their

help marketing communication programs and whatever those translate into will not succeed.

According to one estimate, one-third of communication budgets are spent on advertising and

two-third on promotions1.

Of promotions, 37% is spent on channel intermediaries and 63% on customer promotions2.

Push communications are directed toward channel members (37%) so that they have an

incentive in carrying stocks and making sure there are no stock-outs. The second step toward

the push is customer incentives (63%) that actuate the customers to test the product either as

frees or through other inducements.

In other words, just like we created a media-mix in terms of advertising, we again have to

create a promo-mix in order to ensure the desired action on part of the customer.

Promotions trade-directed

The reason it costs to involve traders in the promo game, because they know their role and

power. While you offer something to customers, the retailers expect something to themselves

also, for they are stocking your product more than the normal levels in the hope that push will

work.

You may also need extra space or prime space in order to make your promo-based offerings

stand out for the customers not to miss those. For that you have to offer some incentives to

retailers to do what you want.

Involvement of sales staff

Involvement of your sales staff is of high importance. They were involved while you were

building the brand picture. You also involve them while you review the picture. Being close to

the customers and trade, the sales people understand the market better than anyone else, and

hence, must be involved in working out the levels of discounts and incentives. They understand

the purchasing criteria and the overall process through which not only customers, but also

traders go. Keep them involved amounts to keeping everyone in the company close to reality3.

Relationship marketing takes on an added importance here. Sales people take on the role of

customer relationship managers as well.

Promotions customer-directed

Such promos are on the increase. The main types used are:

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Brand Management (MKT624)

· Store price reduction

· Multi buy/Multi-save

· Additional quantity in pack

· Manufacturer's price reduction

· Coupons

· Rewards and gifts

· Free items (sampling)

Involvement of sales staff becomes important here also. Extremely important here for brand

managers is to stay in close coordination with sales and finance. Working out accounting

modalities while promotions are to start is important to keep records straight. Let sales people

inform members of the channel through company circulars about the campaign.

Effects of promotions4

1. Promo increases sales in short-term

According to one source the elasticity (the increase in sales as a result of a certain

expenditure on promotions) of sales to promotions is much bigger than that of

advertising. It is 20 times as much. This doesn't mean that every promo is successful.

But, a well chosen and well planned promo certainly increases sales in the short term.

The effect of promo is, therefore, short lived. It may not last beyond the period of

activity. Period after that may see a drop in sales, for customers buy in excess of their

requirements. This is what can be termed as "borrowed sales syndrome" borrowing

high sales from future at a certain point in time and then seeing a drop at a later stage.

2. Promos may be unprofitable

All promotions cost money. They definitely cut into your contribution margins, leaving

the company less profits. When you add the costs of disrupted production schedules,

distribution and logistics and the net effect may well take you into a loss situation.

Businesses, according to one argument, exchange profits for volumes, which may slide

immediately after the promo is over. You must see to it that promos do not land you in a

loss situation.

3. Duration should be short

Duration should be short and promos should not be repeated too often giving the

consumer the feeling that your brand is not worth regular purchasing and needs crutches

all the time to sell. Instead of the fact that brand should generate value by charging

premium, which must be central to its core, it devalues itself if subjected to prolonged

or very frequent promotions.

You have to be careful about the response effect stage, determine your goals, and then

see how best you can create customer value by also ensuring profitability for the

company in the long run.

The devaluation occurs all the more so because promos are easy to imitate by

competitors. Imitation leads to a cycle of escalation and eventually to price war. The

whole category suffers and the brands are reduced to commodities with no winners.

4. Other Effects

Promos, though expensive, have a lot of power to do good things to brands. Getting a

brand trial in itself is an achievement. If the product is good, then consumers will hook

on to that. In other words, it depends on the brand what promise it carries and how it

delivers that. Brand with a good contract along with other factors of marketing-mix will

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Brand Management (MKT624)

do well if promoted sensibly. Marketing people should relate the extra expenditure with

the extra volume that can offset the expense.

Summary

Effective consumer promotions drive traffic, enhance awareness, increase trial, and build the

brand. All you need do is be very clear about your objectives and goals, which are to gaining

and keeping customers, enhance brand's image instead of focusing on cutting price.

Bibliography:

Roger J. Best: "Market-Based Management Strategies for Growing Customer Value

and Profitability"; Prentice Hall (312)

Roger J. Best: "Market-Based Management Strategies for Growing Customer Value

and Profitability"; Prentice Hall (312)

Scot M. Davis: "Brand Asset Management Driving Profitable Growth through Your

Brands"; Jossey-Bas, a Wiley Imprint (173-177)

Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy"; Kogan

Page (74)

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