There are a number of reasons that are favorable to the growth of sales promotion:
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.