Sales promotions have a significant effect on the behaviour of consumers and trades people. Such promotions can bring in more profits for the manufacturers because they permit price discrimination.
1. Price discrimination:
Producers can introduce price discrimination through the use of sales promotions. They can charge different prices to different consumers and trade segments depending on how sensitive each segment is to particular prices.Coupons, special sales events, clearance sales and discounts are examples to explain the phenomenon.
Often such price discrimination are offered in specific cities in the country,Bajaj Auto Ltd. started the scheme on 20th august 2001, where by if you buy a Bajaj Spirit two-wheeler you get Rs.3000/- off, valid only in Ahmedabad.
2. Effect on consumer behaviour:
As sales promotions are mostly announced for a short period, customers may feel a sense of urgency and stop comparing the alternatives. They are persuaded to act now rather than later.With every 500g pack of Tang, you get a free Tang glass. Offer valid only till stocks last.
3. Effect on trade behaviour:
Short-term promotions present an opportunity and encourage dealers to forward buy. This forward buying ensures that retailers won’t to go out of stocks. As dealers have more than the normal stocks, they think it advisable to advertise in local media, arranged displays and offer attractive promotion deals to consumers. These actions help in increasing the store traffic. Buy 2 dozen shampoo sachets & get 2 sachets free.
4. Regional Differences:
The South is generally characterised by greater degree of going out and people tend to drink outside the house. The Tamilian, consumer in particular, is value oriented, rational and looks up to film stars, while the Keralite is more international in his outlook. The Bangalorean is as Cosmopolitan as his Mumbai or Delhi counterpart. Such factors have to be taken into consideration while providing incentives to the customers.
In mid 80s, Philips decided to launch a special project in Tamil Nadu and Andhra Pradesh for their rural buyers. So, for the Tamil Nadu market, they created a special campaign “The Super Star of the House” and made the cine idol Rajnikant their brand ambassador as in that state he is popularly known as “Superstar”. Whereas, in Andhra Pradesh, they launched their brand as “Mega Star of the House” as Chiranjeevi was taken as their brand representative. Sales promotion was done by organizing various ‘super shows’ and ‘mega-shows’ for the masses in states of Tamil Nadu and Andhra Pradesh respectively. Both these campaigns became a major success.