Block: Sales Promotion Management

III

Ch-19

Sales Promotions Budget and Evaluation

Chapter

19

Sales Promotions Budget and Evaluation

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Ch-19

Sales Promotions Budget and Evaluation

How are Sales Affected by Sales Promotions?

There are four basic mechanisms involved 1. Brand switching: The objective of some sales promotions is to induce brand switching, which is encouraging consumers to purchase the promoted brand instead of the regular brand that would have been purchased had there been no sales promotion. 2. Repeat buying: Sales promotions influence the consumers in a manner that the chances of purchasing the same brand again in future. 3. Purchasing more, or accelerating timings: Consumers purchase more than their immediate requirements, or the purchase timings are changed. 4. Increasing category expansion and consumption: Consumption of total category is increased by the consumers as a result of sales promotion. increases quantity product

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Sales Promotions Budget and Evaluation

Sales Promotion Design Issues

 There are a number of internal and external factors that influence sales promotions design. These factors include (1) place of sales promotion in of budget (3) present and expected environmental factors.  The starting point in developing the promotional design is to specify the sales the force. promotion target groups marketing strategy (2) allocation

competitive moves and (4) significant external macro

objectives. The range of sales promotion objective is fairly large because involved can be consumers, trade and sales

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Sales Promotions Budget and Evaluation

Confusion often may arise in determining what type of promotion will best produce the desired result, and this is a key decision area concerning the promotion design that must be taken up one after the other, in a sequential manner. 1. Promotion Choice There are different types of promotions that can be used, singly, or in combination: a. Consumer promotion b. Trade promotion, and c. Sales force promotion. There are two major approaches for consumer and trade promotions: a. Same for less, and b. More for the same c. The type of promotions for consumers and the trade can be usefully put under two headings immediate value offer vs delayed value offer, and price-cut vs extra value offer.

Cont.

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2.

Ch-19

Sales Promotions Budget and Evaluation

Product Choice  This step focuses on choosing the products for sales promotion, their or models, and different variations of the product, etc.  Sales promotion planners have to decide whether to run promotions on product-line, or only selected items in the line?  Should the promotions be run on higher priced or lower-priced products, products that contribute more to the sales or those that contribute less? pack sizes, the entire the

 In case of consumer non-durable products, would it be advantageous to come out with special promotion packs, or the promotion should be run on regular packs ?  Answers to these questions are likely to be significantly influenced by taking into account consumer and trade behaviour, competitive situation and coordination with advertising and personal selling.
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3.

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Sales Promotions Budget and Evaluation

Choice of Market Areas  Promotion planners have the option to select national or regional markets. However, developing different When regional

promotion programmes are developed for regional degree of protection from competitive moves. promotional deals can

markets, they provide some

complicate sales forecasting, production scheduling and physical

distribution; this may also lead to cost escalation.  Higher inventory risk would require that promotions be developed for separate

markets. Excess product stocks from one market can be the sales potential is more.

shifted to another market where

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4.

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Sales Promotions Budget and Evaluation

Promotion Timing, Duration and Frequency

When the product or brand inventories are less than normal in trade channels, the objective of the promotion would be to build inventories, but when the inventories with the traders are high then the objective would be to clear the inventories. It is inadvisable for the producer to announce a promotion when the retailer shelves are full with the competitive brand because the promotion is quite likely to prove unprofitable.  Ideally, some manufacturers plan their promotions when annual marketing plans are developed. However, sometimes marketers face compulsions like unexpected moves by competitors  The duration of consumer promotion should be such that a larger percentage customers get exposed to the promotion offer.  Frequency of promotion depends on competitive situation, deal sensitivity of the interest of the trade, and the complexity of the promotion offer.
Cont.

of customers,

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Block: Sales Promotion Management

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Ch-19

Sales Promotions Budget and Evaluation

Marketing objectives Combined promotion and advertising budget Marketing strategy Promotion objectives and performance criteria Company policy

Promotion Planning Process

Review of past performance

Advertising objectives

Promotion strategy

Advertising strategy

Prepare detailed sales promotion budgets

Decision on promotion tactics, generate and screen alternatives, design the schedules Review performance criteria (pretest if needed) Implement promotion Evaluate performance (concurrent & post-promotion evaluation)

Design advertising

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Ch-19

Sales Promotions Budget and Evaluation

Testing the Sales Promotion

Pre-testing  How sales promotion is to be communicated and what would be target groups is important and can be pre-tested. communicated to the

 To test consumers behavioural response, such as trial purchase, or repeat purchase, etc., pre-testing consists of experimenting in certain markets or individual stores in a market. All other factors remain the same, only the sales promotion device being tested in the variable is manipulated.  It is often quite helpful to evaluate the response of re-sellers before implementing the promotions programme. The simplest way is to visit several important retailers and wholesalers and discuss the programme and seek their opinion and suggestions. This may prove to be quite favourable in case the support of re-sellers is considered to be of paramount importance for promotion results.
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Sales Promotions Budget and Evaluation

Concurrent Testing This testing is done when the sales promotion is in progress. Concurrent testing may permit the promotion manager to modify the sales promotion, if needed. This type of testing is conducted in terms of sales data, which can be obtained on a weekly or monthly basis. Post-testing  Post-testing is done after the promotion period is over. To assess the change to in and

consumer awareness and attitude, telephone calls, questionnaires mailed personal interviews can be used. 

consumers

To measure the sales effect, sales figures before the promotion period can

be

compared with figures at the end of the promotion, and one month after

the promotion ends.

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Ch-19

Sales Promotions Budget and Evaluation

Post-Testing Sales Effect

Sales, pre Promotion Period

Sales, Promotion Period

Sales just after promotion period

Sales in the long run

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Ch-19

Sales Promotions Budget and Evaluation

Types of Promotion
Promotion stands for personal selling, advertising, promotion mix., and customers relations. All of these methods try to inform, persuade and remind the target large no. of audience about your product or service. They are complementary to each other and should be integrated with your profit. There are some other different forms of these types of promotion such as broadcasting, printing, direct mail and electronic devices advertising that offer many advantages, disadvantages, costs and paybacks. The similar message may be evaluated based on the source of the message in terms of reliability.  Promotion Mix Decision: There is no any unique promotion mix (between Personal Selling, Advertising, Sales Promotion, and Public Relations) for all situations. The promotion mix for your company should be designed to fulfil your overall objectives.  Push, Pull or Push-Pull Strategy? There are three basic promotional strategies philosophies push, pull or push-pull. or

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Ch-19

Sales Promotions Budget and Evaluation

Guidelines to Planning Sales Promotion

i. ii. First step in promotion planning is situation analysis. Allocation of budget to sales promotion, out of the combined total budget for advertising

and sales promotion. iii. Considering the objectives and the budget allocation, each promotion event must be

carefully created. iv. There is vast choice of promotion tools, and the combinations of these tools seem to be

endless. v. A clear understanding of various tools and techniques is essential for the planners to

make the winning choice from among alternatives. vi.

19-13

Next step relate to sales promotion design issues.

(2nd Edition)

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Block: Sales Promotion Management

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Ch-19

Sales Promotions Budget and Evaluation

Pertinent Points to Considered for Effective Promotion A. B. C. D. E. F. Promotion Choice Product Choice Choice of Market Areas Promotion timing, duration and frequency Rate of discount, terms and conditions Protection from Competition

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