1.ManagementResearch ProjectImpact of Sales Promotions onSale of FMCG Products at (Withspecific reference to Retail Mallsin Ahmedabad)

2. ACOMPREHENSIVE PROJECT REPORTONImpact of Sales Promotions on Sale of FMCG Products (With specific reference to Retail Malls in Ahmedabad) Submitted toXcellon Institute School of Business IN PARTIAL FULFILLMENT OF THEREQUIREMENT OF THE AWARD FOR THE DEGREE OF POST GRADUATE DIPLOMA IN GENERAL MANAGEMENTUNDER THE GUIDANCE OFProf. Daisy KurienSubmitted byCHETAN PANARA (M00086) KAUSHAL DHAKAN (M000) JAY AJUDIA (M00036) [Batch: 2010-12] MBA SEMESTER IV (Xcellon Institute: School of Business) 3. DeclarationWe, Chetan Panara; Kaushal Dhakan; Jay Ajudia, hereby declare thatthe report for Comprehensive Project entitled Impact of SalesPromotions on Sale of FMCG Products on Retail malls inAhmedabad is a result of our own work and our indebtedness to otherwork publications, references, if any, have been duly acknowledged.Place: Ahmedabad Chetan PanaraDate: 25th April 2012 Kaushal Dhakan Jay Ajudia 4. Xcellon Institute: School of BusinessCERTIFICATECertified that this Comprehensive Project Report Titled Impact of SalesPromotions on Sale of FMCG Products on Retail malls inAhmedabad is the bonafide work of Chetan Panara, Kaushal Dhakan,and Jay Ajudia who carried out the research under my supervision. I alsocertify further, that to the best of my knowledge the work reported hereindoes not form part of any other project report or dissertation on the basis ofwhich a degree or award was conferred on an earlier occasion on this orany other candidate.Prof. Daisy Kurien Prof. Devang Patel(Name and Designation of Guide) 5. PrefaceIn this age of globalization hyper competition has become a regular feature.Today the markets are no less then battlegrounds and one has to strive very hard forsurvival and growth.Due to very rapid industrialization all over the world the demand for the managerialpersonnel and the administrative personnel has increased. The perfect study ofManagement involves both the theoretical as well as practical aspects. To survive inthis highly competitive market Practical Knowledge is as relevant as theTheoretical.The significance of MBA Degree is that the Theoretical aspects, which a studentlearns throughout the year in the class sessions, can be practically applied throughdifferent projects, which one undertakes. Keeping in tune with this doctrine, we havetried to apply theoretical aspects throughout the project, which we learned under thecourse of management.In this project more emphasize given to the various tools of sales promotion and itsimpact on sale of FMCG products (with specific reference to Retail malls inAhmedabad). Actually in recent trend to some extent this technique also becomevictim of clutter, even though it can be eliminated by generating innovative and moreattractive tools to lure the customers.Now a day most of the FMCG companies considering sales promotion as animportant part of their marketing strategy. From the analysis of survey it becomesclear that consumers do response to the sales promotion campaign, but there arecustomers who strongly prefer to stick to brand name. 6. AcknowledgementEvery study requires a guidance of someone who is working in same field..We are extremely thankful to our Project Guide, Prof Daisy Kurien for their preciousguidance regarding the preparation of the Project Report. Their guidance has provedto be useful and without them, the preparation of this report might not have beenpossible.We are also thankful to the other faculty members of Xcellon for extending theirvaluable support for this project.We also extend our sincere thanks to the Respondents, who helped us during thecourse of our project and for their gracious attitude.We would like to take this opportunity to extend our warm thoughts to those whohelped us in making this project a wonderful experience.Last but not the least; we would also like to thank our family for their support andencouragement. 7. SR No Particulars Page NoPART - I GENERAL INFORMATION1 Introduction1FMCG Industry EconomyCommon FMCG productsMarket potentiality of FMCG industryLeading FMCG companies & Industry PotentialThe future of FMCG2 Top 10 companies in FMCG sector 7Retail malls in Ahmedabad3 FMCG Category and products13PART - II PRIMARY STUDY4 Introduction of the Study 144.1 Literature Review4.2 Statement of the Problem4.3 Research Objectives4.4 Research Hypothesis4.5 Motivation for the study5 Research Methodology445.1 Research Design5.2 Sampling Element5.3 Sampling Design & Data Collection6 Data Analysis and Interpretation457 Results and Findings588 Limitations of the Study599 Conclusion60o Annexureo Bibliography 8. PART - IGENERAL INFORMATION 9. PART- IIPRIMARY STUDY 10. Annexure1 sample questionnaire 11. The Indian FMCG sector is the fourth largest sector in the economy with a totalmarket size in excess of US$ 20.1 billion. It has a strong MNC presence and ischaracterized by a well-established distribution network, intense competitionbetween the organized and unorganized segments and low operational cost.Availability of key raw materials, cheaper labour costs and presence across theentire value chain gives India a competitive advantage. Also, increase in the urbanpopulation, along with increase in income levels and the availability of newcategories, would help the urban areas maintain their position in terms ofconsumption. At present, urban India accounts for 66% of total FMCG consumption,with rural India accounting for the remaining 34%. However, rural India accounts formore than 40% consumption in major FMCG categories such as personal care,fabric care, and hot beverages.Family income is one of the variables which should be considered while designingsales promotion schemes more specifically cash discount. There is significantdifference between consumer preference of cash discount and free gift as salespromotion schemes. It is also very clear that consumers prefer cash discount as asales promotion schemes compare to free gift as a sales promotion scheme. It isfound that Consumer deal proneness differs according to marital status.Furthermore, it is also proved that married are more deal prone compare toUnmarried. Added to it Brand Equity perception differs according to employmentcategories. It is concluded that male prefers the newspaper and point of purchasematerial as a source to know sales promotion schemes over female.Overall, Sales promotion scheme on international brand, awareness spread out byword of mouth, Scheme is value added type with immediate benefit is preferred bythe customers. So while designing sales promotion schemes and its benefits fromthe perspectives of the customers above mentioned attributes of the sales promotionschemes should be considered to achieve the objectives of the sales promotionschemes. 12. 1. IntroductionFMCG industry, alternatively called as CPG (Consumer packaged goods) industryprimarily deals with the production, distribution and marketing of consumer packagedgoods. The Fast Moving Consumer Goods (FMCG) is those consumables which arenormally consumed by the consumers at a regular interval. Some of the primeactivities of FMCG industry are selling, marketing, financing, purchasing, etc. Theindustry also engaged in operations, supply chain, production and generalmanagement.FMCG Industry EconomyFMCG industry provides a wide range of consumables and accordingly the amountof money circulated against FMCG products is also very high. The competitionamong FMCG manufacturers is also growing and as a result of this, investment inFMCG industry is also increasing, specifically in India, where FMCG industry isregarded as the fourth largest sector with total market size of US$20.1 billion. FMCGSector in India is estimated to grow 60% by 2011. FMCG industry is regarded as thelargest sector in New Zealand which accounts for 5% of Gross Domestic Product(GDP).Common FMCG productsSome common FMCG product categories include food and dairy products,glassware, paper products, pharmaceuticals, consumer electronics, packaged foodproducts, plastic goods, printing and stationery, household products, photography,drinks etc. and some of the examples of FMCG products are coffee, tea, dry cells,greeting cards, gifts, detergents, tobacco and cigarettes, watches, soaps etc.Market potentiality of FMCG industrySome of the merits of FMCG industry, which made this industry as a potential one,are low operational cost, strong distribution networks, presence of renowned FMCGcompanies. Population growth is another factor which is responsible behind thesuccess of this industry. 13. Leading FMCG companies & Industry PotentialSome of the well known FMCG companies are Sara Lee, Nestl, Reckitt Benckiser,Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi,Mars, Coca cola, Nirma, Dabur, Himani etc.The Indian FMCG sector is the fourth largest sector in the economy with a totalmarket size in excess of US$ 20.1 billion. It has a strong MNC presence and ischaracterized by a well-established distribution network, intense competitionbetween the organized and unorganized segments and low operational cost.Availability of key raw materials, cheaper labour costs and presence across theentire value chain gives India a competitive advantage.The FMCG market was set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billionin 2015. Penetration level as well as per capita consumption in most productcategories like jams, toothpaste, skin care, hair wash etc in India is low indicating theuntapped market potential. Burgeoning Indian population, particularly the middleclass and the rural segments, presents an opportunity to makers of brandedproducts to convert consumers to branded products.Growth is also likely to come from consumer upgrading in the matured productcategories. With 200 million people expected to shift to processed and packagedfood by 2012, India needs around US$ 28 billion of investment in the food-processing industry.Automatic investment approval (including foreign technology agreements withinspecified norms), up to 100 per cent foreign equity or 100 per cent for NRI andOverseas Corporate Bodies (OCBs) investment, is allowed for most of the foodprocessing sector. 14. That will translate into an annual growth of 10% over a 5-year period. It has beenestimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs96,100 crores in 2011. Hair care, household care, male grooming, female hygiene,and the chocolates and confectionery categories are estimated to be the fastestgrowing segments, says an HSBC report.With the presence of 12.2% of the world population in the villages of India, the Indianrural FMCG market is something no one can overlook. Increased focus on farmsector will boost rural incomes, hence providing better growth prospects to theFMCG companies. Better infrastructure facilities will improve their supply chain.FMCG sector is also likely to benefit from growing demand in the market. Because ofthe low per capita consumption for almost all the products in the country, FMCGcompanies have immense possibilities for growth. And if the companies are able tochange the mindset of the consumers, i.e. if they are able to take the consumers tobranded products and offer new generation products, they would be able to generatehigher growth in the near future. It is observed that the rural income has grown,boosting purchasing power in the countryside. However, the demand in urban areaswould be the key growth driver over the long term.Also, increase in the urban population, along with increase in income levels and theavailability of new categories, would help the urban areas maintain their position interms of consumption. At present, urban India accounts for 66% of total FMCGconsumption, with rural India accounting for the remaining 34%. However, rural Indiaaccounts for more than 40% consumption in major FMCG categories such aspersonal care, fabric care, and hot beverages.In urban areas, home and personal care category, including skin care, householdcare and feminine hygiene, will keep growing at relatively attractive rates. Within thefoods segment, it is estimated that processed foods, bakery, and dairy are long-termgrowth categories in both rural and urban areas. 15. The future of FMCGFast moving consumer goods will become Rs 400,000-crore industry by 2020. ABooz & Company study finds out the trends that will shape its future. Consideringthis, the anti-ageing skincare category grew five times between 2007 and 2008. Itstoday the fastest-growing segment in the skincare market. Olay, Procter & Gamblespremium anti-ageing skincare brand, captured 20 per cent of the market within ayear of its launch in 2007 and today dominates it with 37 per cent share. Who couldhave thought of ready acceptance for anti-ageing creams and lotions some ten yearsago?For that matter, who could have thought Indian consumers would take oral hygieneso seriously? Mouth-rinsing seems to be picking up as a habit mouthwashpenetration is growing at 35 per cent a year. More so, who could have thought ruralconsumers would fall for shampoos? Rural penetration of shampoos increased to 46per cent last year.Consumption patterns have evolved rapidly in the last five to ten years. Theconsumer is trading up to experience the new or what he hasnt. Hes looking forproducts with better functionality, quality, value, and so on. What he needs is fastgetting replaced with what he wants. A new report by Booz & Company for theConfederation of Indian Industry (CII), called FMCG Roadmap to 2020: The GameChangers, spells out the key growth drivers for the Indian fast moving consumergoods (FMCG) industry in the past ten years and identifies the big trends and factorsthat will impact its future.It has been estimated that FMCG sector witnessed robust year-on-year growth ofapproximately 11 per cent in the last decade, almost tripling in size from Rs 47,000crore in 2000-01 to Rs 130,000 crore now (it accounts for 2.2 per cent of thecountrys GDP). Growth was even faster in the past five years almost 17 per centannually since 2005. It identifies robust GDP growth, opening up of rural markets,increased income in rural areas, growing urbanization along with evolving consumerlifestyles and buying behaviours as the key drivers of this growth. 16. It has been estimated that the FMCG industry will grow at least 12 per cent annuallyto become Rs 400,000 crore in size by 2020. Additionally, if some of the factors playout favourably, say, GDP grows a little faster, the government removes bottleneckssuch as the goods and services tax (GST), infrastructure investments pick up, thereis more efficient spending on government subsidy and so on, growth can besignificantly higher. It could be as high as 17 per cent, leading to an overall industrysize of Rs 620,000 crore by 2020. 17. 2. Top 10 companies in FMCG sectorHindustan Unilever Ltd.Hindustan Unilever Limited (HUL) is Indias largest consumer goods company basedin Mumbai, Maharashtra. It is owned by the British-Dutch company Unilever whichcontrols 52% majority stake in HUL. Its products include foods, beverages, cleaningagents and personal care products.HUL was formed in 1933 as Lever Brothers India Limited and came into being in1956 as Hindustan Lever Limited through a merger of Lever Brothers, HindustanVanaspatiMfg. Co. Ltd. and UnitedTraders Ltd. It is headquarteredin Mumbai, India and has an employee strength of over 16,500 employees andcontributes to indirect employment of over 65,000 people. The company wasrenamed in June 2007 as Hindustan Unilever Limited.Lever Brothers started its actual operations in India in the summer of 1888, whencrates full of Sunlight soap bars, embossed with the words "Made in England byLever Brothers" were shipped to the Kolkata harbour and it began an era ofmarketing branded Fast Moving Consumer Goods (FMCG).Hindustan Unilevers distribution covers over 2 million retail outlets across Indiadirectly and its products are available in over 6.4 million outlets in the country. As perNielsen market research data, two out of three Indians use HUL products.ITC (Indian Tobacco Company)ITC Limited or ITC isanIndian public conglomerate company headquarteredin Kolkata, West Bengal, India. Its diversified business includes four segments: FastMoving Consumer Goods (FMCG), Hotels, Paperboards, Paper & Packaging andAgri Business. ITCs annual turnover stood at $7 billion and market capitalization ofover $33 billion. The company has its registered office in Kolkata. It started off as theImperial Tobacco Company, and shares ancestry with Imperial Tobacco of theUnited Kingdom, but it is now fully independent, and was rechristened to IndianTobacco Company in 1970 and then to I.T.C. Limited in 1974. 18. The company is currently headed by Yogesh Chander Deveshwar. It employs over26,000 people at more than 60 locations across India and is listed onForbes 2000.ITC Limited completed 100 years on 24 August 2010.ITC has a diversified presence in Cigarettes, Hotels, Paperboards & SpecialtyPapers, Packaging, Agri-Business, Packaged Foods & Confectionery, InformationTechnology, Branded Apparel, Personal Care, Stationery, Safety Matches and otherFMCG products. While ITC is an outstanding market leader in its traditionalbusinesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it israpidly gaining market share even in its nascent businesses of Packaged Foods &Confectionery, Branded Apparel, Personal Care and Stationery.GCMMF (AMUL)Amul is the name of a dairy cooperative in India. Derived from the Sanskrit word"Amulya," Amul means invaluable. Formed in 1946, it is a brand name managed byan Indian cooperative organisation, Gujarat Co-operative Milk Marketing FederationLtd. (GCMMF), which today is jointly owned by 3.03 million milk producersin Gujarat, India.Amul is based in Anand, Gujarat and has been a successful example of cooperativeorganization. Amul spurred the White Revolution in India which in turn made Indiathe largest producer of milk and milk products in the world. It is also the worldslargest vegetarian cheese brand .Amul is the largest food brand in India and worlds largest pouched milk brand withan annual turnover of US $2.2 billion (2010-11). Currently Unions making upGCMMF have 3.1 million producer members with milk collection average of 9.10million litres per day. Besides India, Amul has entered overseas markets such asMauritius, UAE, USA, Oman, Bangladesh, Australia,China, Singapore, HongKong and a few South African countries. Its bid to enter Japanese market in 1994 didnot succeed, but it plans to venture again.Dr Verghese Kurien, former chairman of the GCMMF, is recognised as a key personbehind the success of Amul. On 10 Aug 2006 Parthi Bhatol, chairman of theBanaskantha Union, was elected chairman of GCMMF. 19. Dabur IndiaDabur India Limited is a leading Indian consumer goods company with interestsin Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. From itshumble beginnings in the bylanes of Calcutta way back in 1884 as an Ayurvedicmedicines company, Dabur India Ltd has come a long way today to become aleading consumer products manufacturer in India. For the past 125 years, we havebeen dedicated to providing nature-based solutions for a healthy and holisticlifestyle.Through our comprehensive range of products, we touch the lives of all consumers,in all age groups, across all social boundaries. And this legacy has helped usdevelop a bond of trust with our consumers. That guarantees you the best in allproducts carrying the Dabur name.Asian Paints (India)Asian Paints is an Indian chemicals company headquartered in Mumbai, India. Itmanufactures a wide range of paints for decorative and industrial use. Asian Paintsis Indias largest paint company and Asias third largest paint company, with aturnover of Rs 77.06 billion. It is one of the largest paint companies in the world andoperates in 17 countries. Besides Asian Paints, the group operates around the worldthrough its subsidiaries Berger International Limited, Apco Coatings, SCIB Paintsand Taubmans. Asian Paints was founded on 1 February 1942 by ChampaklalChoksey, Chimanlal Choksi, Suryakant Dani and Arvind Vakil in MumbaiForbes Global magazine USA ranked Asian Paints among the 200 Best SmallCompanies in the World for 2002 and 2003 and presented the Best under a Billionaward, to the company. Asian Paints is the only paint company in the world toreceive this recognition. One of the countrys leading business magazine "BusinessToday" in Feb 2001 ranked Asian Paints as the Ninth Best Employer.It has beenrecognized by "Economic Times" as well. Forbes has also ranked Asian Paintsamong the Best under a companies in Asia In 2005, 06 and 07. 20. Cadbury IndiaCadbury India began its operations in India in 1948 by importing chocolates. It nowhasmanufacturingfacilities in Thane, Induri (Pune)andMalanpur(Gwalior), Bangalore and Baddi (Himachal Pradesh) and sales offices in NewDelhi, Mumbai, Kolkata and Chennai. The corporate head office is in Mumbai. Since1965 Cadbury has also pioneered the development of cocoa cultivation in India. Forover two decades, Cadbury has worked with the Kerala Agricultural University toundertake cocoa research.Cadbury was incorporated in India on 19 July 1948. Currently, Cadbury Indiaoperates in four categories: chocolate confectionery, milk food drinks, beverage andcandy & gum category. Its products include Cadbury Dairy Milk, Bournville, 5-Star,Perk, Gems, Eclairs, Bournvita, Celebrations, Bilkul Bournville,Cadbury Dairy MilkShots,Cadbury Dairy Milk Silk,Halls,Tang and Oreo.It is the market leader in Chocolate Confectionery business with a market share ofover 70%.The Brand Trust Report, India Study, 2011 published by Trust ResearchAdvisory ranked Cadbury in the top 100 most trusted brands list.Britannia IndustriesBritannia Industries Limited isan Indian food-products corporation basedin Bangalore, India. It is famous for itsBritannia and Tiger brands of biscuit, which arepopular throughout the country. Britannia has an estimated 38% market share.The Companys principal activity is the manufacture and sale of biscuits, bread, rusk,cakes and dairy products.The company was established in 1892, with an investment of Rs. 295.Initially,biscuits were manufactured in a small house in central Kolkata. Later, the enterprisewas acquired by the Gupta brothers mainly Nalin Chandra Gupta, a renownedattorney,and operated under the name of "V.S. Brothers." In 1918, C.H. Holmes, anEnglish businessman in Kolkata, was taken on as a partner and The Britannia BiscuitCompany Limited (BBCo) was launched. The Mumbai factory was set up in 1924and Peek Freans UK, acquired a controlling interest in BBCo. Biscuits were in bigdemand during World War II, which gave a boost to the companys sales. The 21. company name finally was changed to the current "Britannia Industries Limited" in1979. In 1982 the American company Nabisco Brands, Inc. became a major foreignshareholder.Marico IndustriesMarico is a fledgling Indian group providing consumer products and services in theareas of Health and Beauty based in Mumbai.During 2009-10, the company generated a Turnover of about Rs.26.6 billion (USD600 Million), in respect of its food, hair care and skin care related activities. Maricosown manufacturing facilities are located at Goa, Kanjikode, Jalgaon, Pondicherry,Dehradun, Baddi, Paonta Sahib and Daman.In Bangladesh, Marico operates through Marico Bangladesh Limited, a whollyowned subsidiary Manufacturing facility at Mouchak, near Gazipur.The organisation holds a number of brands including Parachute (brand), Saffola,Hair&Care, Nihar, Mediker, Revive,Manjal, Kaya Skin Clinic, Aromatic,Fiancee, HairCode, Xmen, Hercules, Caivil, Code 78 and Black Chic.Retail malls in AhmedabadAlphaOneAlphaOne, Ahmedabad is a mixed-use development located at Vastrapur, adjacentto the Vastrapur Lake, a location considered central to the new developments in thecity. It has easy access from all sides, especially Ring Road and SG Road.The mixed-use development comprises of Retail, Entertainment, Hotel, Spa andService Apartments. The concept seeks to develop AlphaOne, Ahmedabad as asingle destination entertainment point for the entire city. The total area beingdeveloped is close to 1.2 million square feet, of which retail-cum-entertainmentcomprises of 704,000 square feet.AlphaOne, Ahmedabad had its soft launch on September 02, 2011 and opened forone and for all on October 15, 2011. 22. Iscon Mega MallLargest mall in Gujarat with over 450000 sq. ft. of retail spaceReliance & Westside as major anchorsReliances first & largest hypermarket in India of 185000 sq. ftTwo huge central atriums of 11878 & 10340 sq. ft610 cars & 795 two wheelers parking spaceEscalators & Travelators from parking level to the malBig BazaarThe yet another mall on the SG Road is of future Group. The mall was only attractionof huge public before ISCON Mega Mall came up. Still it is one of the best mall ofAhmedabad 23. 3. FMCG Category and productsCategory: Products:Household CareFabric wash (laundry soaps and syntheticdetergents); household cleaners(dish/utensil cleaners, floor cleaners,toilet cleaners, air fresheners, insecticidesand mosquito repellents, metal polish andfurniture polish).Food and BeveragesHealth beverages; soft drinks;staples/cereals; bakery products (biscuits,bread, cakes); snack food; chocolates; icecream; tea; coffee; soft drinks; processedfruits, vegetables; dairy products; bottledwater; branded flour; branded Rice;branded sugar; juices etc.Personal Care Oral care, hair care, skin care, personalwash (soaps); cosmetics and toiletries;deodorants; Perfumes; feminine hygiene;paper products. 24. 4. Introduction of the study4.1 Literature ReviewSales promotionA typical sales promotion budget covers almost 70% of the total consumer salespromotional budget. It is also considered as a brand differentiator by many bigplayers like Coca-Cola, Pepsi, Heinz and many more. For many business expertsand academics, sales promotion is regarded as typical marketing techniques thatadd value to a product in order to achieve specific marketing goals. The primarypurpose of sales promotion is to induce the consumers to make a quick buying-decision in order to create increases sales. Typical example of sales promotion is tooffer customers to take chance of winning a prize or offering some extra productswith the same price.Sales promotion and marketing are inter-related but not have the similar purpose. Itis advertising which makes a platform for sales promotion where customers can seethe direct added value of buying your product. On the other hand, advertising is anintangible promotion of your products to send the marketing message to thecustomer base.Sales Promotion: Advantages & DisadvantagesThe main advantages associated with promotional sales are-an easy way to learncustomer response and it work fast. It is also an inexpensive marketing technique.Sales promotion does not always bring positive impact to business, sometime thistype of promotion cause negative brand impact to customers mind in the long-term.So, a promotional campaign needs to be designed taking into account theconsequences of losing brand value. A PIMS study of 1991 suggests that overuse ofsales promotion brings low ROI, almost 15% less, in comparison to balanced andcalculated promotional offers. It is advisable not to use sales promotion as a tool ofbrand imaging; advertising is always the best way as far as branding is concerned.So, marketers need to be careful and must understand the difference between thesales promotion and advertising 25. Objective of sales promotion:Before designing a promotional campaign, you must identify the target groups. Thisis done by breaking up of your product markets and identification of small groups ofconsumers whose wants and needs are not the same as the mass market as awhole this is one of the key to success in sales promotion. For finding the targetgroup you need to take a qualitative research on the market to determine yourgroups of customers, if the target group exists then find out their needs & wants, andwhat drives them to buy your product. After learning about the target groups, youmust set the objectives of sales promotion which is all about why you want toachieve in sales promotion campaign and how your customers will be benefits. Otheraspects of sales objectives are: budget of the promotion and duration of thepromotional offer.Examples of Sales objectives 1. Many marketers use the promotional sales as a tool to learn the response ofthe first time users, by offering reduced price, sales coupons, or money-backguarantees. 2. To increase the repeat purchase from the existing users. 3. It can work as an introductory platform for a new product. But a hosing planand get a domain name free. 4. Sales promotion is a vehicle to defend your business against yourcompetitors. 5. By giving your users free coupons upon buying every products so as they canget considerable discount on the next purchase with a specified time willcertainly bind your customers with your products and it will unlikely that theywill switch on a new brand, even if it being highly competitive. 26. 6. Try to target and find a new segment in the market by focusing geographicand psychology of users such as users with high and low purchasing needs.Normally, arranging a competition or contents are very helpful for targeting aspecific interest group.Types of Sales PromotionBasically there are three main categories of sales promotion targeted at differentelements of markets such as consumers, traders, industries.1. Consumer sales promotions2. Trade sales promotion3. B2B and industrial sales promotion1. Consumer Sales PromotionSamplingIf your objective is to trial the product then sampling is an effective sales promotionmethod. Usually sampling is involved with low value products and products havinghighly visible features of benefits. For delivery sample products marketers use eitherdoor-to-door or mailing approachCouponingIt is one of the oldest sales promotion strategies and sometimes couponing makesthe product problematic by cheapening your brand name. Coupon is mainly used forattracting new customers as well as to increase instant sales with price reduction ofa product.Contests and SweepstakesThese are very popular low-cost methods of sales promotion used and viable inalmost any demographic location on earth. These techniques help people to learnyour product more and help them pay more attention to your product. For instance ifyou arrange a completion about providing the accurate information of your product ,then certainly interested customers will learn about your product and this is why it isan effective way of educating customers. 27. Money refundsInstant cash-back, refunds and rebates are very attractive ways to promote sales incell phone service providers and web-hosting companies. For any product salespromotion, money back offers give a sense of security to all customers.Premiums and bonus packsA premium offer means an extra item at a low price or totally. Premiums are one ofthe effective sales promotions in targeting the brand switching users and also toincrease sales rate among the existing users.Loyalty schemesThis is great way to hold the loyalty of customers. It is basically a point basedsystem, where each customer gets some points on each purchase and later he canuse these points on buying the same products or other products at a reduced price.To many marketers, loyalty schemes are also known as-frequent purchasingscheme.ExhibitionsThis is not like trade show. The purpose of an exhibition is to interact with thecustomers, answer their queries and not to merchandise any products. Generallyexhibitions are held to develop consumer interests on products. It is a very powerfuland efficient vehicle to reach the customers and to educate them about yourproducts. Example of exhibition is -Motor Show.PackagingMany marketers do no pay much attention to the quality of packaging, because theysimply do not understand the psychological and brand image aspects of packaging.An attractive and innovative packaging can work like a salient sales man-packagingdoes the hooking function to buyers. A well-packaged product carries not only thebrand values but also create an emotional link to your prospects. Not that it is onlyimportant for packaging to be eye-catching, aesthetic, but it needs to protect theproduct inside with proper manner. 28. 2. Trade Sales PromotionsImprove the distribution line is the key purpose of trade sales, by organizing tradeshows. Some effective techniques used in a trade promotion are: discounts, point-ofsales materials, shelf facings, and displays.IncentivesThis is a popular trade promotion idea with the manufacturers, retailers normallydoes not use this technique to boost their sales. Incentives are given as a form ofcash bonus or prizes per sale.Buying allowancesIts a kind of price reduction for your product for a specific period of time.Trade showsIt is a way of getting to learn new customers, introduce those new products, gettingcustomer reactions. But unlike exhibitions, trade show involves in selling products. Asuccessful trade show can be measured by keeping records of the number ofvisitors, useful leads and identifying the products with most interests to customers.Advertising allowances promotionThis is very common practice among manufacturers where a certain amount ofmoney is given to the retailers by the manufacturing company. This is allowances isbased on the number of products and orders retailers can bring to themanufacturers.Free trainingIt is a well-unformatted sales man work like an ambassador for your brand.Customers need proper information from a proper channelled-no one than sales mandoes this job better. As a part of the promotional offer and relationship building,manufacturers offer training to the retail staff so as they become more effective andskilled while dealing with customers. This free training is very important promotion 29. factor you market any complicated and expensive products. Along with it eachtraining manufacture needs to provide well-documented brochures and technicalmanuals to the retailers.3. Sales Promotions: B2B & IndustrialThis is the last but not certainly the least important portion of the sales promotionplan. Industrial sales promotion is all about applying the trade & consumerpromotional ideas into industrial marketing environment. Depending on the situation,you need to decide on which consumer and trade promotion ideas is best suited inB2B environment. For example, consumer promotional offer like buy one get onefree can be offer in B2B environment as buy one and get one-year service free.Depending of the type of products you choose to promote decides which promotionalideas will bring you the best ROI. While devising a promotional plan, keep in mindthat sales promotion has disadvantages too. So, make sure sales promotioncampaign does not harm your brand image at any cost. And finally, always try toavoid price competition wars as much as possible, rather put you all the attention inimproving the quality of products by adding more values to it.Sales promotion consists of all promotional activities other than advertising, personalselling and publicity that help to increase sales through non repetitive and one timecommunication. In other words, it includes marketing activities other than personalselling, advertising, and publicity that stimulate consumer purchasing and dealereffectiveness, such as point of purchase displays, shows and exhibitions,demonstrations and various non-recurring selling efforts not in the ordinary routine.PurposeThe ultimate aim or purpose of sales promotion is that of increasing the volume ofsales and profits but it differs from advertising and personal selling both in approachand techniques. Personal selling involves face to face contact with specificindividuals, while advertising is directed at a large number of potential customers.Sales promotion serves as a link between two by focusing selling efforts on selectedsmall groups of people. Sales promotion usually involves non-recurring and no 30. routine methods, in contrast with the routine and recurring nature of advertising andpersonal selling. Under advertising, the media is not owned and controlled by theadvertiser except in direct mail advertisings. But sales promotion methods arecontrolled by the advertiser. Sales promotion covers various stimulants directed tothe consumers and dealers that is why it is of two types-consumers sales promotionand dealerssales promotion. The former stimulates consumers buying at the pointof sale, and latter improves dealers effectiveness at the retail outlets.How Sales Promotion Objectives are set:Sales promotion has dual objective: (A) Basic objectives and (B) Other objectives.(A) Basic objectives of sales promotion are:(i) Increasing the buying response of ultimate consumers.(ii) Increasing the selling efforts and intensity by dealers as well as by salespersonnel.(iii) Supplementing and co-coordinating the efforts of advertising and personal selling(B) The other objectives are:(i) Calling attention to new products and product improvements.(ii) Informing buyers of new brand and new packaging.(iii) Improving market share.(iv) Obtaining dealer outlets.(v) Meeting competition.These objectives are set on the basis of following criteria.(i) Cost of reaching an audience member.(ii) Acceptability of the tools to be used.These criteria are developed taking into consideration the following variables/factors:(i) Kinds of product:The product is one of the factors determining the form of promotion. Toys, toiletsoaps and cosmetics are effectively shown on television. Mass selling consumergoods can be easily promoted through radio and television. Industrial and specialtygoods should be promoted through technical journals and through sales engineers. 31. (ii) The buyer:If the marketers are to provide realistic solutions to the problem of buyers, they mustknow their customers, their needs and desires, their attitude, values, aspirations andexpectations. Hence marketers must have up-to-date information about customerdemand and customer behaviour. If the buyers are educated then demonstrations orinstructions can be used as sales promotion technique. Similarly, contests andquizzes can be used if buyers are of young age and educated.(iii) Nature and size of market:The number, geographical location and purchasing power of potential customersexercise a significant impact on the sales promotion. Sampling, coupon, moneyrefund orders, premium offer, price-off and trading stamps etc., are suitable for salespromotion in local markets. On the other hand, fairs, exhibitions and fashion showsare more appropriate for sales promotion on the national level particularly forgarments, books and electronic items.(iv) Stages in product life cycle:This is an important managerial tool in sales promotion. A product life cycle consistsof four stages.(a) Introduction of the product requires lot of energy to create awareness,acceptance and demand for the product. Introducing a new product for mostcompanies is a costly and difficult exercise that is why they mostly depend onmiddlemen,(b) Growth. It includes a fast growth both in sales volume and profit.(c) Maturity (Saturation).This stage is longer. But the speed in achieving salesvolume reduces during this stage. Profit also starts declining much faster than thesales. 32. (d) Declining. This is the last stage in product life cycle. After a period of stability, thebuyers lose interest on the product, and sales start falling more quickly. At this stageeither high cost sales promotion technique may be used or existing product may beimproved.(v) Management policy:In the management policy, first of all, sales promotion objectives are set, thencommunication tools required to achieve these objectives are designed, and the thirdstep is to determine the cost required to execute promotional activities andprogrammes. In short sales promotion expenditure is directly related to theobjectives to be achieved.(iv) Budget allocation available:The decision on how much to spend on promotion is externally difficult on account ofmultitude of promotion tools, on the one hand, and varieties of products and marketson the other. For example, the greater the geographical dispersion of a targetmarket, the greater the communication expenditure required. Similarly, if an offeringis in its early life cycle, there is a greater need of expenditure. But promotion budgetshould always justify the tasks to be undertaken. A basic principle would be the costand returns of sales promotion tools to be adopted.Hindustan Lever has its well drawn up sales promotion budget. If any businesshouse does not have its promotion budget fixed, then promotion programmes willhave to be designed to support the marketing plan.(v) Government regulations:Government has passed various laws and made rules to protect the consumerinterest, such as the prevention of Food Adulteration Act, the Drugs and MagicRemedies (Objectionable Advertisements) Act, and Drugs and Cosmetics Act etc.Sales promotion policy must take into consideration the government regulationsrelating to the particular product, e.g. the commodity rates must be specified on thepackage and in case of medicines drug contents and date of manufacturing, date ofexpire, and price must be specified. 33. Sales Promotion EffectivenessAre monetary savings the only explanation for consumer response to a salespromotion? There are monetary and non-monetary promotions provide consumerswith different levels of three hedonic benefits (opportunities for value-expression,entertainment, and exploration), and three utilitarian benefits (savings, higherproduct quality, and improved shopping convenience) explained by Pierre Chandon,Brian Wansink et al (2000). They have also described that for high-equity brands,monetary promotions are more effective for utilitarian products than for hedonicproducts.Marketers and academics often view the reliance on sales promotions, especiallymonetary promotions, as a sub-optimal consequence of price competition caused bymyopic management (Buzzell, Quelch and Salmon 1990). These critics argue that, inthe short-run, the proliferation of monetary promotions erodes their capacity torent market share, which explains why so many are unprofitable (Abraham andLodish 1990; Kahn and McAlister 1997). In the long run, it is feared that salespromotions increase price sensitivity and destroy brand equityboth with retailersand consumers (Mela, Gupta, and Lehman 1997). As a result, many industry expertsare calling for more effective and cost-efficient promotions that rely less on price(Promotion Marketing Association of America 1994), and some go so far as torecommend eliminating most promotions by switching to an everyday-low-pricepolicy (Kahn and McAlister 1997; Lal and Rao 1997).Adopting consumer perspective the value that sales promotions have for brands isrelated to the value, or benefits, that sales promotions have for consumers. So, itleads to the fundamental question of why consumers respond to sales promotions.Most econometric or game-theoretic studies assume that monetary savings are theonly benefit that sales promotions have for the consumer. If this is true, an everyday-lowprice may indeed represent an efficient solution for providing consumers withthese savings while minimizing search costs for the consumer and logistical costs forthe firm. 34. On the other hand, if, sales promotions provide consumers with an array of hedonicand utilitarian benefits beyond monetary savings, everyday low prices cannot fullyreplace sales promotions without the risk of alienating consumers who value thenonmonetary benefits of sales promotions. The existence of multiple consumerbenefits may also help understand some puzzling consumer responses to salespromotions which cannot be fully explained by the search for savings (e.g., Dhar andHoch 1996; Hoch, Drze and Purk 1994; Inman, McAlister, and Hoyer 1990;Schindler 1992; Soman 1998).Beyond its intended contribution to the general debate on the value of salespromotions or on the antecedents of consumer response to them, studying theconsumer benefits of sales promotions as practical implications for improving theireffectiveness. It is obvious because monetary and non-monetary sales promotionsoffer different benefits; they should be more effective for different types of products.Sales Promotions in IndiaThe FMCG sector which had kept the highest advertisement expenses as theproportion of sales, has kept the ad expenses almost proportionate to growth in netsales. The elasticity of advertisement of the sector stood at 0.80 per cent to their netsales during the analyzed period. Income and expenditure statement of the majorcompanies in the segment analyzed for the FMCG companies, which used to befervent advertisers in the past, have marginally hiked their ad budget in 2008-09 incomparison with 2007-08. According to the analysis of FMCG sector, HindustanUnilever Limited increased its advertising costs in 2008-09 by 48 per cent to2,130.92 crore which was at 440.22 crore in 2007-08. Another FMCG major, ITCLimited, spent nearly 33 per cent more in 2008-09 than the previous year, as thecompany earned 8.37 per cent growth in net sales during the same period whereasBritannia which spent about 17.47 per cent more on advertisements in 2008-09 ascompared to the previous year recorded a growth of 20.44 per cent in the sameperiod. 35. Dabur spent nearly 14.85 per cent more on advertisements in 2008-09 as againstthe corresponding period of previous year while the companys net sales increasedby 15 per cent in 2008-09. Marico Limited which cut its advertising expenses in2008-09 by 6.05 per cent saw a growth rate of 22.52 per cent in the net sales figurein 2008-09 as compared to 2007-08.Fast Moving Consumer Goods (FMCG) Sector of IndiaThe Indian FMCG sector is the fourth largest sector in the economy with a totalmarket size in excess of US$ 13.1 billion. It has a strong MNC presence and ischaracterized by a well established distribution network, intense competitionbetween the organized and unorganized segments and low operational cost.Availability of key raw materials, cheaper labor costs and presence across the entirevalue chain gives India a competitive advantage.The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in2015. Penetration level as well as per capita consumption in most product categorieslike jams, toothpaste, skin care, hair wash etc in India is low indicating the untappedmarket potential. Burgeoning Indian population, particularly the middle class and therural segments, presents an opportunity to makers of branded products to convertconsumers to branded products. Growth is also likely to come from consumerupgrading in the matured product categories. With 200 million people expected toshift to processed and packaged food by 2010, India needs around US$ 28 billion ofinvestment in the food-processing industry.India - A large consumer goods spenderAn average Indian spends around 40 per cent of his income on grocery and 8 percent on personal care products. The large share of fast moving consumer goods(FMCG) in total individual spending along with the large population base is anotherfactor that makes India one of the largest FMCG markets.Even on an international scale, total consumer expenditure on food in India at US$120 billion is amongst the largest in the emerging markets, next only to China. 36. Promotion & ConsumptionDoes consumption respond to promotion? Many studies have focused on the effectsof promotion on brand switching, purchase quantity, and stockpiling and havedocumented that promotion makes consumers switch brands and purchase earlier ormore. The consumersconsumption decision has long been ignored, and it remainsunclear how promotion affects consumption (Blattberg et al. 1995). Conventionalchoice models cannot be used to address this issue because many of these modelsassume constant consumption rates over time (usually defined as the totalpurchases over the entire sample periods divided by the number of time periods).While this assumption can be appropriate for some product categories such asdetergent and diapers, it might not hold for many other product categories, such aspackaged tuna, candy, orange juice, or yogurt. For these categories, promotion canactually stimulate consumption in addition to causing brand switching andstockpiling. Thus, for product categories with a varying consumption rate, it is criticalto recognize the responsiveness of consumption to promotion in order to measurethe effectiveness of promotion on sales more preciselyEmerging literature in behavioural and economic theory has provided supportingevidence that consumption for some product categories responds to promotion.Using an experimental approach, Wansink (1996) establishes that significant holdingcosts pressure consumers to consume more of the product. Wansink andDeshpande (1994) show that when the product is perceived as widely substitutable,consumers will consume more of it in place of its close substitutes. They also showthat higher perishability increases consumption rates. Adopting scarcity theory,Folkes et al. (1993) show that consumers curb consumption of products when supplyis limited because they perceive smaller quantities as more valuable. Chandon andWansink (2002) show that stockpiling increases consumption of high convenienceproducts more than that of low-convenience products. In an analytical study,Assuncao and Meyer (1993) show that consumption is an endogenous decisionvariable driven by promotion and promotion-induced stockpiling resulting fromforward-looking behaviour. 37. There are some recent empirical papers addressing the promotion effect onconsumer stockpiling behaviour under price or promotion uncertainty. Erdem andKeane (1996) and Gonul and Srinivasan (1996) establish that consumers areforward looking. Erdem et al. (2003) explicitly model consumers expectations aboutfuture prices with an exogenous consumption rate. In their model, consumers formfuture price expectations and decide when, what, and how much to buy. Sun et al.(2003) demonstrate that ignoring forward looking behaviour leads to an overestimation of promotion elasticity.Sales Promotion and Consumer Response/ PreferenceConsumer promotions are now more pervasive than ever. Witness 215 billionmanufacturer coupons distributed in 1986, up 500% in the last decade(Manufacturers Coupon Control Center 1988), and manufacturer expenditures ontrade incentives to feature or display brands totalling more than $20 billion in thesame year, up 800% in the last decade (Alsop 1986; Kessler 1986). So far, not muchwork has been done to identify the purchasing strategies that consumers adopt inresponse to particular promotions, or to study how pervasive these strategies are ina population of interest.Blattberg, Peacock and Sen (1976) define a purchase strategy as a general buyingpattern which "incorporates several dimensions of buying behaviour such as brandloyalty, private brand proneness and deal proneness." A greater understanding ofthe different types of consumer responses to promotions can help managers todevelop effective promotional programs as well as provide new insights forconsumer behaviour theorists who seek to understand the influence of differenttypes of environmental cues on consumer behaviour.Blattberg, Eppen, and Liebermann (1981), Gupta (1988), Neslin, Henderson, andQuelch (1985), Shoemaker (1979), Ward and Davis (1978), and Wilson, Newman,and Hastak (1979) find evidence that promotions are associated with purchaseacceleration in terms of an increase in quantity purchased and, to a lesser extent,decreased inter purchase timing. Researchers studying the brand choice decision-forexample, Guadagni and Little (1983) and Gupta (1988)-have found promotions to be 38. associated with brand switching. Montgomery (1971), Schneider and Currim (1990),and Webster (1965) found that promotion-prone households were associated withlower levels of brand loyalty.Blattberg, Peacock, and Sen (1976, 1978) describe 16 purchasing strategysegments based on three purchase dimensions: brand loyalty (single brand, singlebrand shifting, many brands), type of brand preferred (national, both national andprivate label), and price sensitivity (purchase at regular price, purchase at dealprice). There are other variables that may be used to describe purchase strategies,examples are whether the household purchases a major or minor (share) nationalbrand, store brand, or generic, or whether it is store-loyal or not. McAlister (1983)and Neslin and Shoemaker (1983) use certain segments derived from those ofBlattberg, Peacock, and Sen but add a purchase acceleration variable to study theprofitability of product promotions.Throughout the world, consumer sales promotions are an integral part of themarketing mix for many consumer products. Marketing managers use price-orientedpromotions such as coupons, rebates, and price discounts to increase sales andmarket share, entice trial, and encourage brand switching. Non-price promotionssuch as sweepstakes, frequent user clubs, and premiums add excitement and valueto brands and may encourage brand loyalty (e.g., Aaker 1991; Shea, 1996). Inaddition, consumers like promotions. They provide utilitarian benefits such asmonetary savings, added value, increased quality, and convenience, as well ashedonic benefits such as entertainment, exploration, and self expression (Chandon,Laurent, and Wansink, 1997).A large body of literature has examined consumer response to sales promotions,most notably coupons (e.g.. Sawyer and Dickson, 1984; Bawa and Shoemaker,1987 and 1989; Gupta, 1988; Blattberg and Neslin, 1990; Kirshnan and Rao, 1995;Leone and Srinivasan, 1996). Despite this, important gaps remain to be studied. It isgenerally agreed that sales promotions are difficult to standardize because of legal,economic, and cultural differences (e.g., Foxman, Tansuhaj, and Wong, 1988;Kashani and Quelch, 1990; Huff and Alden, 1998). Multinational firms should 39. therefore understand how consumer response to sales promotions differs betweencountries or states or province.Price elasticity:Traditionally the price has been considered an informative element, from which theConsumer can create an expectation on the quality of the product to acquire (Leavit,1954; Tull et al., 1964; McConnell, 1968; Lichtenstein et al., 1988).Similarly, manufacturers and retailers act on the prices policy to achieve increases intheir sales of products. With these reductions in prices, consumers are expected tobuy a greater amount of the product or brand. Although these are usual effects, theywill depend on the brands submitted to such fluctuations (Hoch and Banerji, 1993;Aggarwal and Cha, 1998). In the analysis of the effects of price fluctuations, theconcept of price elasticity of the demand must be unavoidably mentioned. As Fibichet al. (2005) point out; price elasticity of demand is the percentage change inquantity demanded as a result of a 1 per cent change in price. The individualssensitivity to price is conditioned by a series of factors like market share, level ofcompetition, activity in display, brand loyalty or other variables related to theconsumer like his income (Lambin, 1991). Cross price elasticity is adequate to knowthe extent to which a variance in a brand price alters the demand of the rival brands.Some phenomena or issues of interest in relation to this have been analyzed in theprevious literature: asymmetric price effect (Lemon and Winer, 1993; Bronnenbergand Wathie, 1996; Sethuraman et al., 1998), asymmetric share effect (Sethuraman,1995; Sethuraman and Srinivasan, 1999) and proximity to neighbor effect(Sethuraman et al., 1998). The results of Sethuraman (1995) indicate that whilereductions in the price of manufacturer brands with more market share will influencethe store brands sales, it is less likely that manufacturer brands are affected byreductions in the price of store brands.The brand choice made by the consumer at the moment of the purchase will beinfluenced by the price of the different brands of the category of product. In this way,a reduction in the price of an expensive brand may make this more attractive for the 40. consumer and, therefore, the likelihood of choice of this brand may be increased tothe detriment of the rest.Sales promotion: immediate price reductionsPrice and promotion strategies are closely related. It is very difficult to distinguishprice variances which are caused by decisions derived from the prices policy fromthose produced as a result of the promotion policy. Thus, proposal has beendeveloped by Cummins (1998), according to which sales promotion has to stopbeing a part of the communication mix to become an autonomous variable.When the promotion ends, sales are reduced even below the usual levels (withoutpromotion). In the long term, the sales level tends to go back to a position near theinitial position. Even Mela et al. (1998) confirm that long-term price promotions makethe consumer more sensitive to price and therefore their effectiveness is reducedwith the subsequent negative effect on benefits. These results are coherent withthose obtained by Mela et al. (1997). Nevertheless, we must clarify that the effectsprovoked by promotions vary according to multiple factors: the type of incentive, theamount of discount provided or the type of product to which the promotion is applied,among others.Some years ago both effects were more intense than nowadays because the use ofsales promotion was not as widespread as it is now. Nowadays the consumerobserves that the category of products is systematically affected by somepromotional actions, and as a consequence he will not modify the planning of hispurchase (Fader and Lodish, 1990; Lal, 1990). Retail establishments should modifytheir promotional plans in order not to lose the essential objective: modify favorablythe consumer buying behaviour surprising him with a promotion action. This elementof surprise is now in danger.Besides, the presence of promotion actions attractive to consumers may make thischange establishment (Tellis, 1997). This effect is related to the change of brand, 41. that is, consumers who do not usually acquire the brand feel attracted and buy it.The greater increase in sales occurs as a consequence of this reality (Blattberg andNeslin, 1990; Gupta, 1993).It is necessary to be continuously in touch with the market because on certainoccasions the use of promotions could cause unwanted effects. This happens whenthe consumer perceives that he is paying for unnecessary product highlighting andpositioning activities, which will make his behaviour, deviate from the desired one,and thus, he will stop buying the promoted brand (Simonson et al., 1994). On someoccasions the consumer may also stop buying a brand or avoid its purchase when itis promoted so as not to have to justify his behaviour before the group (Simonson,1989). Or the consumer simply decides not to buy the promoted product because hefeels that he is being manipulated and he will act punishing the retailers.The results of works such as those by Suri et al. (2000), detect the need to introducepromotions as explicit elements of the consumer buying behaviour. Begona AlvarezAlvarez and Rodolfo Vazquez Casielles (2008) concluded that the brand choice andbuying behaviour developed by consumers is a complex phenomenon. The variablesthat influence it are numerous and it is necessary to know them to act and developuseful strategies that achieve the objectives aimed at in each case. The influence ofprices on this process is very important.In previous researchers questions related to reference prices have been approachedin depth. It seems widely accepted that when consumers buy a product theycompare its price with a subjective level. The problem focuses on finding the mostadequate way of estimating that level. While some theoretical trends consider thatthe consumer forms his reference price from the observation of the prices at theestablishment, others defend that the consumer remembers the prices paid onprevious occasions and he will form his reference price from them. The analysismade allows them to propose the estimations from stimuli or observation asexplanatory of the brand choice and decision process developed by the consumer. 42. Just as it was expected, Begona Alvarez Alvarez and Rodolfo Vazquez Casielles(2008) have confirmed the importance of prices in the purchasing process. Theeffects derived from their fluctuations depend on the characteristics of the brand.Specifically, they have found differences in the intensity of response to pricevariances between manufacturer brands and store brands. The latter appeared to bemore vulnerable.Since one of the most widely used techniques of sales promotion are immediatediscounts, they have considered it necessary to clarify the effects this may produce.Interesting results have been obtained regarding this issue. Discounts are perceivedas attractive and serve to modify consumer preferences, but depending on thecategory of product.Thus, for those in which consumers show a strong tendency or preference for thebrand, the expected results are not obtained, because they are not relevant in thebrand decision process. The application of another promotional tool would be moreadvisable instead. However, for other categories of product with lower loyalty rates,the application of discounts is the most adequate action, since the use of otherpromotion actions does not produce any effect.Sellers use various advertising and promotion tactics to attract customers andincrease sales. Previous research has shown that framing of promotion messagesand presentation of price information influence consumers perceptions of prices andtheir willingness to buy (Das, 1992; Sinha et al., 1999; Sinha and Smith, 2000).However, Lan Xia and Kent B. Monroe (2008) have distinguished betweenconsumers who have prior goals to buy the product relative to those who do nothave such purchase goals. Further, they have added whether consumersresponsesto different promotion message framing and price presentations differ when they door do not have pre-purchase goals. Since the same promotion information may leadto different perceptions as consumersgoals vary (Shavitt et al., 1994), understandinghow consumers with different purchase goals react to various promotion messagescan help sellers design effective promotion programs. 43. Consumer goalsMany consumer purchasing decisions are goal oriented (Bagozzi, 1997; Bagozzi andDholakia, 1999). Such goals are important as they direct other stages of theconsumers decision process. Broadly, there are different levels of consumer goalspecificity (Lawson, 1997). People with abstract goals tend to search across productcategories and consider a wider range of information as relevant. For example, if thegoal is to get away from work and have fun (an abstract goal), consumers mayconsider multiple activities including going to a movie, visiting friends, or taking avacation. Many options are relevant and attentions are spread across multipleproduct categories. On the other hand, if the goal is to buy a microwave oven (aconcrete goal), only microwave oven information is relevant and tends to getpeoples attention.In the market place, consumer goals vary along a continuum ranging from no goal,abstract goal to concrete goal. Goals guide consumers information gathering anddecision processes. Goals are associated with different levels of consumerinvolvement (Howard and Kerin, 2006) which guide the allocation of attention as wellas other cognitive resources for information processing (Peterman, 1997).Whenconsumers have an abstract goal or no goal at all, the involvement with anyparticular purchase is low and they may spread out their attention and no singlepiece of information may be regarded as particularly relevant.However, when they have a specific purchase goal, their involvement is high andthey are more focused in their information search and processing and perceive sometypes of information to be more relevant than others. As Bargh (2002) has indicated,the particular goal in place changes everything the focus of attention and theevaluation of objects and events, as well as memory for eventsAlthough the importance of consumer goals has been recognized in previousresearch, it has not been explicitly incorporated in research on consumersperceptions of price promotions (Mazumdar et al., 2005). Yet, when shopping, 44. consumers may encounter various price promotion messages for products orservices for which they do or do not have specific purchase goals. Mazumdar et al.(2005) in a summary of reference price research called for more research examiningshopping occasions (i.e. planned vs unplanned purchases) as an importantmoderating factor of the effects of various types of reference price information. LanXia and Kent B. Monroe (2008) examined how consumers prior purchase goalsinteract with promotion characteristics to influence their perceptions of pricepromotions and their willingness to buy.Price promotions and pre-purchase goalsGoals play a fundamental role in influencing how information in a promotionmessage will be processed (Shavitt et al., 1994). When individuals have multipleinformation processing strategies available, they select among them on the basis ofgoals, motives, and the environmental context (Taylor, 1998). Thus, by definitioninformation regarding a specific product attracts more attention when consumershave a prepurchase goal for that product category compared to when consumers donot have a pre-purchase goal.Price promotions usually provide consumers with monetary savings on specificproducts. If consumers are in a store intentionally searching for these specificproducts, then it is expected that they would find promotions on such products moreattractive compared to those consumers who are in the store but do not have a priorpurchase goal for a promoted product. Therefore, the purchase likelihood is higher.In addition to this main effect, consumers may react to different promotioncharacteristics in different ways given the existence or absence of a pre-purchasegoal.For example, Howard and Kerin (2006) found that consumers with different levels ofinvolvement, operationalized by whether they are in the market for a particularproduct, have different information processing styles and hence respond to differentprice promotion cues. 45. Price promotion characteristics can be grouped into four categories: pricepresentation, deal characteristics, situation factors, and study effect (Krishna et al.,2002). Price presentation research examines whether consumers perceptions of apromotion are influenced by how the promotion is communicated, e.g. framing.Research on deal characteristics studies the influence of factors such as dealpercentage, free gift value, and size of the bundle. Situation factors refer to theoverall situation of the price promotion including types of stores, brands and whetherthe promotion information is received at home or in the store.Finally, study effect addresses measurement issues including factors such asnumber of variables manipulated and number of participants. Different promotioncharacteristics influence current as well as future purchase intentions (DelVecchio etal., 2006). Lan Xia and Kent B. Monroe (2008) examined several important issuesrelated to price presentations and deal characteristics of price promotions focusingon promotion framing, format, and promotion depth.Promotion format: Discount vs. Free GiftIn addition to promotion framing, price promotions come in different formats such asdiscount, coupon, rebate, and purchase with free gift, etc. While most promotionforms involve monetary savings, some promotions are non-monetary. One type ofnon-monetary promotion often used is offering consumers a free product or giftinstead of a price discount.Compared to price discounts, non-price promotions such as free gifts are likely to beperceived as small gains (Diamond and Johnson, 1990) and maintain product qualityperceptions comparing to discounts (Darke and Chung, 2005). Discounts reduce theprice that consumers have to pay for the product (i.e. reduced sacrifice). However, ina free gift promotion, while the value of the promotion may be equivalent to adiscount, nevertheless, it does not reduce the sacrifice with the focal productpurchase and therefore it could be perceived as a gain. If consumers with andwithout pre purchase goals respond differently to gains and losses in price promotionperceptions, they may react differently to monetary and non-monetary price 46. promotions Diamond and Abhijit (1990) found that a price discount was more likely tobe chosen even when the discount was less than the retail value of the free product.As discussed earlier, if consumers who are planning to buy a product are morefocused on the monetary sacrifice, they would prefer a price discount (reduced loss)over a free gift promotion (small gain). However, consumers who are not planning tobuy may be more attracted by a small gain associated with the free gift. Lan Xia andKent B. Monroe (2008) concluded how consumers with or without a specific pre-purchase goal respond differently to a price promotion. Not surprisingly, Lan Xia andKent B. Monroe (2008) showeda consistent main effect of goal onparticipantswillingness to buy. This main effect was not mediated by perceivedvalue. This result is consistent with the intuition that consumers are responsive toinformation that matches their needs. Product or brand level price promotioninformation is less relevant when consumers do not have a pre-purchase goal. Theyobserved a main effect of promotion format. Participants preferred discount over freegift and higher discount level over lower discount level regardless of the presence ofa pre-purchase goal. These main effects were mediated by perceived transactionvalue.It is also added that the main effect of promotion format probably due to fact that thetwo promotion framing represented equivalent price savings. In addition to the maineffects, they show how consumersgoals interact with some important characteristicsof price promotions to influence their willingness to buy. The effect of the promotionmessage framing or format is conditional on consumers prior purchase goals.Consumers planning to purchase a product are more responsive to promotionmessages framed as reduction of losses (e.g. pay less and a discount) whileconsumers without a goal are more responsive to messages framed as additionalgains (e.g. save more and free gift).Henceforth, consumers with different purchase goals respond differently to the depthof a discount. When consumers do not have a purchase goal, they are lessresponsive when the discount level is either too small or too large. In contrast, suchthresholds are less observable when consumers have a prior purchase goal. Furthermore, it has been concluded that perceived quality is the underlying mechanism for 47. the effect of promotion framing across purchase goals. Overall, introducingconsumer goals as a moderating factor provides some boundary conditions toprevious research effects and adds to knowledge of consumers perceptions of andresponses to various price promotions.The notion that targeted deals are more efficient than across-the-board salespromotions that provide unnecessary discounts to price-insensitive consumers hasprompted a dramatic growth in customized pricing and sales promotions (Acquistiand Varian 2005). However, questions have been raised regarding the efficacy oftargeted offers in general (Homburg, Droll, and Totzek 2008) and customized pricepromotions in particular (Acquisti and Varian 2005; Feinberg, Krishna, and Zhang2002).Thus, whether companies should rely on customized promotions remains an openquestion, highlighting the need for additional research into how consumers respondto targeted discounts as well as contingencies that affect their response to theseofferings (Franke, Keinz, and Steger 2009; Simonson 2005). In this regard, avariable that has received little attention in the literature is the relative exclusivity oftargeted price promotions. Because such promotions are offered selectively to someconsumers (i.e., deal recipients) but not to others (i.e., deal non recipients), targetedprice promotions involve a level of exclusivity that surpasses that associated withmore inclusive (i.e., undifferentiated) offers. At their most exclusive, price discountscan be customized to maximize promotional fit with individual consumers (Simonson2005). At more modest levels of exclusivity, targeted promotions can be selectivelyoffered to entire groups of consumers, as with affinity marketing programs (e.g.,Borders educator savings promotions, which limit discounts to current and retiredteachers).Research by Feinberg, Krishna, and Zhang (2002) provides evidence of a betrayaleffect, in which loyal consumers of a brand provide less favourable preferences forthat brand when they are excluded from a targeted deal offered only tocompetitorscustomers. 48. Equity frameworks (Adams 1965; Bolton and Ockenfels 2000; Greenberg 1986)presume that people will engage in interpersonal comparisons that factor not onlythe outcomes received (non social utility) but also how such outcomes compare withthose that others accrue (social utility). When consumers react to marketing offerswith the goal of maximizing personal welfare (i.e., they are self-regarding), thereceipt of an exclusive deal leads to advantageous inequity that enhancesevaluations of the targeted discount among deal recipients (Greenberg 1987;Loewenstein, Thompson, and Bazerman 1989). In contrast, non recipients (whoseexclusion from the offer results in disadvantageous inequity) should evaluate thistype of promotion less favourably. Thus, as a result of their respective outcomes,recipients and non recipients should differ in their evaluations of a targeted deal.Equity theory further suggests that evaluations of a targeted offer will depend notonly on the relative outcomes associated with the offer (i.e., whether the consumer isa recipient or non recipient) but also on the inputs or costs associated with receipt ofthe promotion. In the context of targeted deals, these inputs may be represented bythe amount of effort customers have invested in their relationship with a marketer(e.g., through their past patronage of the brand) (Feinberg, Krishna, and Zhang2002; Homburg, Droll, and Totzek 2008); in turn, these investments should influencehow consumers respond to a targeted offer (Verhoef 2003). In this regard, thenegative reactions of deal non recipients in Feinberg, Krishna, and Zhang (2002)likely arose because of disparities in both exchange components.In comparison with deal recipients, these consumers experienced disadvantageousinequity in terms of both the relative outcomes associated with the offer (non receiptof the targeted promotion) and the relative inputs (brand-loyal non recipients hadmore invested in their relationship with the marketer than deal recipients, who wereusers of a competitive offering). Being placed in a situation of disadvantageousinequity presumably prompted negative emotions (Tabibnia, Satpute, and Lieberman2008) that undermined the preferences of non recipients for the brand to which theyhad previously been loyal.However, Michael J. Barone & Tirthankar Roy (2010), explored was whether, when,and how recipients evaluations of a targeted price promotion may be affected by the 49. offers exclusivity (i.e., the extent to which an offer is available to consumers in themarketplace). If exclusion from a targeted offer can trigger disadvantageous inequityfor non recipients (as Feinberg, Krishna, and Zhang (2002) demonstrate), it stands toreason that receipt of an exclusive discount should engender advantageous equityfor deal recipients.Furthermore, an emerging literature on inequity aversion (Fehr and Gintis 2007; Fehrand Schmidt 1999) suggests that certain people desire outcomes that balanceselfregarding (i.e., selfish) interests with other-regarding interests. Thus, someconsumers may be reluctant to engage in exchanges that provide them withadvantageous inequity, and this disinclination is likely to grow with the level ofinequity characterizing the exchange (Scheer, Kumar, and Steenkamp 2003).Inequity-averse deal recipients should evaluate a deal less favourably as it becomesmore exclusive. As a result of their motivation to avoid experiencing the negativeaffect (e.g., guilt) that may accompany advantageous inequity (Scheer, Kumar, andSteenkamp 2003), inequity-averse recipients should evaluate exclusive deals lessfavourably than more inclusive offers. While variations in inequity aversion havebeen examined at more macro levels (e.g., across cultures; see Scheer, Kumar, andSteenkamp 2003), little work has explored individual difference factors thatcharacterize inequity-averse people.However, such an examination affords a means of identifying theoretically relevantvariables that moderate consumers tendencies toward inequity aversion, informationthat is useful in developing strategies aimed at more effectively and efficientlydelivering targeted deals to the marketplace.3.8 Short- and long term effects of Sales PromotionThe evidence of short-term effects seems to be well documented in the literature. Itis suggested that SP can build brand awareness and motivate trial, provide morespecific evaluation methods, as they are more immediate and operate in a specifictime frame, (Pham, M.T., Cohen, J.B., Pracejus, J.W. & Hughes, G.D., 2001),influence sales, (Roberts, John H., 1995) expand the target market (Robertson, T.S., 50. 1993) and achieve competitive advantage.( Rothschild, M.L. & Gaidis, W.C.,1981).According to their purpose, SPs are often successful in inducing action, as theyencourage consumers to act on a promotion while it is still available. Also, thestrength of SP lies in its flexibility to quickly respond to competitor attacks contributedby Sandra Luxton (2001).Despite these benefits, the question remains whether these effects are made at theexpense of the long term impact that SP may have on companies. Sawyer, A. and P.Dickson (1984) and Simonson, I., and Z. Carmon (1994) proved that there isevidence pointing towards SP having a negative effect on brands, especially inrelation to advertising. It is argued that SP does not have any brand-building impactand could lead to diminishing effects for the brand, particularly well-established ones.In fact, the Ehrenberg et al. study showed that price-related promotions do not haveany effect on brand performance, either in terms of sales or repeat purchase.According to the authors, this is due to the fact that promotions influence existingcustomers in the first place, with some rare exceptions shared by Simonson, I., andZ. Carmon (1994). This is a concern for companies, whose main objective it is totarget new customers or gain more long-term profit, as new customers might onlytake advantage of the promotion and then go back to their preferred brand. Also,even when the existing customers are targeted and the response is satisfying, theseconsumers price sensitivity may be enhanced, causing difficulties in the long run. Apremium brand needs to justify its high price and its image, and often does sothrough advertising, but are these media expenditures a waste of money if the imageis damaged through other communication channels? Perhaps the easiest advicewould be to simply avoid SP due to this potential risk, but as we have seen in theFMCG markets, SP cannot easily be avoided and market characteristics forcecompanies to address this issue. In addition, it is arguably the FMCG markets thatface the largest issue of competition and lack of differentiation among products; andthese are all the problems that successful branding might ease.Also, as previously implied, retailers and the characteristics of the retail environmentplay an important role in customers perception of a brand. Not surprisingly, it hasbeen found that the context in which a brand is seen influences the brand image 51. perception, and might damage the brand in some cases. For instance, displayfeatures in a store may trigger different responses in consumers. If a company hasinvested marketing communications efforts in establishing a high-quality brandimage and the product is then placed in an undesirable context (for instance, inproximity to the brands associated with lesser quality), consumers may perceive lessbrand value incorporated by Wakefield, K. L. and Jeffrey J. Inman (1993). Thus, itmay be the retailers who have ultimate control over the brand image.The SP activities of companies could have an additional impact on the whole marketcategory as well. It is found that a successful price promotion did expand thecategory while the promotion lasted, while having a negative long-term effect ofdecreased sales in the period after the promotion. A reason for this might lie in thefact that people tend to buy greater quantities during the promotion, and this leads toweaker demand once the promotion has finished. Another, equally distressing theoryabout the promotional impact on the category is that since SP tends to encouragebrand switching, the category does not benefit as a whole as people switch to evenlower prices.Price sensitivityOne of the most discussed negative effects concerns consumer price sensitivity.Findings show that SP tends to increase consumer price sensitivity, due to theformation of reference prices. When consumers buy a product, they start to comparethe price to the reference price, as opposed to the actual one. If a consumer is usedto buying two coffees for the price of one, when the SP is removed, the actual priceof the coffee suddenly seems more expensive. However, this implies that, in orderfor consumers to become too price sensitive, promotions would have to happenfrequently, since consumers do not tend to always remember prices. Naturally,different consumers react differently to prices and SP, depending on their ownpredispositions and preferences. For instance, customers loyal to a specific brandwill perhaps not switch even when presented with the most tempting offer whileothers actively search for the best offer available. Promotions can, however, lead toa greater number of people becoming offer-seekers as, Mela et al., (1997) found 52. that, looking long-term, price promotions do make both loyal and non-loyalcustomers more sensitive to price4.2 Statement of the ProblemProfessional management is essence for improving overall efficiency andeffectiveness in every business, which makes business organization sustainable inchanging political and economic environment. Since couple of years more andnumber of corporate sector companies have experienced the grave problems ofdeciding promotional strategy and specifically sales promotion schemes to win thecustomers. Also, on the other hand, sales promotion initiatives taken without keepingthe long term objectives of the business may dilutes the brand equity. It is felt thatmanagement practices of designing and implementing promotional decisions shouldbe well researched and rational to justify the investment on promotions. It has beenfelt that large gap remain what has been accomplished and what is remaining.Therefore the statement of the problem under the study that has been selected isImpact of Sales Promotions on Sale of FMCG Products (With specificreference to Retail Malls in Ahmedabad)4.3 Research Objectives 1. To study the consumer perception towards sales promotion schemes. 2. To understand the media preference to know the sales promotion schemesinformation. 3. To study consumer preference of sales promotion schemes acrossdemographic variables. 4. To study the sales promotion schemes preference according to variousattributes. 53. 4.4 Research HypothesisHo1: There is no significant difference between Consumer attitude towards the cashdiscount as a sales promotion scheme and demographic variables.Ho2: There is no significant difference between consumer preference of cashdiscount and free gift as sales promotion schemes.Ho3: There is no significant difference between Consumer deal proneness anddemographic variables.Ho4: There is no significant difference between consumers perception anddemographic variables considering sales promotion schemes.Ho5: There is no media preference to know the sales promotion schemesinformation.Ho6: There is no significant difference between demographic variables and salespromotion schemes preference.4.5 Motivation for the studyWith the growth of population and spending power of the consumer has created theopportunities and challenges for the FMCG companies in the world market.Simultaneously, competition to win consumers has been increased drastically. Worldis becoming the small village and Many MNCs have entered in India and othercountries. Marketing paradigm is shifting from consumer satisfaction to consumerdelight. Enticing consumers with the various sales promotion schemes is the order ofthe day. If this tool is not used strategically, company has to follow the trend ofpromotions to maintain the market share. Considering almost universal applicationsof designing the sales promotion schemes and understanding its impact on businesshas motivated to take the steps in the direction to study this crucial aspect ofpromotion management. 54. 5. Research Methodologies5.1 Research DesignA research design is a framework or blue print for conducting the research project. Itdetails the procedures necessary for obtaining the information need to structureand/or solve research problems. The research design lays the foundation forconducting the project. The descriptive research design is being used to study theformulated problem. Primary and secondary data has been collected according tothe need of the study. For collecting primary data, structured questionnaire has beenprepared considering objectives of the study. More over important factors has beenconsidered to measure the interested variable of the study.5.2 Sampling ElementEach and every individual who purchases the FMCG products in Ahmedabad cityhas been identified as a sampling element.5.3 Sampling Design & Data CollectionThe universe of the study consists of all retail consumers in Ahmedabad city.Sample Size: 100Sampling Method: Convenient Sampling MethodData Type: Primary Data & Secondary DataData Collection Tool: Structured QuestionnaireScope of Research: Ahmedabad city 55. 6. Data Analysis and InterpretationQuestionnaire is one of the tools of the primary data collection. In this researchconsumer responses have collected through questionnaire.1. Do you buy FMCG products from retail malls?There are 100 respondents from them 15 percentage of consumers buy FMCGproducts from local kirana stores, so we terminate those respondents.The further analysis is based on the data collected from 85 responses.2. From where, you buy FMCG products?Most of consumers buy FMCG products from Big Bazaar as they have five retailmalls in ahmedabad city, also they are best at offering products at low price. Star 56. Bazar is also a tough competitor of Big Bazar as its TATA holding company and onlyone retail mall in ahmedabad. There are four retail malls of D-Mart in ahmedabadoffering products below MRP though they are not targeting consumers of BigBazaar. Hyper city is newly opned and having great footfalls without advertising,Reliance mart and National handloom also offers great discounts. Relince fresh hascompetitve advantage on fruits and vegitables so some of comsumers also buyFMCG poducts along with fruits and vegitables.3. How much do you spend on the purchase of FMCG products everymonth?Generally consumer spend maximum up to around 3000 rupees per month as thereare also heavy spenders in Ahmedabad. We also get some consumers, even onewho spend more than 4000 rupees. 57. 4. Which types of sales promotion tools encourage you to buy?Generally consumer are ultimatly interested in therir benefits so every salespromotion offer little or more encourages them to buy.5. Do you wait for sales promotion offers by retail malls?Majority of respodents visit retail mall at the time of purchase and there is any ofsales promotion offer running and there they knowabout other offers so theygenerally dont wait for sales promotion offer. Only 20 respodents agreed that theywaits for sales promotion offer.6. During sales promotion do you purchase more than required? 58. It seems that sales promotion offers does not influnce much to the FMCG consumersbut still eigtheen consumers buy products more than reqired may be for store. 27consumers purchase more than required somestimes, it may be that if offer is oncein thousands than they buy.7. Do you ever switch brand during sales promotion?It also prove here that consumer ultimatly interested in their own interest, and thereare lots of brands available in same segments though there are 23 consumer whoare loyal to their brand.8. According to you which retail mall offers best sales promotion tools? 59. Big Bazaar offers best offers as it promotes through newspaper and TVadvertisements. Other retail malls stand far behind but St