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Sales promotion, a powerful marketing tool Subhash Mohanti, TNN Jun 15, 2003, 12.

25am IST
Source: consumer-mindset Accessed On:3 November 2013 IST 10.53 P.M.

When marketing wizards discovered sales promotion techniques to push up consumption in difficult times, little did they imagine that they would have unleashed a phenomenon for years to come. Sales promotion is no longer a powerful marketing tool only, it's an industry in itself. In the global context, it's worth some billions of dollars. In India it's a Rs 5,000-crore plus industry, and growing. In fact, economic theories have always bowed to the boom-bust theory. A business cycle will always contain a period which will offer serious challenges to any business. Either it will be due to technological changes or change in the behaviour pattern of consumers. Or it will be simply due to general demand slumps, a phenomenon which has possibly overstayed in today's context. It is these times that need to be tackled differently and consumers have to be lured. Sales promotion techniques have not only attempted to bring about fresh demand, they have also helped create new demand. Marketing experts believe that sales promotion industry is here to stay. And it's expected to become more aggressive and certainly more innovative. Explains Rajiv Karwal, CEO, Electrolux Kelvinator Ltd: "Sales promotion is an integral part of the overall marketing programmes for any brand today because competition has increased tremendously and the market size is still small, and that too spread across a huge geographical area. The Indian consumer is very value conscious and his purchasing power is limited. The penetration rates are still too low and hence most brands look at India as as a potential volume oriented market which can open up only when a consumer sees tremendous value proposition. Sales promotion increases the value proposition, and is increasingly being used. FMCG companies are using mostly volume driving promotions and they are quite effective." Says Hindustan Lever, senior manager, purchase S P Rao: "Its has completely changed the consumer mindset. He asks, 'what else?' every time he buys something." And that's why the growth of sales promotion as a distinctive industry is not in doubt. In fact, necessity is the mother of invention. And in recessionary markets, sales promotion indeed is the single most important invention of the modern times. If these started as distributing freebies along with mainline products, over a period of time, it has now gathered enough momentum to become an indispensable tool in the hands of companies focused on creating market space for even not so convincing products. Also, while advertising takes a longer time to pay off, promotions promise instant gratification -- to buyers and sellers alike. Timex sales, for instance, almost double during the promotion period. Says Kapil Kapoor, MD, Timex Watches Ltd: "SP's are a way of life not only in India but all over the world. Consumers seek good value. Impetuous purchase is increasing and a lot of low risk/half-decided consumer cross over at a time they see good value." Says Bhupinder Singh Sodhi, general manager, sales, Godrej Consumers Products: "The key is that sales promotion has helped avoid brand as well as value dilution in times when consumers were shying away." Hence, companies, instead of cutting prices, have resorted to 'something else' to woo

back consumers. Of course, these effectively lower price rationalisation in the hands of the seller, but they do not bring down the value of sales. To the buyers, these are a form of value addition. Our thumb rule is that in four weeks of consumer promos, we sell through eight weeks of sales." Possibly, the strongest focus of sales promotion initiatives in the present times is at the point of retail. Thus, a direct thrust on retail customers, who naturally feel pampered. Says a senior executive of a large packet tea company: "The last few years have probably been the worst of times for not only India but global economies as well. Market uncertainties coupled with shrinkage in jobs have only made a consumer more cagey and therefore savings oriented." Evidently, avoidable consumption has suffered or has been reduced to the bare minimum. Some of the worst sufferers in the retail segment therefore have been garment manufacturers or makers of conspicuous items. Hence promotional activities too have been stepped up sharply in these segments. The success of sales promotion as a marketing tool is not only evident at the point of retail. It has proved an effective incentive mechanism for wholesalers and retailers as well. "It's not a commission on sales. It might be even a motor car or an exotic holiday plan," Sodhi says. The effectiveness of sales promotion is indeed reflecting in the topline growth of many a consumer product companies. Sodhi's words are tough to substantiate in terms of hard figures, because not many would like to talk figures. However, it appears that if 10 per cent of the mark-up price has gone into sales promotion, the topline has grown by 5-7 per cent Sales promotion, a powerful marketing tool Subhash Mohanti, TNN Jun 15, 2003, 12.25am IST Emergence of sales promotion as an industry is best explained by companies which deal in only institutional sales of gifts. They are making a big difference to the marketing strategy of the clients. "We are an integral part of the sales promotion industry", director, Zenith Finesse Preetimoy Chakraborty said. Companies such as his, more often than not carry out a thorough research on the kind of gift that will suit the product vying for consumer attention. While this is one facet of the story, the other is in co-branding of products to ride piggyback on an already popular item. "Thus, we may see a tea company offering say, biscuits or a toothpaste in a market segment where it may not have a strong presence," Rao says. This not only creates awareness, but also finds a ready market, practically on the strength of the freebie, which already enjoys complete acceptance in that particular market segment. The point then is why should a stronger brand want to do so, that is be dished out as a freebie with a product which is trying to create a market of its own. Such an exercise is not without reasons. Even though the co-branding exercise is with a relatively unknown product, getting packaged with this product helps create a large awareness. It also means a higher brand recall at a comparatively lower cost, since both companies bear the expenses. In any case, the main product is the bigger spender since it is looking to enter a new segment or pushing to stay ahead of competition. What, however, is significant is that companies are constantly on the lookout for new plans to enhance the positioning of their products and also expand the market-size. Says Sodhi: "These strategies are here to stay, be it in bad times or good times." It does not matter even if sales are good. No company withdraws a paying scheme in a hurry. Thus even though a detergent product is selling fairly well in a particular market, the manufacturer does not withdraw the freebie for quite sometime. "We often think up newer ways of retaining the new markets by offering yet another product. This is to retain the customer interest," Sodhi adds.

It is true. Schemes often become stale after a while and induce a sense of lethargy among consumers. Just as advertising strategies are altered from time to time to keep up the interest, so do companies revise sales strategies, adopt new ones or innovate on the kind of products to be given out as freebies, to remain in the spotlight. "It is very important to understand the consumer mind. More than the value, it is the perceived value which is crucial," Sodhi maintains. It's not always a freebie. Companies often offer another product at a considerably lower price. So a detergent manufacturer could offer a bucket along with a packet of detergent at a price. The deal is packaged in such a way that a consumer is tempted to buy in order to get the bucket at a virtually throwaway price. Only recently Cadbury India ran a scheme where it offered to its customer a badminton racket for an additional price of Rs 7 per kilogram of Bournvita, in the nourishment drink segment. The scheme was lapped up in less than a week. In fact the scheme was withdrawn because all the badminton rackets were exhausted. Perhaps the company did not anticipate this kind of frenzy from its youthful consumers. According to Polar marketing director Hardeep Singh, there is no doubt that the consumer promos have grown phenomenally over the past few years. But he differentiates between the experiences in the consumer durables sector and consumer goods sector. "In the CD sector, there is perhaps no method in the madness. There is a mad rush to offer mouthwatering concepts to the consumer," he says. Generally, as a rule, accent of any marketing exercise is on brand building first. But in today's scenario, there is not so much time at hand. With technology ruling the roost, there is significant parity among goods, especially in the consumer durables sector. The white goods segment for instance, dishes out new products almost by the day. Illustratively the washing machines for instance. Every company talks about special features, which are more or less common. Naturally the differential point is quite clouded. Then what is criteria for making the right choice? In a situation where product parity is high, it then remains to be seen what is the distribution strength, the dealer strength and his advice and finally the freebies. "The Indian mindset which is faithfully following its western counterpart about freebies will never change. In fact it will only grow," says Singh. ingh admits that the spend on selling promotion has gone by 500-600% in the past three to five years. This is also because the spends do not follow any seasonality today. "That's because markets as well as the players have become vulnerable. The pressure to sell has become immense. Thus brand-building has taken a back seat giving the baton over to sales promotion techniques to help try and enhance sales and turnover." However, the promotional work has its accompanying hazards as well. There was a time when companies could actually pinpoint on the exact time-frame to run the campaigns. But it's not happening, especially in the consumer durables sector. It is difficult to adhere to a certain timeframe because no one is sure if sales would continue with the promotional activities. Hence, decisions are influenced by more what the competitor is doing. It is like an epidemic. This is more so because of the increasing similarity among products. This is not the case with the consumer goods sector, where there is more balance given the presence of at least two or three market leaders who drive the markets.