Page 174 - DMGT507_SALES AND PROMOTIONS MANAGEMENT

Sales and Promotions Management

Notes 2. When the inventory holding costs are high.
3. When the product is seasonal.
4. When the product is likely to go out of fashion quickly.

Choice of Market Areas

Strong brands are good traffic builders and when such brands are inexpensive and low bulk to
transport and store, there is considerable forward buying and diversion in non-deal areas by the
trade. Sales promotions of similar value should be announced at the same time everywhere.
Higher inventory risk would require that promotions be developed for separate markets. Excess
product stocks from one market can be shifted to another market with more sales potential.

Promotion, Timing, Duration and Frequency

When the product or brand inventories are less than normal in trade channels, the objective of
the promotion would be to build inventories. When the inventories with the traders are high,
then the objective would be to clear the inventories. It is inadvisable for the producer to announce
a promotion, when the retailer shelves are full with the competitive brand, because the promotion
is quite likely to prove unprofitable. If the product use were linked to weather conditions, then
this factor would affect the consumer demand and the timing of promotion.

The duration of consumer promotion should be such that a larger percentage of customers get
exposed to the promotion offer. In case of some product categories, interval between two
successive purchases may give an idea about the duration. Low-involvement products are usually
purchased more frequently and hence the duration of the deal for this category can be shorter.
In case of high-involvement category products, to induce a sense of urgency, the duration of the
offer can be short. To attract the second wave of customers, it may prove to be advantageous to
announce the extension of the deal period.

Frequency of promotion depends on competitive situation, deal sensitivity of customers, the
interest of the trade, and the complexity of the promotion offer. Very frequent promotions of
high-involvement category products may create negative impressions about the quality and
price relationship of the product. Trade deals often become necessary to motivate dealers to
arrange displays and participate in contests.
Rate of Discount, Terms and Conditions

What should be the minimum level of benefit in terms of price-cut or value addition that would
attract the attention of the target customers to induce the desired change in purchase behaviour?
Planners have to ascertain the j.n.d (Weber's Law) and answer this question.
A smaller discount figure on high priced products would translate in high monetary figure and
would appear significant enough to attract customer attention and is likely to influence purchase
behaviour. In case of low priced products, a higher percentage figure can be associated with the
purchase of multiple units of the product. Generally, the price elasticity of low priced products
is high because consumers do not perceive much difference between brands, and do not mind
switching to another brand. Customers can also stock more units of low priced and low bulk
products in response to promotion offer. Higher discounts should be considered to achieve
large short-term sales of low priced products. Strong brands in general do not involve any
inventory risk, serve as traffic builders, and would not require higher discounts.
In case of trade promotion, the producer may specify the minimum purchase value or the
quantity of product to avail the benefit of promotion. Payment terms may be specified, or the

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