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by Prasanna Perera, Marketing and Management Consultant, Chartered Marketer, CIM, UK

Look around the supermarkets and retail bazaars of Sri Lanka. You will quickly observe a multitude of sales promotion from discounts, free offers, banded offers, incentive vouchers and prize competitions.

All these varied promotions have something in common i.e. they offer consumers added value and benefits often as a reward for their loyalty. Therefore it is clear that sales promotions have become a powerful and integral part of Marketing activities, in a Sri Lankan context.

What really is sales promotion?

Some define sales promotions as marketing communications, which is not advertising personal selling or public relations. Another popular definition is ``marketing activities usually specific to a time period, place or customer group, which encourages a direct response from consumers, through the offer of additional benefits." By dwelling on this definition, the key elements of sales promotions can be understood.

(a) Sales promotions are usually temporary and confined to a specific time period.

(b) A direct response from customers, is usually sought. This is not necessarily a sale, but may encourage customers to request for additional information, samples and leftlets.

(c) Sales Promotions are benefit oriented. These benefits provide added value to customers, during sales promotional campaigns.

There are many sales promotional tools available. These different tools vary in terms of who the promotions are targeted. For example, "push" promotions target intermediaries, while ``pull" promotions target consumers.

Dealer incentives are one example of push promotions and prize competitions of pull promotions, in terms in of the benefits offered through sales promotions, a distinction can be drawn between value increasing and value adding promotions.

Value increasing promotions alter the product/price equation by reducing price or increasing product quantity or quality. (Now enhanced product performance, at the same price. A special discount for the Sinhala New Year). On the other hand, value adding promotions leave the basic product/price unchanged, but offer some "added" benefit (loyalty programs, instant prizes and premiums).

Sales promotional tools should be selected in terms of the required consumer appeal. Basically, different promotional tools, appeal to different people. For example certain consumers prefer instant benefits, whilst others are quite happy to enjoy delayed/lagged benefits.

Another aspect to be noted in using different promotional tools, is the suitability in terms of the product/market. For example, price discounting is not suitable for premium product offerings. However, some added benefits to reward loyalty, would be appropriate.

Why are sales promotions growing in popularity?

Evidence of the growth of sales promotions can be seen by visiting a few supermarkets and retail outlets. Every imaginable type of promotional offer is made available to the customer. There are several factors, which are driving the growth of promotions. Sales Promotions are no longer considered as cheap gimmicks.

As such, the reputation of promotions has been enhanced with the participation of market leaders, who are often global operators. In a self service, in-store setting, increased impulse purchases take place. These impulse purchases can be triggered by sales promotions, resulting in higher levels of promotions in supermarkets.

Another factor contributing to the popularity of sales promotions, is the fragmentation of mass markets, into micro markets.

These micro markets provide opportunities to carry our more focussed and targeted promotions, than mass media advertising. We are also witnessing the gradual deadline of brand loyalty, as customers are afforded a wider choice and the differential between brands are narrowing.

In such a situation, sales promotions could keep brand loyalty alive by keeping the brand in the foreground and rekindling customer interest and attention.

Sales promotions are also increasingly conducted by companies, in order to match competitive actions, specially in highly competitive markets. Through sales promotions, these companies hope to safeguard market share and their competitive position.

Consumer Response to Sales Promotions

Promotions are a very effective persuader, in the race to win over additional consumers. The vast majority of consumers are positive, in their response to sales promotions. Generally, price and product based promotions, targeted at the value conscious consumer, brings forth a favourable response.

Consumers also respond positively to promotions, which encourage increased usage of their regular brands. (Affords an opportunity to further consolidate their brand loyalty). Sales Promotions which do not expose consumers to additional risks also receive favourable responses.

For example, more flexible payment terms, which enhance the attractiveness of purchase. In periods of economic recession and inflationary pressures, consumers resort to promotional deals, in order to obtain greater value for their purchases.

Relationship building through sales promotions

The importance of building relationships, with customers and consumers, is the secret of "customer retention". Intermediaries or the trade is an important customer group, particularly in highly fragmented and competitive markets. Many manufacturers rely heavily on retailer co-operation, and this is reflected in the growing popularity of trade promotions.

In the Sri Lankan marketplace, it is the retailer that often recommends brands to consumers. For example, consumers request for a soft drink and it is the retailer who promotes a specific brand.

In industrial marketing, relationship building is critical for success. These relationships are built through effective promotions, among others. Promotions in industrial marketing are focussed on reducing the risk of the buyer. For example, free samples, unlimited trial offers, invitations to participate in trade and consumer exhibitions are some of the promotions, utilised in business-to-business marketing.

Promotions could also help to build relationships with the salesforce. (Salesforce promotions). It is not merely offering financial incentives to the salesforce, that helps build relationships. The ability of a sales promotion, to creatively involve the salesforce, is what facilitates relationship building.

Therefore do not miss out on the opportunity afforded to build relationships with customers, consumers and employees, through promotions.

Limitations of sales promotions

It must be borne in mind that sales promotions is not the panacea for all marketing problems. Fundamental weaknesses in the marketing mix cannot be rectified through promotions. Many marketers believe that the majority of the marketing problems, can be solved through sales promotional activities. This is the starting point of most problems, resulting in the overuse and inappropriate use of promotions.

Sales promotions can lead to price wars, if not practised professionally. Margins and profitability will be eroded unnecessarily, as a result. Various promotions, undermine that image and reputation of brands. Specially cheap gifts frequent price discounting. Therefore it is important to safeguard the "position" of a brand, by indulging in promotions which are appropriate and required.

Overredemption is another common limitation. Coupons and gift are all based around estimates of responses. Certain promotions draw unexpected interest, resulting in stockouts of gifts leading to subsequent customer dissatisfaction. Fulfilment of promotions, is another limitation.

Once a promotion is advertised and implemented, fulfilment of the promised rewards is mandatory. However in practice many shortfalls do occur in this regard.

The future of sales promotions

Innovation and creativity, are key to the future success of sales promotions. Developments in information technology and packaging, are providing exciting ways to offer consumers added benefits.

For example, the management of customer databases, is an ideal way to plan and execute promotions. Customer databases facilitate targeted promotions and communications, through channels such as direct mail etc. The effectiveness of promotions can also be measured, in this manner.

Electronic mediums such as the internet, will be increasingly used by a range of industries, to carry out promotions. For example, printed brochures an catalogues will be replaced by digital catalogues, which will include instant order processing, built-in discounts and other benefits. (Instant gifts).

Packing development will provide novel and innovative methods, to carry out future sales promotional activities. Novel samples packs, on-pack coupons and gifts, utility containers etc. are some examples of how packaging can be utilised for promotions.

Smart card technology, can hold an automatically redeem coupon information based on previous purchases. Therefore, hi-tech coupons can be used for promotions, making traditional entry coupons, a thing of the past.

Conclusion

Many of the misconceptions about sales promotions are gradually disappearing. Many international leading brands are conducting promotions, in order to build brand loyalty dealer loyalty and to consolidate the positioning of their brands. It is also important to acknowledge that promotions are not necessarily short-term and temporary.

Consider the host of customer loyalty programs being conducted on a regular basis, such as frequent flyer, frequent shopper and frequent user.

The important, aspect in conducting sales promotions in competitive markets, is professionalism. This involves acknowledging the strategic role of promotions, planning promotions, integrating promotions into overall marketing programs and redemption/fulfilment of promises.

"Do not be obsessed by deals, but rather by value additions"

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