Major Sales Promotion Techniques
Companies use various sales promotion techniques to promote their products. The intention is to increase sales, make a large customer base, encourage trial, encourage repeat purchases to stimulate consumers’ purchase. The types of sales promotion techniques used by the company depend upon the sales promotion objectives set by the company.
The brand is offered at a lower price than what it normally sells for. It provides direct value to consumers and is an unambiguous incentive to purchase. Money offs have a proven track record of stimulating short term sales increase. But price reductions can be easily matched by competition, and if used frequently can devalue brand image due to its association with low price for long periods of time.
If the brand sells at the lower price for a considerable period of time, customers will associate the brand with the lower price. And when the company terminates the sales promotion scheme, the original price will seem high as customers have got used to buying at the low price.
The company gives added value by giving consumers extra quantity at no additional cost. Because price is not lowered, there is lesser risk of devaluing a brand image. With some product groups, like cold drinks, it encourages buyers to consume more. Bonus packs are useful when the product is consumed over a period of time.
Customers notice when a pack of detergent powder which normally lasted ten days, lasts a few more days. And with such experiences build into them, they will go for the bigger packs because they know that it will be useful. But with products, like chocolates, which are consumed in one go, the consumer might not know the difference between consuming a normal pack and a slightly bigger one.
Bonus packs will be useful for such products if a separate pack containing the extra quantity is offered. Even for goods which are consumed over a period of time, a separate pack containing the extra quantity will be more useful than stuffing the extra quantity in the same pack.
Premiums are any merchandise offered for free or at low cost as an incentive to purchase a brand. There are two major forms:
Free in or on Pack Gifts
They ore given away free with brands. Occasionally the gift is a free sample of any new brand that is related to the brand so that consumers get a chance to use it. A free sample may be a new variety or flavor which benefits by getting a trial. The purpose of the sales promotion scheme may actually be to induce consumption of the new brand so that consumers develop o good perception about it. But on unknown brand will not to do much to increase the sale of the brand for which the sales promotion is ostensibly held. Some consumers may not even need the particular flavor or the product.
Companies can offer common generic products, like some quantity of sugar, as the free item. Such products are unambiguous gifts to the consumers as they ore needed in all households. If brands, like a tube of toothpaste, are offered as gifts, there will be the problem of whether the customers like the brand enough to consider it an inducement.
Free in the Mail Offers
The scheme involves collection of packet tops or labels by customers which are sent in the mail as proof of purchase to claim a free gift or money voucher. Redemption can be very low as consumers collect labels with a view to mailing but are never able collect the requisite number.
Most customers are not patient enough to collect Iabels for the small financial benefit that the scheme may offer. For such schemes to really catch on the collecting of labels has to be projected as being “cool” or the thing to indulge in. The customers should be exchanging notes as to how many the other has been able to collect.
To create such a mass hysteria the company has to promote the scheme in a big way and big rewards should be offered. It will be useful if celebrities are associated in the promotion of the scheme. Such schemes for children can be very successful. A smart scheme which incorporates the latest cool possession of the children’s world will be successful even without promotion.
Free samples may be delivered at home or given out in the store. The idea is that having tried the sample a proportion of consumers will begin to buy it. This is an expensive but effective way of getting consumer trial. But it may be ineffective if the brand has nothing extra to offer.
A customer receives an item upon presenting a coupon. Coupons can be delivered to the house, appear in magazines and newspapers or appear on packs. Home coupons i.e. coupons delivered at home, is a good method to achieve trial for new brands. Magazine or newspaper coupons is cheaper than home delivery and can be used to stimulate trial but redemption rates ore much lower. The purpose of an on-pack coupon is to encourage initial and repeat purchase of the same brand or trial of a different brand.
A brand carries an on pack coupon redeemable against the consumer’s next purchase usually for the same brand. Redemption rate is normally high. The coupon can offer a higher face value than the equivalent cost of a money-off pock since the effect of the coupon is on both initial and repeat sales. But it is usually less effective in raising initial sales than money-off because there is no immediate saving and its appeal is almost exclusively on existing consumers.
Competitions require participants to exercise a certain degree of skill and judgement. They may be asked a few simple questions. Entry is usually dependent upon at least one purchase. Compared to premiums and money-offs, competitions offer a less immediate incentive to buy and requires time and effort on the port of entrants. However, they can attract attention and interest in the brand.
Draws make no demands on skills or judgement. The result depends on chance. A store may run an out-of-the-hat draw where customers fill in their names and address on an entry card and on a certain day, a draw is made.
Media advertising can be used to communicate sales promotions. In fact the company should strive to make a splash with certain types of sales promotion schemes like competitions, collection of labels, and draws, and should have the twin objectives of making the sales promotion scheme successful and promoting the brand when it advertises its schemes.
Such forms of sales promotion, like competition, collection of labels, and draws can be advertised as they are not likely to devalue the brand as a scheme of price-offs can. In fact, a company should be circumspect in advertising sales promotion schemes like price-offs and free gifts as such schemes are normally considered as a signal of the fact that the company is not dong well and is desperate to sell.
The traders i.e., retailers and wholesalers may be offered discounts in return for purchasing and keeping the manufacturer’s brand. Concentration of buying into fewer outlets has made the retailers very powerful and this power is translated into discounts from manufacturers. The discount may be part of joint promotion whereby retailer agrees to devote extra shelf space, buy larger quantities and allow in-store promotions.
When a company gives a discount and the retailers return the favor by allowing in-store promotion or by devoting extra shelf space to the brand, it is a fair game. But when a manufacturer gives price discounts to keep the retailer in good humor and to protect its brands from being put off the shelves, it only makes the retailers more brash and greedy.
The appropriate strategy to counter all-powerful retailers is that the manufacturers strengthen their brands and create strong demand for them among consumers. The most powerful of retailers will keep brands that consumers want to buy and treat manufacturers of such brands with respect.
The retailer is offered more merchandise at the same price. The scheme ultimately translates into the manufacturer offering price discounts, with its accompanying pitfalls.
The manufacturer offers financial inducements or prizes to the distributor’s sales force in return for achieving sales targets for its products. Besides increasing sales for its products, the manufacturer is able to wield some influence over distributor’s salespersons. Salespersons may show loyalties towards products of such manufacturers and may push their products. But the manufacturer should ensure that the distributor is a part of the deal.
It should not happen that the distributor and his salespersons want to promote products of different manufacturers, with the distributor promoting products of a manufacturer who gives him more margins and the salespersons pushing products of a manufacturer who gives them inducements for selling his products.
The manufacturer may offer allowances in the form of a sum of money in return for retailers providing promotional facilities in the store. An allowance would be provided to persuade a store to display cards on its shelves indicating that a brand is being sold at a special low price. An advertising allowance would be paid by a manufacturer to a retailer featuring its brands in retailer’s advertising.