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SALES PROMOTION

Effect of Sales Promotion Schemes on Customers

Group 3

Koundinya. N- 93

Arjun A16

Dileep A24

Renjith P49

Vineet A69

Prashant K195

Raunak K199

Gopi D - 178

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Contents

Introduction .................................................................................................................................................. 2

Literature Review .......................................................................................................................................... 3

Objective ....................................................................................................................................................... 4

THE MODEL ............................................................................................................................................... 5

Research Methodology ................................................................................................................................. 6

Primary Research ...................................................................................................................................... 6

Phase I: Manufacturers ......................................................................................................................... 6

Phase II: Retailers .................................................................................................................................. 7

Phase III: Customers .............................................................................................................................. 7

Conclusion and Key insights .......................................................................................................................... 9

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Introduction

Sales Promotion is the set of marketing activities undertaken to boost sales of the product or service.

Sales promotion is one of the five aspects of the promotional mix. (The other 4 parts of the promotionalmix are advertising, personal selling, direct marketing and publicity/public relations.)

Sales promotion includes several communications activities that attempt to provide added value or

incentives to : consumers, wholesalers, retailers, or other organizational customers

Main Purpose is to stimulate immediate sales.

These efforts can attempt to stimulate product interest, trial, or purchase. There are quite a large

number of promotional schemes prevalent at the moment. We discuss here only a few that are very

much visible to the common man so much so that the consumer response towards the schemes is

easily available.

Classification :-

1.

Consumer Promotion Tools: - Free Samples, Coupons, Discounts, Loss Leader, Loyalty

Marketing, etc.

2.

Trade Promotion Tools: - Price Off, Allowance, Free Goods, etc.

3.

Business Promotion tools: - Trade Shows, Sales Contest, Specialty advertising, etc.

Sales Promotion :- A South Asian Perspective

Globalization and Open-market are used in almost all the South-Asian countries. Earlier on, most of

the countries in this region used to be traditional in dealing with the customers at the lower levels, in

the sense that the wholesalers had their set of retailers and each retailer had a set of loyal customers.

Brand switching was rare and trade flourished on faith and counter-faith. With the opening up of

markets to imported goods, coming up of new ideas along with multinational firms and multi-cultural

goods became a must.

Hitherto unknown commodities have become the article of faith, now so much so that one wonders as

to how we were living without these essentials.

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All this has not happened in a day nor is the transformation complete. The changes are gradual and on-

going. The introduction of providing incentives either to lure the customers or to keep them in the net

is a new phenomenon for the countries in this region.

The consumer may have utilitarian motives like savings, quality and convenience, or the consumer may

have hedonist motives like amusement, exploration, seeking variety, etc.

Literature ReviewUnderstanding consumer responses to retailers cause related voucher schemes evidence from the UK

grocery sector by Matthew Gorton, Robert Angell, Yu-Shan Tseng, John White.

CRVS Model - This paper discuss about a model CRVS to understand consumer responses to cause

related voucher schemes. CRM initiatives have been implemented in a range of industries in a similar

way grocery retailers came up with similar initiativecustomers receive vouchers linked to their total

spend, which can be donated to, for example, schools and sporting clubs. Schools and clubs then

redeem these vouchers, at levels set by the retailers, for equipment and other goods.

The conceptual model incorporates six theoretically derived

exogenous constructs, i.e. status of the cause, company-cause fit,

personal involvement with the cause, attitudes to the company,

perceived sincerity of the company and perceived ubiquity. These

are hypothesized to influence consumer responses to three

primary endogenous variables: interest in the company,

favorability of attitudes to the company and use (impact on

purchasing intentions). The model is tested using survey data (n = 401) collected in two UK cities

Newcastle and Plymouth and for two stores Tesco and Morrisons.

Hypothesis

H1. Status of cause will positively influence personal involvement.H2. Status of cause will positively influence perceived sincerity.

H3. Status of cause will positively influence interest

H4. Company cause fit will positively influence perceived sincerity.

H5. Company cause fit will positively influence favorability.

H6. Personal involvement will positively influence interest.

H7. Personal involvement will positively influence favorability.

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H8. Perceived sincerity will positively influence interest.

H9. Perceived sincerity will positively influence favorability

H10. Perceived ubiquity will negatively influence favorability.

H11. Perceived ubiquity will negatively influence use.

H12. Attitude to the company will positively influence favorability.

H13. Attitude to the company will positively influence use.

H14. Interest will positively influence favorability.

H15. Favorability will positively influence use.

Indirect effects -

H16. Status of cause will positively influence interest through personal involvement.

H17. Status of cause will positively influence favorability through perceived sincerity.

H18. Company-cause fit will positively influence favorability through perceived sincerity.

Test Used

Confirmatory factor analysis (CFA) - The objective was to validate each of the nine constructs in keeping

with standard practices of unidimensionality

Structural equation modeling (SEM) - Each of the factors specified in the conceptual model was tested

via SEM and three indirect paths were hypothesized.

Result The analysis indicates that CRVS can stimulate favorable attitudinal change and behavioral

intentions. Consumer responses are thus not limited to CRVS being perceived merely as a good thing

and the results are encouraging for the retailers concerned and, more widely, those interested in

creating a CRVS. Attitudes to the company, perceived ubiquity and favorability were identified assignificant predictors of the construct use.

Physical Implications - Managers have to very careful in the selection of a cause, its status, and how to

build personal involvement. There should be consistency in communication for CRVS. If a company

suffers from negative consumer attitudes, then CRVS alone is unlikely to turn around their business

performance.

Objective

The primary objective of research is to measure the effectiveness of various sales promotion schemes

on consumers. The study would be conducted across several product categories. The sector chosen is

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FMCG and the various categories selected are Food, Stationery and Cosmetics & Hygiene. The following

model depicts the entire system which incorporates all the stakeholders involved in a sales promotion

system thus representing the starting, intermediate and end point of a sales promotion scheme.

THE MODEL

Specific objectives of the research are also:

1.

To find the best fit sales scheme corresponding to a particular product category. For instance, if

the product is considered to be a soap, the Buy 1 get 1 free offer may create a positive impact

on the buying patterns of the consumer. However if the product is bread, then the same offer

may come across as a stock clearance offer or a bundling of near to expiry products

2.

To understand the different motives of the several stakeholders present in the system. From the

above model, it can be observed that sales promotion schemes may be between a manufacturer

and a retailer or a manufacturer and a consumer directly or in between a retailer and a

consumer. In each of these cases, the motive of the sales promotion scheme may be different.

This research project aims at understanding what those motives are, are they been able to

achieve and so on.

Distributors/Manufacturers

Distributors/Manufacturers Distributors/Manufacturers

Sales Schemes

SalesSche

es

Sales Schemes

Sales Schemes

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Research Methodology

Primary Research

As per the objectives of the study, the primary research will be conducted in 3 phases. Each phase will

target one of the three main stakeholders in any sales promotion scheme the manufacturer/service

provider, the retailer, the customer. All 3 phases can be simultaneously launched.

Phase I: Manufacturers

Nature of Research: Exploratory

Objective:

To understand the manufacturers motives behind different sales promotion schemes

To understand the customers response to various schemes offered by the retailer To analyze the impact of external factors such as geography, culture etc. on effectiveness of

sales promotion schemes

Sampling:

Convenience sampling technique may be used. Since only sales/marketing managers in FMCG

manufacturing companies will be targeted, a non-probabilistic sampling technique such as convenience

sampling will be appropriate. 5 Managers each from 3 different companies in each of the 3 product

categories identified for research (cosmetics, food and snacks, stationery)hence 45 respondents.

Data Collection Strategy

In depth interviews (Since the respondents in this phase of the research are limited in number but

highly informed about the topic of the study, it makes sense to spend more time and effort on

interacting with each one of them.

Topics to be covered in Interview

To find motive of the sales promotion scheme (eg. To induce trial, to clear stock, to prolong PLC stage

etc); To understand the response received for different sales schemes in different product categories; To

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understand how the same scheme performed across geographies or at different points of the year or in

the presence of competitors schemes etc.

Phase II: Retailers

Nature of Research: Exploratory

Objective: To understand the retailers motives behind different sales promotion schemes;

To understand the customers response to various schemes offered by the retailer;

Sampling:

Convenience sampling technique may be used. Since only retailers dealing in FMCGs will be targeted, a

non-probabilistic sampling technique such as convenience sampling will be appropriate. Two types of

retail outlets are to be coveredmodern trade and traditional trade. To check for geographical factors,

the research may be carried out across different regions.

Data Collection Strategy:

In depth interviews (Since the respondents in this phase of the research are limited in number but highly

informed about the topic of the study, it makes sense to spend more time and effort on interacting with

each one of them.)

Questionnaire structure

To find motive of the sales promotion scheme (If it is a scheme by the retailer)

To understand the response received for different sales schemes in different product

categories;

Phase III: Customers

Nature of Research: Exploratory

Objective:

To understand the customers perception and preferences ofvarious schemes;

To understand the impact of schemes on customers of different behavioral profilesloyals,

switchers, etc;

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To understand the effect of demographical factors of customers on their reaction to sales

promotion schemes.

Sampling: Probabilistic sampling technique may be used. In the probabilistic technique, stratified

sampling method has been used. In the stratified sampling, the customers will be grouped into clusters

on the basis of profession. Our target group will be students, housewives and business people. We will

ensure that each segment will have equal contribution in the responses. Since almost everybody shops

for FMCGs, it seems justifiable to undertake a probabilistic sampling technique for research purpose.

Data Collection Strategy: Structured questionnaire (Since the number of respondents is significantly

high, capturing data is most convenient through a questionnaire. The questionnaire shall be

administered online.)

Questionnaire structure:

1. Demographic profiling: age, income, location, number of members in the household, profession etc.

2. Shopping behavior: (Frequency, place of shoppingmodern or traditional etc)

3.

Behavioural Profiling: (To differentiate loyals and switchers) one product from each of the three

chosen product categories will be used for this purpose.

for eg. Which is your favourite brand of soap?

How often do you purchase other brands? Etc.

4. Receptiveness to different sales promotion schemes in that product category measured on a Likert

scale. The different schemes to be rated can besame product free, price off, price off on higher

quantum purchase, free assured gift, lucky draw lots, higher quantity at same price etc.

Part 3 and 4 of the questionnaire will be repeated for each of the three product categories chosen for

research.

Data Analysis:

The survey data can be analyzed using MS Excel and any statistical analysis software such as SPSS. The

Likert scale ratings of different types of sales promotions can be used to measure the likelihood of

success of the particular sales promotion schemes to different demographic or behavioral segments of

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customers. Exploratory factor analysis can be performed to identify the major distinguishable consumer

behavior patterns towards sales promotion schemes.

Conclusion and Key insights

From this study we intend to derive key customer insights regarding the impacts of sales promotion

schemes. The first conclusion we shall be able to derive is how successful a sales promotion scheme can

be across the FMCG product categories - Stationery, Food and Cosmetics/Hygiene. This study shall help

to understand customer response and perception towards various sales promotion schemes across the

above mentioned product categories. The second key conclusion that we shall be able to derive will be

based on the first insight. That is, we shall be able to point out the best fit of sales promotion scheme for

a particular product category. As marketers this has important implication while designing a sales

promotion schemes. The third result that we shall be able to derive from the primary research on the

manufacturers and the retailers as in what the actual motive was behind the sales promotion employed

and whether they were able to fulfill that motive. Their motives could range from- inducing trial for a

new product, prolonging the PLC stage of a product, clearing out stock etc. Along with these we shall

also be able to identify different external factors that affect the sales promotion scheme like- Geography

and time, competition, type of trade where the customer shops etc.

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