CREATING CUSTOMER VALUE

Strategic versus tactical nature of sales promotions MOHIT S. KELKAR PGDM-Exec 2014-15K. J. Somaiya Institute Of Management Studies & ResearchCONTENTSIntroductionPrevious Research on Sales PromotionsSales Promotions ComplexityStrategic versus Tactical GoalsTo What Extent can SP be Strategic?SP and Consumer PsychologyManaging Environmental ContingenciesPlanningManagers PerspectiveDescriptive StudyConclusion

2INTRODUCTIONSales promotions labelled as short-term or tactical instrumentsSP characteristics :Communication traitsDiversity of Sales promotion toolsSP market affiliationConsumer behaviour impact dimensionThe strategy versus tactical goals potentially associated with SP tools is rooted not only in the marketing concept, but also in the IMC framework.

3PREVIOUS RESEARCH - THE SHORT VERSUS LONG-TERM EFFECTProfitability of SP contentious issue

Increased promotional activity reduces brand loyalty and detracts brand quality image

Fundamental features of SPIncentive or inducement (For immediate sales boost)Effects are short termSecondary compared (Compared to Advertising)

4SALES PROMOTIONS COMPLEXITYDiamond & Johnsons Three Dimensions based on consumers attributes ratingsPriceEffects other than PriceEfforts.Consumer-oriented SP can also be classified asConsumer reward immediate or delayedBrand or Retailers objective (encourage repeat purchases or reinforce brand image)SP A Marketing device

5SALES PROMOTIONS COMPLEXITYSP effectiveness dependent on mix of consumersdeal-pronenessconsumer expertize etc.Psychological meaning to customers & brand positioningQuality-price tierType of productType of brandConsumer markets growth stageProduct life cycle stageChoice contextConflicting goals of manufacturers and retailers

6STRATEGIC versus TACTICAL GOALSStrategic goalsLong termMarketing should be thought, planned & managed strategicallyIntegrated Market Communication (IMC)Revenue, profitability & sustainability matterDepends on Organisations activities and resources.Tactical goalsShort termTo accomplish limited goals & quick fix action

7To What Extent can SP be Strategic?SP and Consumer PsychologyReward for personal information and proof of purchase (Form filling)Reward for continuation of purchase (Loyalty Schemes)Free trial offer. (Mothers Day)Interacting with consumers to promote sales and to impart knowledge of the product.Two Conditions to influence consumer behaviour for long termAttitude Formation. (Case 1)Causal Attribution. (Case 3)

To What Extent can SP be Strategic?Managing Environmental ContingenciesExpanding the target market - Introduce the brand to new segments.To gain competitive advantage- The main distinction between tactical and strategic use of SP is when there is a pattern of organizational behaviour steadily built over time contrasted with a sudden and episodic move influenced by the opponent To nurture relationship and network- The connection between one brand and another can help bring about a long-term association in consumers memory.

To What Extent can SP be Strategic?PlanningIn order to pursue, consolidate or change an agreed positioning and market segmentation strategy several decisions have to be made, In this planning process, the following challenges must be tackled:Establish SP scheduling, deal frequency and to choose adequate match of prize to target consumerTo be imaginative, creative and cost effective in developing sweepstakes, lotteries and contestsTo minimize the negative attributions associated with price promotionsTo determine what success measures will be used and to assign loyalty schemes effectivelyManagers PerspectiveManagement team must act in accordance with the conviction of strategic relevance of SP.

Descriptive StudyResearch ObjectivesWhat goals managers assign to each SP tool and in what extension those goals are more strategic or tacticalMethodologyA survey was conducted (Manufacturing & Retail each)Analysis is done based on the data obtained from Survey (Factor & Cluster analysis)ResultsBased on the analysis, it is seen that managers allocate a given promotional instrument to a specific task & they believe that different tools are able to achieve different goals. Retailers positioning of the SP tools partially matches with manufacturers perspective.DiscussionPrice promotions, such as price cuts and cash refunds, were appropriated for quick reactive response, and for yielding short-term results and some promotional instruments were only feasible within a long-term perspective.Managers of manufacturing firms and retailers perceive & position differently each SP technique.ConclusionIn terms of SP we can say that it is not wise to keep blaming the tools when the responsible one is the user. Some of the SP tools are structurally compatible with the strategy frameworkTheir effectiveness in expressing the strategic dimension is tied in to the way they were planned and implemented.Focusing on the long term and applying the organizations resources to enhance consumers brand value is a very challenging task as far as SP implementation is concerned. In fact, the easy way is to manage SP as a short-term device.Potentially SP can be strategic, but to make SP perform strategically is surely a hard job.

THANK YOUMOHIT S. KELKARPGDM-Exec 2014-15mohit.kelkar@somaiyya.edu