Sales Promotion Effect On Sales Marketing Essay

ABSTRACT:

This article considers whether sales promotion effect on the sales of product is increasing among other competing brand of same good. This article also demonstrate existence of sales promotion effect in packaged good product, how it can be processed, modeled, and its importance in assessing the effectiveness of sales promotion. This study is about the effects of sales promotion on sales of product in soap industry (LUX).Analytical results show that if the sales promotion increased then it increased the demand of product. Hypothesis is tested on five hundreds respondents of several cities of Pakistan and applies multiple regression tests on these data. Result from this study shows that the sales of the product has a strong relationship with the price of product, its membership card, its package , point of purchase, rewards programs and discount factor.

KEY WORDS: Sales promotion, purchase acceleration, generic advertisement

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INTRODUCTION:

Sales promotions such as temporary price reductions are frequently used by managers to stimulate sales in the short run. Marketing academics and practitioners tend to rely on price elasticity to summarize sales promotion e¬€ects. The proper theoretical and managerial interpretation of sales promotion e¬€ects is obtained by expressing e¬€ects in terms of absolute sales. (Heerde,2005).Despite the fact that sales promotion have long been employed in marketing practices and research automatically a clear understanding of the impacts of sales promotion on sales brand preferences continue to evade brand manager and scholar salike.on average sales promotion do not effect post promotion brand preference. However depending upon characteristics of the sale promotion and the promoted product, promotion can either increase or decrease preference a brand (Devon DelVecchio, 2006). There is investigation for the effects of consumer sales promotion on automobile sales, the largest dollar- volume durable-goods category in retailing. Between 1985 and 1987, the domestic automakers offered major year-end promotions on automobiles, using low-rate financing and cash rebates to stimulate sales. The 1986 and 1987 promotions were also followed by large post-promotion drops in sales. (Thompson, Noordewier, 1992).While researchers have examined the impact of retail promotions on purchase acceleration in the past; the distinction between time-limited and time-independent promotions has not been made in this context. It was found that promotions of short duration (time-limited), such as store coupons, accelerate purchases, whereas promotions of longer duration (time-independent), such as manufacturer’s coupons, have no such impact. The impact of semantic cues was examined highlighting the time-limited nature of promotions (such as ’10 Hours Only Sale’), impact on purchase willingness, intent to search further for deals and attitudes towards the deal. (Praveen Aggarwal 2002)

Usman Tariq Unsari, Extended Diploma in Strategic Management and Leadership, Guildhall College, UK.

Email: [email protected] Cell: +44 7931161045

There is some work which shows the foundation essential repeated price promotions, or sales, for products by supermarket retailers. By powering a larger number of discounted products within a particular category, retailers are able to attract a su¬ƒcient number of customers to onset the e¬€ect of lower margins on sale items by selling more high-margin items. Hypotheses concerning the rationale and e¬€ectiveness of sales are tested by estimating econometric models that describe (1) the number of sales items per store, (2) the depth of a given sale, and (3) promotion e¬€ectiveness on store-level demand. (Timothy J. Richards, 2006)

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Lower price brands promote more effectively. More precisely, it predicts that cross promotion effects depend on two components of brand positioning in the price/quality quadrant. Second, cross promotion effects between two brands depend on their distance in the price/quality quadrant. The data reveal that in the orange juice category lower quality /lower price brands generally promote more effectively than higher quality/higher price brands. (Promotion, Brand Choice, Brand Positioning, Loss Aversion, Reference-dependence). (Bronnenberg, Wathieu, 1996)

The use of price promotions to stimulate brand and ¬rm performance is increasing. How (i) the availability of longer scanner data time series, and (ii) persistence modeling, have lead to greater insights into the dynamic e¬€ects of price promotions, as one can now quantify their immediate, short-run, and long-run e¬€ectiveness. (Marnik G. Dekimpe, 2005).Promotions can indeed significantly increase category expenditure; their impact varies considerably from category to category. Operating in a category management environment, category revenue is an important determinant of category profitability. Second, it is total category revenue, not share that drives category profitability. (William P. Puts is, Jr, 1998) The green shelf signs read “Super Saver” and displayed the brand’s name and the promoted price. After three months of promotion manipulation in the store, students’ evaluations of the brands were remeasured. (Davis, Inman, McAlister, 1992)

To understanding consumer choice behavior as consumer expectations of price study reflects effects of price and pro- motion on consumer choice behavior. Our reference effects model suggests that too much promotion and price discounting may adversely affect brand choice behavior. Though the consumer’s utility for purchasing brand is simply a function of price, promotion, and reference effects for brand alone, the consumer’s response toward brand is a function of price, promotion, and reference effects for all available brands. Promotion like the promotional reference point, reference price is determined by the consumer’s exposure to marketing activity by the brand correlation between price and promotion. . (James M.Latin and Randolph E.Bucklin 1989)

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Quality levels are high and margins low in markets with unstable shares or unconcentrated competitors.(Competition; Marketing Strategy; Econometrics; Industry Structure) formulates and solves the theoretical marketing mix model. Price-cost margins vary with product quality levels, promotional intensity, and industry structure. First, consider the relationship between quality and price-cost margins. Second, price-cost margins are related to promotional intensity, like quality, through the price elasticity Competitive and Market Conditions. Product quality varies with price-cost margins and competitive and market Conditions, Price Cost Margins. Competitive and Market Conditions., Market Growth e.g. four-year growth rate of the served market .First, high quality is associated with a high price-cost margin. This positive quality- margin relationship implies that high prices signal high quality: For high quality products, prices and margins are correspondingly high, so that sellers may use prices to convey information about product quality to buyers, and buyers can correctly impute quality from price. Third, high promotional intensity is associated with a low price-cost margin. Product quality is also low in markets with large competitors’ market shares. (Gregory S. Carpenter, 1987)

“Do Higher Prices Signal Higher Quality,”(Gerstner, Eitan 1985).”The Price Perceived Quality Relationship experimental Evidence,”(Peterson, Robert A. 1970).There is reality of flexible consumption rates in packaged goods products, however this trend can be modeled, and its significance in assessing the efficiency of sales promotion.It denote an incidence, choice and quantity model, where category consumption varies with the level of household inventory. Way in two different functions to relate consumption rates to household inventory, and estimate the models using scanner panel data from two times product categories. (Kusum L. Ailawadi, Scott A. Neslin, 1998).The empirical analysis suggests that different segments of consumers place varying emphasis with regard to economic bene¬ts, psychic bene¬ts, effort costs, and substitution costs. A further examination of the derived segments with respect to consumer correlates such as psychological, attitudinal, behavioral, and demographic characteristics reveals that coupon-related consumer characteristics, rather than demographics, exhibit signi¬cant and meaningful differences across these segments. Implications of the segment-level analysis for evaluating coupon drops and managing promotional expenditures can also be measured. (Ramaswamy, Srinivasan, 1998).Analytical results show that if the bene¬ts from generic advertising from increased demand are outweighed by the costs from lower product differentiation then high-quality producers will not bene¬t from generic promotion.(Crespi,Marette,2002). There are presentation frameworks for classifying both sales promotions and marketing contexts, which can help an understanding of which sales promotions might work in particular NFP contexts. Then focus on a septic type of sales promotion, which represents a potentially valuable and creative tool for NFP marketers, the sales promotion competition. It details the bene¬ts that sales promotion competitions can offer NFP marketers, and also contributes some strategy to support in operating them efficiently. (Sue Peattie, 2003). The use of expiration dates has experienced similar growth. In 1987, 26% of all coupons were issued without an expiration date. We suggest that this change in the typical coupon format has induced a change in many consumers’ coupon redemption behavior. (Davis, Inman, McAlister, 1994).How many brands there are in the category? Price cut and pure price cut. How the average increase in brand sales resulting from these promotions can be explained by category characteristics. Price cuts and features or displays are often combined featured price cuts and displayed price cuts. (Narasimhan, Neslin, Sen, 1996).Rotating in difference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model. It is capable of nesting the standard legit model, and is similar to a nested logic model when there exists clusters of brands of like quality e.g. Quality; Asymmetric Switching; No homothetic Utility; Legit Models.(Allenby,Rossi,1991). The price model is estimated on 28 brands across four product categories. The results show a specific asymmetric pattern of price competition. Higher-price, higher quality brands steal share from other brands in the same price-quality. However, lower-price, lower-quality brands take sales from their own below brands, but do not steal significant share from the above e.g. Promotional Analyses, Market Structure Models, Price Competition.(Blat berg ,Wisniewski,1989).

THEORATICAL FRAMEWORK:

The growing importance of sales promotions in many categories led researchers to start evaluating their ways in which sales promotions can affect sales: brand switching, repeat purchase, purchase acceleration and category expansion. In ignoring the potential for the category-expanding effect of sales promotion

“What Do We Mean by Promotions?”

FMCG promotions are divided into those directed at the trade (e.g. manufacturers offering a price reduction to a retailer), and those directly targeted at the consumer. In the research discussed here, we consider only consumer promotions, including “display” (inshore displays and point-of-purchase advertisements), “feature” advertising (flyers distributed at point-of-sale and in local newspapers) and temporary price reductions

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Sales promotion is one of the four aspects of promotional mix. (The other three parts of the promotional mix are advertising, personal selling, and public relations) Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability.e.g contests, point of purchase, displays rebates ,free travel, such as free flights. Sales promotions can be directed at the customer, sales staff, or distribution

Channel members (such as retailers). Sales promotions targeted at the consumer are called consumer sales promotions. Sales promotions targeted at retailers and wholesaler called trade sales promotions.

THEORATICAL MODEL:

Membership

Card

0.062

SALES

PROMOTION EFFECT

ON SALES

Price-pack deal

0.168

Point-of-purchase

Displays

0.127

Loyal reward program

0.305

Discounts

0.199

Price deal

0.066

EQUATION FOR SALES PROMOTION:

SALES PROMOTION= α + β1 (Price deal) + β2 (Membership card) + β3 (Price pack deal) + β4 (Point of purchase) + β5 (Loyal reward programs) + β6 (Discount) + Error

HYPOTHESIS DEVELOPMENT:

Ho: There is a direct relationship between sale promotion and sales.

Or

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Sale promotion affects the consumer behavior towards product sale.

HA: There is no relationship between sale promotion and sales.

There are six variables which are use in the model of this research work. In the following line variables are explained to understand the model for better approach.

Price deal: A temporary reduction in the price, such as save Rs 2 per pack.Price is a factor that effect the behavior of consumer.Whenever price reduces it increased the demand of product.

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Loyal Reward Program: Consumers collect points, miles, or credits for purchases and redeem them for rewards. Two famous examples are Pepsi Stuff.All the people of world want to purchase from that store or industry that gives reward, and good response to them.

Price-pack deal: The packaging offers a consumer a certain percentage more of the product for the same price (for example, 25 percent extra). Pack is an attractive thing in promotion.

Membership card: The Smart Loyalty AG system supports, directs and enhances the turnover.

Coupons have become a standard mechanism for sales promotions.

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Point-of-purchase displays: Extra sales tools given to retailers to boost sales. When a company pays attention to their retailer and provide them facilities then retailer also do good job in response.

Discounts (also called functional discounts): These are payments to distribution. Channel members for performing some function.Quantity discount to costomer etc.

SAMPLING OF THE RESEARCH WORK:

To evaluate the theory describe in this last section it is necessary to describe data collection method and sources. Data of six variables at the time of analysis gathered from different cities, university students, and villages of Pakistan. The collection period of the data is one month. Sample size is five hundred and applies multiple regression tests on these data. The results show that sales promotion and other variables are fit for this research work and good relationship with each other.

DATA ANALYSIS AND INTERPRETATION:

The structure of the sales promotion is identified by examining the pattern of competitive brand cross price effect. The purpose of this section is to analyze and interpret the data. The model shown in the equation is tested on the brand of soap industry LUX in Pakistan. Analysis is as given

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Table.1 Descriptive Statistics

N

Minimum

Maximum

Mean

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Std. Deviation

Sale promotion

422

1.00

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2.00

1.3009

.45921

Price deal

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422

1.00

2.00

1.2038

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.40329

Membership card

422

1.00

2.00

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1.3104

.46322

Price pack deal

422

1.00

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2.00

1.1777

.38273

Point of purchase

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422

1.00

2.00

1.3863

.48747

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Loyal reward

422

1.00

2.00

1.1943

.39614

Discount

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422

1.00

2.00

1.1635

.37027

When data was tested on 422 respondent outputs of the results are mentioned in table 1.There views about the sale promotion as dependent variable are the means as 1.3009 and deviate by .46.Price deal as 1.2 and deviated by .40, membership as 1.3 and deviated by .46,price pack as 1.17 and deviated by .38, and so on. This result shows that the variance for Sales promotion is not so high. More respondent are close to the means on all the variables.

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Table.2 Correlation

Sale promotion

Price deal

Membership card

Price pack deal

Point of purchase

Loyal reward

Discount

Sale promotion

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1

.066

.062

.168

.127

.305

.199

Price deal

1

.080

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We tackle each chunk with precision, keeping quality consistent and deadlines on track from start to finish. Whether it’s a dissertation or a multi-part essay, we stay in sync with you, delivering top-notch work every step of the way.

.103

.239

.257

.269

Membership card

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1

.144

.299

.111

.174

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Price pack deal

1

.013

.085

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.314

Point of purchase

1

.287

.215

Loyal reward

1

.269

Discount

1

The Pearson correlation matrix obtained for six variables is shown in table 2.when price reduce by .066 then it increase sales of the product by .066 which is less efficient as compare to another. Maximum effects on sales by loyal reward by .305.discount by .199.while others are less closely to the importance. From the results; we see that the correlation of the price deal is positive with sale promotion that is .066, membership card .062; pice pack .168, point of purchase .127, loyal reward .305, and discount .199.all variables have positive correlation with sales promotion.

Table.3 Model Summary

R

R Square

Adjusted R Square

Std. Error of the Estimate

.351(a)

.123

.110

.43313

To test the hypothesis multiple regression analysis was done. The results of the regressing the six independent variables against sales promotion can be seen in table.3.the first table in model summary output list the six independent variables that are entered into the regression model and R (0.351) is the correlation of the six independent variables with the dependent variable.

In the model summary table ,the R Square (0.123) ,which is the explained variance, is actually the square of the multiple R (351)2

Table.4 Coefficients

Standardized Coefficients

T

Sig.

Beta

Sale promotion

5.693

.000

Price deal

-.051

-1.040

.299

Membership card

-.010

-.208

.835

Price pack deal

.122

2.487

.013

Point of purchase

.042

.829

.407

Loyal reward

.271

5.436

.000

Discount

.094

1.825

.069

The next table titled as Coefficient helps us to see which among the six independent variables influence most the variance in Sales promotion effects on sales. If we look at the column of Beta under standardized coefficients, we see that the highest numbers in the beta are 0.271 which is significant at .000 levels, and0.122 of price pack which means if more efforts on these two will increase the sales.

Table.5 ANOVA

Sum of Squares

df

Mean Square

F

Sig.

Regression

10.926

6

1.821

9.707

.000(a)

Residual

77.854

415

.188

Total

88.780

421

The ANOVA table shows that the F value of 9.707 is significant at 0.000 levels. We sure model is significant and best fitted. In the df (degree of freedom) in the same table the first number shows the number of independent variables, the second number 415is the total number of complete responses for all the variable in the equation.

What the result means is that the 12% of the variance of sale promotion has been significantly explained by the six variables. It means there is a positive relationship of dependant variable with independent variable. So we accept the null hypotheses and reject alternative.

REFFERENCES

Bart J. Bronnenberg Luc Wathieu , 1996, Asymmetric Promotion Effects and Brand Positloning,Marketing science,15, No. 4,379-394

Chakravarthi Narasimhan, Scott A. Neslin, & Subrata K. Sen,1996, Promotional Elasticities and Category Characteristics, Journal of Marketing ,60,17-30

Devon DelVecchio ,2006, the effect of sales promotion on post-promotion brand preference Journal of Retailing, 82,203-213

Gregory S. Carpenter, 1987, the impact of marketing mix relationship and industry structure, M arketing Science, 6, No. 2, 208-221.

Greg M.Allenby, Peter E.Rossi, 1991, Quality Perceptions and Asymmetric Switching between Brands, Marketing Science, 10, No. 3,185-204.

Gerstner, Eitan 1985, “Do Higher Prices Signal Higher Quality,” Journal of Marketing Research, 22, 207-215.

Harald J. van Heerde, 2005, Supplement elasticities with absolute sales e¬€ects, Appl. Stochastic Models Bus.Ind.,21,397-402

James M. Lattin and Randolph E. Bucklin, 1989, Reference Effects of Price and Promotion on Brand Choice Behavior, Journal of Marketing Research, 26, No. 3, 299-310

John M Crespi, Stephan Merette, 2002, Generic advertising and product differnciation, Amer.J.Agr.Econ, 84(3), 691-701.

Marnik G. Dekimpe, 2005, measuring short-and long-run promotional e¬€ectiveness on scanner data using persistence modeling, Applied Stochastic Models Business and Industry, 21,409-416

Patrick A. Thompson, Thomas Noordewier, 1992, Estimating the Effects of Consumer Incentive Programs on Domestic Automobile Sales, Journal of Business & Economic Statistics, 10, No. 4, 409-417.

Peterson, Robert A. 1970, “The Price-Perceived Quality Relationship: Experimental Evidence,” Journal of Marketing Research, 7, 525-538.

Praveen Aggarwal, 2002, Purchase acceleration effects of time-limited promotions, Journal of consumer behavior, 2, 4,393-403.

Robert C. Blattberg and Kenneth J. Wisniewski, 1989, Price-Induced Patterns of Competition, Marketing Science, 8, No. 4,291-309.

Scott Davis, J.Jeffrey Inman, and Leigh McAlister, 1994, Do Coupon Expiration Dates Affect Consumer Behavior? Journal of Marketing Research,31,423-428

Scott Davis, J.Jeffrey Inman, and Leigh McAlister, 1992, Promotion Has a Negative Effect on Brand Evaluations or Does It? Additional Disconfirming Evidence, Journal of Marketing Research, 29, 143-148.

Timothy J.Richards, 2006, Sales by Multi-Product Retailers, Managerial and Decision Economics, 27,261-277.

William P. Puts is, Jr,1998, Are Brand Promotions Just a Zero-Sum Game – or Can They Increase the Size of the Pie?, Business strategy review,9,issues 3,21-32

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