Sales Promotion Schemes Project Report MBA
One of the most difficult marketing decisions facing companies is how much
to spend on promotional John Wanamaker, the departmental - store magazine,
said, "I know that half of my advertising is wasted but I don't know which
Thus it is not surprising that industries and companies vary considerably in
how much they spend on promotion. Promotional expenditures might amount to
30-50% of sales in case in cosmetics industry and only 10-20% in the
industrial equipment industry. Within a industry, a low and high spending
companies can be found.
How do companies decide on their promotion budget? There are mainly four
methods of sales promotion :
• Affordable Method :
Many companies set the promotion budget at what they think the company can
afford. One executive explained this method as follows : "Why, it’s simple.
First I go upstairs to the controller and how much they can afford to give
us this year. He says a million and half. Later, the boss comes to me and
asks how much we should spend and I say ‘Oh about a million and half."
It is a method which is uncertain one and makes long term planning
• Percentage of Sales Method :
Many companies set their promotion expenditures at a specified percentage of
sales. Accordingly the sales is set on the basis of sales.
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In this a specified sales percentage is decided for the promotional budget
Advantages of this method :
First, its use means that promotional budget vary with what a company can
Second, it encourages the management to think in terms of the relationship
among promotion costs, selling price, and profit per unit,
Third, it encourages the competitive stability to the extent that competing
firms spend approximately the same % of their sales on promotion.
Inspite of the advantages, the % sales method has little to justify it. Its
reasoning is circular : It views sales as the determiner of the promotion
rather than as a result. It leads to budget setting by availability of funds
rather than by marketing opportunities.
• Competitive Parity Method :
Some companies set their promotional budget to achieve share-of-voice parity
with other competitors. Two arguments are made in support of competitive
parity method. One is that the competitors expenditure represents the
collective wisdom of the industry. The other is that maintaining a
competitive parity helps prevent promotional wars.
Neither argument is valid. There are no grounds for believing that
competition knows better what should be spent on promotion.
• Objective and Task Method :
The objective & task method calls upon marketers to develop their promotion
budgets by defining their specific objectives, determining the task that
must be performed to achieve these objectives, and estimating the cost of
performing these tasks.
Deciding on the promotion mix :
Companies face the task of distributing the total promotion budget over the
five promotional tools :
• Sales Promotion
• Public Relations and Publicity
• Sales Force
• Direct Marketing.
Whatever method a company adopt for promoting its product it must be from
above mentioned method.
What is Sales Promotion ?
Promotion is the final element in the marketing mix. After the nature of
product is decided, its price fixed and the methods of distribution decided,
the manufactures has to take effective steps in meeting the consumers in the
markets. In the present consumer oriented markets it is the duty of
manufacturers to know what is required by the consumer. It is also their
duty to make the customers know where, when how and at what prices. The
products would be available.
Meaning of Promotion
The term promotion is the
term and includes mainly three type of sales activity :
1. Mass impersonal selling methods (Advertising).
2. Face to face personal selling (Salesman ship).
3. Activities other than personal selling and advertising such as point of
purchase display (P.O.P.) show and exhibitions, demonstrations and other non
securing selling efforts. This form of activity is called ‘Sales Promotion’.
There are two type of promotion blends :-
1. Pull Blend.
2. Push Blend.
Both of these are closely
related to the channel of Distribution.
1. A pull blend is one in which mass impersonal, sales efforts are given the
greatest emphasis. The purpose of pull blend to pre-sell to the final
consumers. So that they demand the product at the retail level of
distribution. The firm adopting this strategy would spend more on
advertising and sales promotion rather than in personal selling. These
efforts pull down the product from the manufacturer.
2. A push blend emphasizes personal selling. Naturally firms adopting this
method develop a strong sales force at both the distributor and the dealer
level. This method would tends to push the product through the channel of
Promotion and Selling
The term promotion is very often used as a synonym for selling. But selling
is a narrow term which includes only transfer of title or personal selling.
Promotion on the other hand is broader in its outlook and includes a variety
of activities used ultimately for increasing sales volume.
Promotion and Sales Promotion
Similarly the terms sales promotion can not be taken to mean what is
commonly does. Sales promotion, is only a part of the promotion. Basically
promotion is an "exercise" in information persecution and influence.
Promotion has come to mean the over all co-ordination of advertising
selling, publicity and public relations. Promotion is a helping function
designed to make all other marketing activities more effective and
efficient. But sales promotion as such helps only the selling activity
still, there exit same difference of opinion on the real connection of the
term sales promotion.
Acc. to A.H.R. Delons :-
"Sales promotion means any step that are taken for the purpose of obtaining
or increasing sales".
Acc. to W.Q. Kelly Opines :-
"Muddled misused misunderstood that is sales promotion Acc. to him the field
of sales promotion as a marketing activity is still vaguely defined and
Sales Promotion and Advertising
There is no universally accepted distribution between these two terms. To
same advertising includes all forms of mass media communication directed
towards influencing the end consumer. Sales promotion on the other hand,
includes the form of mass communication directed towards information and
influencing the channel of distribution (e.g. distributors, retailers etc.).
Hence a price of product literature distributed by retailers in sales
promotion. These sales promotion merges on one side in to advertising and on
the other in to personal salesman ship. It is concerned with the
dissemination of information to whole salers, retailers, customers (both
actual and potential, and to the salesman).
Sales promotion is concerned with the creation. Application and
dissemination of material and techniques that supplement advertising and
personal selling. Sales promotion makes use of direct mail, catalogues,
trade shows, sales contests, premiums, samples, windows displays and other
aids. Its purpose is to increase the desire of salesman, distributors and
dealers to sell a certain brand to make consumers more eager to buy that
brand. Personal selling and advertising do include prospects to make these
decisions. Sale promotion provides an extra stimulus.
Objective of Sales Promotion
1. To increase sales directly by publicity through media which are
complementary to press and poster advertising.
2. To disseminate information through sales man dealers etc. So as to insure
the product getting in to satisfactory use by the ultimate consumer.
3. To attract new consumer.
4. To face the competition effectively.
5. To help salesman in selling more to the retailers and consumers.
6. To check seasonal decline in sales. Generally speaking sales promotion
involves rendering the following services:-
(a) Services to dealers.
(b) Services to own salesman.
(c) Special publicity.
Sales Promotional at different levels
1. Sales promotion at Dealers Level :-
It may include various schemes some of which are discussed here.
(i) Advertising Materials :-
The advertising material prepared by the company such as store signs,
banners, shelf signs, board etc. are distributed to sub dealer for display
purposes this is in fact a method of advertising.
(ii) Store Demonstration :-
In the promises of the whole saler or the retailer the products sales
personnel will conduct special demonstration for the companies product. A
personal demonstration is good to introduce a new product at its peculiar
advantage can be high lightened and the consumer’s doubt clear. It can be
used to restimulate an old product. A good demonstration with a great dealer
of action will draw heavy crowds in to the store and will attract attention
to the product.
(iii) Special Display and Shows :-
These are in seasonal in character but could be arranged in an elaborate
manner and for all the products of an company. Usually these are arranged
along with trade fair and exhibition. Besides effecting sales these shows
impress the company’s name generally on the public.
Sales promotion at consumer’s level
The various schemes of sale promotion at Consumer’s Level may include.
1. Coupons (A Chit of Stated Value) :-
These are given directly to the consumer these coupons are in most cases
kept inside the package. The consumers many receive a price reduction of the
stated values of the coupon at the time of purchase. The retailer receives
reimbursement for the value of the coupon form the manufacturer. Coupons act
as a short run stimulus to the sale of the product, since they are directly
tied with the purchase of the item. They encourage the retailer to stock the
What is important is that a coupon offer does not spoil the named price of
the brand nor does it un pair the margin of the dealers. But it is not easy
to measure the effectiveness of a coupon offer. One over knows how many
customer would have bought the product without the incentive. It is also
difficult to find out how many customers were held after the coupon offer
2. Price-off-offer (Also known as bargain offer price packs) :-
This offer is intended to stimulate the sales during a slump season. In this
method the customer is offered a reduction from the printed price list. It
is also used when a substitute for competing product enters the market.
Many experts on sales promotion fed that ‘Off Schemes’ are among the weaker
and less desirable methods of promotion. These can be trade resentment
particularly when the retailer raises the price to retain his margin.
Secondly that is not conductive to building up brand loyalty. Consumers may
simply shift to the products that offer this scheme.
3. Samples :-
In the hope of converting a prospect into a customer a sample (Some quantity
of the product) may be given. This helps the consumer to verify the real
quality of the product. Various pair manufacturing companies offer this
method. For developing brand loyalty this method is quite useful. Sampling
is a fast method of demand creation because one knows the result as soon as
the consumer has had time to use the sample and buy the brand.
Disadvantage of Sampler :-
Offering sample in quit expensive. There is the cost of producing samples.
The distribution costs are also high. Sample have to be mailed to potential
customers or to be distributed through retail shops. There are also problems
when the real product does not resemble the sample supplied.
4. Money Refund Offer :-
An offer usually stated on the package is that manufacturers will return
with in a stated period part or all of the purchaser’s money if he is not
completely satisfied with the product.
5. Trading Stamps :-
A premium in the form of stamps is given by the sellers to consumers while
selling goods. The number and value of stamp that the buyer receives depends
on the values of the purchase. These stamps are redeemable through premium
catalogues at the stamp redemption centres.
6. Buy-Back Allowance :
This an allowance following a previous trade deal not offer a certain amount
of money for new purchases based on the quantity of purchases on the first
trade deal. It extends the life of a trade deal and helps to prevent part
deal sales decline. It greatly strengthens the buyer’s motivation to
co-operate on the first deal.
7. Premium :-
There are various forms of premiums provided by the manufacturer as sales
promotional devices :-
(a) Coupons are supplied for effecting price reductions.
(b) Factory in pack premium these are popular in the case of Body food and
Tin food items, Spoons, Cups, Measuring, Glass etc. and such other items are
packed with the product in the box itself. Factory in pack premium are
particularly goods for product meant for children. The Binaca Toothpaste
packs contain animal shape toys. These are very attractive and qutie popular
among the children.
(c) Self Liquidating Premiums :-
The cost of the premium is collected from the buyer himself. But when the
buyers pays for it he has to pay only a considerably low price for the
premium. This is possible for the manufacturer purchases the items in bulk
at a premium and his cost per unit as is substantially low.
Other Steps by Manufacturer for Promoting Sales
Dealers can be helps in different ways :-
1. Communicating Market News :-
Often this service is reciprocal the manufacturer may acquaint his dealer
with the fact relating to his production and prices while the dealer may
familiarize him in return with the information bearing on charges in the
consumer's demand, their like and dislike complaints and criticism,
2. Inviting to Sales Conference and Convention :-
The gestures of regard and respect pave the way for better relation and
3. Offering Reasonable Terms of Sale :-
Of all the forms of encouragement, the monetary incentive evokes immediate
response. Hence every producer must offer the most responsible terms of sale
such as longer periods of credit and higher rates of descants.
4. Supplying suitable packages and useful things.
5. By taking the return back.
6. By furnishing them with sales literature and display materials.
Goods are produced for market. Manufacturers have to make efforts to sell
all they produce. When the manufacturers uses various sales efforts to
obtain increased sales volume for his product it is called aggressive
selling or offensive selling. The sales efforts which a manufacturer makes
to retain his customers i.e. to protect his already established market
against against his competitors is termed as defensive selling. In contrast
to this aggressive selling is concerned with the sales efforts made with the
express objective of selling more by expanding the market for the product of
the selling firm.
Aggressive Selling and Defensive Selling :-
Aggressive selling is based on the answer to the question how much does the
firm gain (in term of sales with profit) by using this method defensive
selling is based on consideration as to how much the firm will lose if it
does not use this method increase of sales can be obtained from two
1. New customers if the market is expending.
2. From the competitors i.e. those consumers who were purchasing similar
product of competiting firms, if the market for the product is static.
Acc. to H. Whitehead :-
"In case of an expanding market all the firm may stand to gain by following
the methods of aggressive selling but if the market is static manufacturer
of a new market will have to be much more aggressive to capture the
established market of competitors".
When Aggressive selling is resorted ?
Usually manufacturer of a new product has to do aggressive selling :-
1. When the product has been improved.
2. When the manufacturer’s product is supervisor in quality to the product
of the established competitor.
3. When the total market for the product or line of product to expanding.
4. If the manufacturer’s share of the market is comparatively small.
5. If the manufacturer has unused production capacity with heavy investment
in plant and equipment he will like to develop the demand for his product
rapidly so that demand for his product is equal to the optimum production
capacity of his plant ; and
6. When primary demand for a product must be created and provision must be
made in the channel of distribution to educate consumers regarding the new
product and to instruct them in its use.
Method of Aggressive Selling :-
Sales promotion efforts use for aggressive selling may be divided in two
1. Trade Promotion.
2. Consumer Promotion.
1. Trade Promotion :-
Under trade promotion methods special incentives are offered to the trader
to buy products of the firm. Such incentive may take one or more of the
following firm :-
(a) Cash Allowance :-
A definite percentage of discount is allowed on the purchase of given unit
of a product.
(b) Extra Product :-
Instead of giving any cash allowance extra product is given with each unit
of product ordered. For instance if a box normally contains 20 Cakes of
Soap, special box contains 25 cakes may be made and sold at the same price
as that of the box of 20 cakes.
(c) Gifts :-
Various gifts are awarded in return for an order of a particular magnitude.
2. Consumer Promotion :-
Under consumer promotion method special incentives are offered to the
consumers to buy the firms product. The more prominent amongst such
incentives are as following.
(a) Coupons :-
A coupon of a giving value is sent to the consumer. By presenting this
coupon to the retailer consumers can purchase a particular product mentioned
on the coupon at a reduced price. The retailer sells the products mentioned.
In the coupon to such consumer (consumers presenting the coupons) under and
agreement with the manufacturer at a price lower than the user retail price.
Thus the consumer get the benefit of reduced price to the extent of the
value of the coupons.
(b) Self Liquidating Offers :-
Under this system, the firm offers an article at an attracting price if the
consumer send a given sum of money accompanied by a given number of box tops
from the packages of a particular product the benefit to the consumer is
that he receives the articles at a bargain price.
(c) Bargain Packs :-
Under this system a product is sold at a reduced price for a short period
Bargain pack method encourages new consumers to try the product. It is also
helpful in obtaining large displays in the shops.
(d) Sampling :-
The method involves giving the product or a small quantity of the product to
a consumer free with the hope that the customer will be favourable impressed
with its actual use and will eventually become a regular purchaser of the
A firm selling new product or an extensively improved product finds this
methods useful. Also a firm whose market is hold by competitors whose free
sampling almost expensive.
The above mentioned methods may be reinforced by adopting.
(i) Direct method of selling through.
(ii) Offer of door to door selling.
(iii) Hire purchase and installment payment methods of selling and by
Other Methods of Aggressive Selling :-
(i) Employment of ‘Missionary Salesman also known as Promotional Salesman’.
These salesman call upon retailers and aggressively promote a product.
(ii) Instead of using wholesalers, the firm may develop its own sales force
to call directly on retailers.
(iii) The firm may follow a compromise method by employing a manufacturer’s
agent and giving him a large enough commission to encourage him to sell
product intensively and aggressively.
(iv) New territory exploitation sales promotion has a particularly important
role in developing the company’s product in new territories.
(v) Increment and promotions.
(vi) Letters to dealer and Customer.
In fact, an ingenious sales manager can devise any number of incentives
schemes for promoting the sales volume.
Find the next chapter.................Project Report on Sales Promotion Schemes
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