Sales Promotion Objectives
The most basic objective of any sales promotion is to provide extra value that encourages purchase. When it is targeted at consumers, the intention is to stimulate consumers’ purchase. When the trade is targeted, the objective is to induce distributors to push the product.
Sales Promotion Objectives are as follows:
1. Fast Sales Boost
Short term sales increase is required to reduce inventories, meet budgets prior to the end of the financial year, moving stocks of an old model prior to replacement, increase stock-holding by consumers and distributors in advance of the launch of a competitor’s products. These are very legitimate goals.
Promotions that give large immediate benefits such as money-offs or bonus packs have bigger effects on sales volume than more distant promotions such as competitions. Sales promotion should not be used as means to patching up more fundamental inadequacies such as inferior product performance or poor positioning.
2. Encourage Trial
Customers may be induced to buy a new brand because of the extra benefits, like price-offs or free gifts, associated with its buying. If the buyers like the brand the long term effect of the promotions may be positive. They continue to buy the brand. Customers also spread positive word-of-mouth since they are pleasantly surprised to find the product good when they did not expect it.
Customers like to talk about products which they accidentally discovered to be good Strong brands can be created through this method as more customers buy the product on their friends’ recommendations. They too find the product good and spread the good word about it.
Sales promotion schemes like price-offs or free gifts induce customers to buy a new brand. They may also be given out as gifts with established brands as a part of the latter’s sales promotion endeavor. Promotions that simply give more products as bonus packs are less successful in promoting new products since consumers place much less value on extra quantity until they have decided they like it.
3. Encourage Repeat Purchases
An offer that requires the collection of packet tops or labels attempts to raise repeat purchases during the promotional period For products like detergent powders, a pack will be used over a long period. It is difficult to keep the customers motivated enough to keep collecting the labels and present it for redemption.
For products that can be consumed in rapid succession i.e. the product is purchased frequently, the scheme can be successful. Children have been found to become obsessed with collecting labels especially if the reward is some cool possession, like Pokeman cards.
4. Stimulate Purchase of Larger Stocks
Promotions that are specifically linked to larger pack sizes may persuade consumers to switch from less economical smaller packs. But when customers buy large pack sizes, they do not necessarily consume more. The large pack size lasts for another time period and customers do not buy the product in the next time period. There is a sharp decrease in demand and the manufacturer faces the problem of idle capacity.
This problem is in addition to the problem that the company faced in meeting the big surge in demand when the scheme was on. Manufacturers should always remember that the per-unit cost of production is minimum when the production is carried out at a uniform rate throughout the year. Per unit cost of production goes up when the production rate is varied.
5. Gain Distribution and Self Space
Trade promotions are designed to gain distribution and shelf space. Discounts, free gifts, joint promotions are used to encourage distributors to stock brands. Also consumer promotions that provide sizable extra value may also persuade distributors to stock or give extra shelf space.