For these cases there are not many complexities as a number of objectives as sales based techniques can be used with relative ease. For Example it is very easy to measure sales effect before sales promotion activities, during these activities and post sales promotion activities . In case of objectives not related to sales, such as trial purchase, or changing consumer awareness and attitude as resultant increase and perceived value of the product, measurement is more difficult. In certain types of promotion, the reseller support is important and can have significant effect on marketer's promotion performance.

Pre-testing

How sales promotion is to be communicated and what would be communicated to the target groups is important and can be pre-tested. For example the pre-tested may find out what is likely to be the perceived value and the risk. A customer considers whether it would be wise to buy an unknown brand of sport shoes at a 45% discount. In this offer was there a risk of buying an unfamiliar brand? The pre-test can be conducted to assess these factors by using focus groups and consumer panels. Another approach, ballot method, consists of kneeling a ballot paper to a list of consumers. They are requested to evaluate different illustrated promotion is and vote for the most right and return the ballot to the firm. A relatively expensive but more accurate method is a portfolio test. A portfolio of sales promotion is prepared and shown to consumers in person and the responses are noted.

It is often quite helpful to evaluate the responses of resellers before implementing the promotion programme. The simplest ways to visit several important retailers and wholesalers, discuss the programme and seek their opinion and suggestions. This may prove to be quite favorable in case the support of resellers is considered to be of paramount importance for promotion results.

Concurrent testing

This testing is done when the sales promotion is in progress. Concurrent testing  permit the promotion manager to modify the sales promotion, if needed. This type of testing is conducted in terms of sales data which can be obtained on a weekly or monthly basis. If the promotion is a consumer contest and the consumer is not require to purchase anything, the response to promotion can be adjudged by the number of entries received at some interval and if need be, the contest period can be extended. In case of a coupon distribution programme, similar approach can be adopted by keeping track of coupons redeemed.

Post-testing

Post-testing is done after the promotion period is over. To assess the changing consumer awareness and attitude, telephone calls, questionnaire mailed to the consumers and personal interviews can be used. In these methods, the most expensive is the personal interview method and the least expensive is the mail. The information sought pertains to the promotion event. In case of samples on premiums distributed through retail stores, intercept interviews at the Point of Sale can reveal more reliable information.

To measure the sales affect, sales figures before the promotion period can be compared with figures at the end of promotion and one month after the promotion ends. Suppose that the promotion objective was to increase sales by 30 percent in certain period and the pre-promotion sales for a similar period were worth 5 million rupees. The sales jumped to in excess of 5.6 million in the promotion period. This would show that the objective was achieved. It is very likely that in the ensuing month after the promotion, the sales will come down to say 3.5 million rupees. In the sales return to 5 million rupees on the long run, then perhaps the sales jump is because of brand features and deal prone customers. However, if the regular sales settle at 5.5 million rupees on the long run, then definitely the promotion prove successful in increasing the long run sales by attracting new customers and we have also attracted customers away from other competing brands.

So first total amount of money for the promotion is determined and then the budgeting is done for different promotional activities.

But how do you determine the amount of money involved in the promotional activities?

This is different to different business. Its more or les dependent on various factors that play role in a products life cycle. The factors like different stages of PLC , the market condition (of the company) , the economy in with the organization functions, the extent of competitive activities etc. All these factors individually or together might effect the promotion budget to a great extent. You just can’t expect the company to have huge promotional budget in times of rescission.

There are basic five techniques that are used to determine/ allocate funds to sales promotion.

Percentage of sales method

In most cases and by most firms this “percentage of sales method” is used to determine the promotional budget of the company. So they more or less pull certain percentage of the sales made in a fixed period. Remember when I say fixed it can be for say last year or for several past years. This decision is more dependent on the current business scenario and current working of the company. It might be that the company may consider just last years sales figures under consideration as they may have made great sales. (So you may take one year or an average of several this depends on many condition in which the org functions). And ya , this can also be a forecasted sales of the year under certain conditions.

Unit of sales method

For Biggies that build big products like two-wheelers auto-manufactures, and other consumer durable this is most preferred method of sales promotion - “Unit of Sales Method” so here the base is UNITS of sales that are made. Here the figures of units are multiplied by fixed amount of money to reach the budge amount. For example: they might allocate $1000 per unit for sales promotions. (I did say its for Biggies so this amount might be big ..)

Competitive parity method

Any marketers match or base their sales promotion budget to that of the major competitors. The logic attributed to this method is that the collective minds of the companies in the industry probably generate promotion budget that are close to optimal and any departure from the industry norms may lead to promotion war.

All you can afford method

Here the amount used literally means “All you can afford” in other words all you are left with. So you pick all that is left after all other relevant allocations have been made. So normally this approach is used by Small fishes (small companies with small budget) or may be by some other firms that are big when they are introducing the new product. This approach is merely an availability oriented budget and kina unsophisticated. Apparently, there is no realization that in a competitive market situation, sales promotion mainframe sales in many ways.

Objective end task method

As I said the promotional budget is determined by the overall promotional strategy of the organization hence objective end task methods is the one which is strategy driven. This is even the most popular technique to decide on sales promotions budget. So what do we do? We (Marketing Managers) start by making a thorough study i.e. understanding the market, the product, the offerings, the most crucial competition and consumer behavior in order to set the ultimate promotion objectives. Remember these objectives may relate to reach short term sales objectives .Remember this is sales promotions that are ultimately derives sales and sales and sales. These objectives may even relate to introducing a new product, stimulate trial, increasing distribution, etc., within a specified period of time. Now you determine how much money would be required to fulfill each of these tasks in order to achieve the promotion objectives. If the cost happens to be greater that money available then ether the objectives are refined or the funds are made available the contingency reserve or by reducing the budgets of the other promotional activities.

DEFINITION OF SALES PROMOTION

“Sales promotion includes incentive-offering and interest-creating activities which are generally short-term marketing events other than advertising, personal selling, publicity and direct marketing. The purpose of sales promotion is to stimulate, motivate and influence the purchase and other desired behavioral responses of the firm’s customers.”

Sales promotion offers a direct inducement to act by providing extra worth over and above what is built into the product at its normal price. These temporary inducements are offered usually at a time and place where the buying decision is made. Not only are sales promotions very common in the current competitive market conditions, they are increasing at a fast pace. These promotions are direct inducements. In spite of the directness, sales promotions are fairly complicated and a rich tool of marketing with innumerable creative possibilities limited only by the imagination of promotion planners. Sales promotion is often referred to by the names of ‘extra purchase value’ and ‘below-the-line selling’.

Today we find companies in almost all sectors offering some sort of a promotion scheme. These sectors range from automobiles to beverages, from financial services to foods, from household durables to services, from household products to business products, from personal care to textiles and apparel.

1. Increasing Competition

The air of change is gaining momentum after the introduction of economic liberalization. Due to increase in competition, companies are finding it increasingly difficult to compete on quality. They are therefore resorting to more innovative methods of sales promotion. In order to have a competitive advantage over its competitors like Levis, Pepe, Killer and others, Spykar Jeans, once a year has a grand sale of upto 50%.

2. Customers Have Become More Price Sensitive

This increased price sensitivity is a direct result of rampant inflation. Economic recession is likely to fuel this trend further, as consumers and dealers become more sensitive towards prices. If the customers get branded jeans at half the actual price, then they are definitely going to make huge purchases of Spykar Jeans because they want value for their money, as they are price sensitive.

3. Sales Promotions Generally Create An Immediate Positive Impact On Sales

Advertising, personal selling and other methods of promotion produce slower sales response compared to sales promotion. Sales promotions are mostly for short duration, for a specified period, leading to a sense of urgency in consumers to buy now. This creates an immediate positive impact on sales.

4. Products have become more standardized

In many product categories, there is a proliferation of brands; many of them are line extensions and me-too brands. Most brands are being perceived by consumers to be more or less similar within a given price range because of the inability of manufacturers to develop truly differentiated products. Under these circumstances, advertising messages are unable to strongly influence the consumers’ perceptions and create brand franchise. As a result of these perceptions of similarity among brands, marketers have no way but to compete on the basis of extra benefit offered through sales promotion. Competing companies struggle to capture market share by using every tool likely to bring sales success.

There are many unbranded jeans sold at shopping malls and places like linking road, bandra which are bought at half the price of actual branded jeans. People who are money conscious buy such jeans. Therefore, Spykar Jeans comes up with such discounts, which helps them in increasing their sales and also in stock clearance, if any.

5. Consumer Acceptance

As competition intensifies and promotions proliferate, consumers have learnt to earn the rewards of being smart shoppers. Over a period of time, they have also learnt that brands on promotion are not necessarily of lower quality.
Spykar Jeans, if sold at disount rates, are not perceived to be a brand of low quality. Instead, if word is out of a mega discount scheme for Spykar Jeans, then people even time their purchase accordingly.

6. Advertising Has Become More Expensive And Less Effective

All the advertising media have become quite expensive. Audio-visual medium, which is considered as the most effective for short-duration ads, may cost in excess of Rs. 1 lakh for a 10 second exposure during prime time. In many cases, consumers have reached a point of boredom due to excessive advertising on TV. Some consumers even consider advertising as an intrusion into their privacy, leading to zapping (surfing channels). Firms with small budgets cannot compete with big companies, which spend huge sums of money on advertising. For these small budget firms, sales promotion is a more cost-effective promotion method to produce sales results.

7.Trade Has Become More Powerful

Retailers and wholesalers have become powerful and find themselves in a position to demand extra facilities from the companies. They Channel members demand more incentives to get the desired results. Manufacturers do not seem to have any alternatives but to concede to their demands, keeping in view the competitive market conditions. In shopping malls like Globus and Lifestyle, decent margins have to be paid to them in order to have shelf visibility for your brand.

8. Emphasis On Sales Volumes

Towards achieving the long-term profit goals, manufacturers try to attain high sales volume. Brand managers and product managers find themselves under pressure to achieve short-term sales results for the sake of their careers. Compared to any other promotional method, sales promotion is a more effective method to generate short-term sales volume.

9. Sales Promotions Maximise Profits

A number of economic theories conclude that a company can maximise profits by using sales promotion. Such promotions can permit price discrimination by allowing the brand to compete in 2 or more different market segments. Sales promotion may allow a premium brand to compete with a lower tier brand among price sensitive consumers. For example, a premium brand of toilet soap may be on promotion in some price sensitive markets, while in the remaining markets it is sold at its normal price.

10. Introducing An Element Of Interest:

There are a number of promotions, which are often called interest promotions. Some of the more popular interest promotion techniques are samples, contests, and sweepstakes, free premiums and mail-in premiums. These promotions create an element of interest and excitement, and consumers enjoy these and response enthusiastically to such contests and sweepstakes, etc.

11. Impulse Buying Is Increasing

The number of marginal customers is increasing. Displays at the point of purchases lead to impulse buying by consumers, more so if the items on display are not expensive. There is a popular saying in Hindi, “jo dikhta hai, voh bikta hai.”

12. Sales Promotion Specialists Are Available 

As a result of economic liberalisation, the number of management institutions has increased. This has lead to the availability of specialists, who are not only well paid but can handle this specialised work more efficiently in the current market conditions, where sales promotion has become more important.

13. Excess Stocks

Because of increasing number of brands, it is difficult for manufacturers and dealers to anticipate future sales. This, at times, leads to excessive inventories, and the quickest way to clear that is to go for sales promotion.

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.

1. Increased price sensitivity

Consumers wait for the promotion deals to be announced and then purchase the product.  This is true even for brands where brand loyalty exists.  Customers wait and time their purchases to coincide with promotional offers on their preferred brands. Thus, the routine sales at the market price are lost and the profit margin is reduced because of the discounts to be offered during sale-season.

‘The Diwali Bonanza Offers’ on electronic goods.

2. Quality image may become tarnished:

If the promotions in a product category have been rare, the promotions could have a negative effect about its quality image. Consumers may start suspecting that perhaps the product has not been selling well, the quality of the product is true compared to the price or the product is likely to be discontinued because it has become outdated.

The Smyle Powder offer of “Buy 1 and get 2 free” went on and on. Ultimately people stopped asking for the product as the on-going sales promotion strategy made the customers perceive it to be a cheap and an inferior product.

3. Merchandising support from dealers is doubtful:

In many cases, the dealers do not cooperate in providing the merchandising support nor do they pass on any benefit to consumers. The retailer might not be willing to give support because he does not have the place, or the product does not sell much in his shop, or may be he thinks the effort required is more than the commission/benefit derived.

4. Short-term orientation:

Sales promotions are generally for a short duration.  This gives a boost to sales for a short period.  This short-term orientation may sometimes have negative effects on long-term future of the organization.  Promotions mostly build short-term sales volume, which is difficult to maintain.  Heavy use of sales promotion, in certain product categories, may be responsible for causing brand quality image dilution.

The other strategy may demand more participation from resellers such as the ability to explain to the consumers as to how a product works.

PULL STRATEGY

In case of using a pull strategy, marketing efforts are directed at the ultimate consumer and consumer promotions such as consumer contests and sweepstakes, rebates, coupons, free samples, consumer premiums, etc are used.  If this strategy is also chosen to include advertising, then, there are large advertising expenditures.

The objective of such promotional efforts would be to create sufficient consumer demand to pull the product through the channels, that is the consumers are encouraged to demand the product from retailers who in torn place orders with wholesaler or manufacturer to meet the consumer demand.

Bajaj Auto Ltd. offered a scheme of taking home a scooter at Rs 999 was a sales promotional offer communicated through effective advertising and was essentially a pull strategy.

This strategy may require little promotional efforts from the resellers except to stock input the product on shelves.

A pull strategy is appropriate when

• The product demand as high.
• It is possible to differentiate the product on the basis of real or emotional features.
• Brand consumers show high degree of involvement in the product purchase,
• There is reasonably high brand loyalty and
• Consumers make brand choice decision before they go to the store.

Push strategies generally appropriate for