Sales Promotion: Merits, Demerits and Activities/ Techniques
What is Sales Promotion?
Short-term incentives, which are offered to encourage the buyers to make an immediate purchase of a product or service is known as Sales Promotion.
Sales Promotion helps to boost the sales of a company. It also aids other promotional efforts, such as advertising and personal selling. All the activities that provide short-term incentives to boost sales are included in sales promotion.
Sales Promotion uses its tools for:
- Customers in the form of discounts, free samples, contests, etc.
- Traders or middlemen in the form of cooperative advertising, dealer discounts, dealer incentives, contests, etc.
- Sales Person in the form of bonuses, contests, special offers, etc.
Sales Promotion techniques are useful because:
- They bring a short and immediate effect on sales.
- They help in stock clearance.
- They induce customers and distribution channels
- They help to win over competitors
Merits of Sales Promotion
- Attention Value: With the help of sales promotion techniques or activities, companies are able to grab the attention of customers, as it gives extra incentive to consumers to make a purchase.
- Useful in New Product Launch: Sales Promotion plays a prominent role when a new product is launched in the market. Products are available as free samples or at low prices, which induces people to try new products.
- Synergy in Total Promotional Efforts: Sales promotion aids other promotional techniques and makes them more effective. It helps to increase the overall effectiveness of promotional efforts by supplementing personal selling and advertising.
Demerits/Limitations of Sales Promotion
- Reflects Crisis: Frequent use of sales promotion techniques may give a bad impression on the image of the product and the company. It gives the impression that there is no demand for that product. It reflects a crisis and declines company’s reputation.
- Spoils Product Image: The image of the product is adversely affected by frequent use of promotional activities. Buyers may feel that the quality of the product is not good or is not appropriately priced, which is why the company is offering incentives.
- Short-term Focus: Sales promotion tools have short and temporary life.
Sales Promotion Activities/ Techniques
- Rebate: Offering products at a price less than the original price to clear off the excess inventory is known as rebate. For example, offering Pizza at INR 250 instead of INR 500.
- Discount: A reduction of a certain percentage from the price for a limited period is known as discount. Discounts are given to induce customers to buy more. For example, 50% off at Nike Stores.
- Refunds: Under this, a part of the product price is refunded to the customers on showing proof of purchase. For example, Swiggy and Zomato offer cashback while making payments through certain apps.
- Product Combination: Giving one product as a gift along with the purchase of the main product is known as product combination. For example, Disney+Hotstar subscription is free with every Airtel recharge.
- Quantity Gift: When we offer some extra quantity of the main product as a gift to the customer, it is known as quantity gift. For example, 10% extra Lays with every packet.
- Instant Draws and Assigned Gift: In this, companies offer schemes, like scratch cards to win instant gifts on the purchase of the product. For example, Utensils companies offer scratch cards to customers.
- Lucky Draw: In this method, customers are given coupons on the purchase of a product and the lucky winners are decided by draw of lots. The winner of the lucky draw gets a gift. For example, a Lucky draw coupon on the purchase of clothes from Shoppers Stop worth Rs. 5,000 and above.
- Usable Benefit: Under this, a coupon or discount voucher is given to customers on the purchase of a product in order to avail any special benefit or discount. For example, buy Asian Paints for your house and win a holiday package for Bangkok.
- Full Finance @ 0%: Under this, products are sold on instalment basis at the rate of zero percent. For example, Buy Samsung Washing Machine at 0 percent interest and pay in 35 instalments. However, customers must be aware of charges in such schemes.
- Sampling: It is distribution of free samples of a product through sales representatives. Usually, daily products, like detergents, soaps, toothpaste, etc., are distributed using this method. This method is generally used at the time of launch of a new product by a company. For example, get mini lipstick free with Maybelline New York Lipstick.
- Contests: Under this method, companies organise events and consumers participate in such events to win prizes and gifts. For Example, contest to design the label for a company, and the best label would be featured in the first 100 products.
- Container Premium: These include special containers or boxes which are used to pack products, which could be reused by the customers. For example, Jars of cake, milkshakes can be used in kitchen to store spices, milk, etc.
- Packaged Premium: In this, the gift is kept inside the pack. The gift is kept in limited products and the excitement to win the gift induces people to buy the products and thus, increasing sales. For example, silver coins in the soaps.
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