Sales Promotion Meaning: As Defined by American Marketing Association

Everything you need to know about the meaning of sales promotion.

Sales promotion has been defined as – “a direct inducement that offers an extra value or incentive for the product to the sales force, distribution, or the ultimate consumer with the primary objectives of creating an immediate sale.”

Sales promotion is a set of marketing activities undertaken to boost sales of a product or service, by persuading or giving incentive to a potential customer, to buy that product or service.

Meaning of Sales Promotion – With Definitions Given by American Marketing Association and Council of Sales Promotion Agencies

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According to American Marketing Association, “sales promotion refers to those activities other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as – display shows and exhibitions, demonstrations, and various other non-recurrent selling efforts not in ordinary routine.”

According to Council of Sales Promotion Agencies, “Sales promotion is a marketing discipline that utilizes a variety of incentive techniques to structure sales-related programs targeted to consumers, trade, and/or sales levels that generate a specific measurable action or response for a product or service.” These definitions suggest that sales promotions are short-term incentives to encourage purchase or sale of a product or service.

Sales promotion involves some type of inducement that provides an extra incentive to buy. This incentive is usually the main element in a promotional program. For example price reduction, coupons, contests, rebate, money-back, extra amount of a product, free sample of the product. Sales promotion can also provide an inducement to marketing intermediaries such as wholesalers and retailers.

Sales promotion is essentially an accelerating tool, designed to speed up the selling process and maximize the sales volume. Sales promotion programs encourage customers and dealers to take immediate action. This will shorten the purchase cycle. Sales promotion attempts to motivate consumers who have not responded to advertisement. Sales promotion activities can be targeted into two categories – consumer-oriented and trade- oriented promotions.

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Consumer-oriented sales promotions are part of a promotional pull strategy. They work along with advertising to encourage consumers to purchase a particular brand and thus create demand for it. Trade-oriented sales promotions are part of push strategy designed to motivate distributors and retailers to carry a product and make an extra effort to push it to their customers.

Marketers have come to recognize that advertising alone is not always enough to move their products into the hands of consumers. Companies also use sales promotion methods targeted at both consumers and the wholesalers and retailers that distribute their product to stimulate demand. Advertising appeals to the mind and emotions to give the consumer a reason to buy sales promotion appeals more to the pocket and provides an incentive for purchasing a brand.

Advertising tells what products to buy and sales promotion tells when to buy. Sales promotion programs oriented towards both consumers as well as trade. Integrated marketing communications programs include consumer and trade promotions that are coordinated with advertising, direct marketing, and publicity/public relations campaigns as well as sales force efforts.

Meaning of Sales Promotion

Different sales promotion methods include distribution of free samples, offering concession and discounts, distribution of free gifts, issue of coupons, organising competition fair exhibition, trade shows and so on. Selecting the appropriate sales promotion tool depends upon the objectives of the firm.

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Consumer promotion tools are used to boost short term sales, to introduce a product or to build market share. Sellers use trade promotion tools to encourage retailers to carry new items and more inventories, to give the product self-space, to promote the product and to push the product to customers.

Sales promotion tools are used with advertising, personal selling or other promotion mix tools.

Sales promotion is a paid, non-personal form of the marketing communication. It involves those marketing activities other than personal selling, advertising, and publicity that stimulate the consumer purchasing and dealer effectiveness. Sales promotion activities support both advertising and personal selling. They are not directed at large audience like the advertising. These activities have short-term goals of increasing sales in a short period.

These activities are used as a temporary offer to the customer in order to stimulate an immediate response. Trade shows, exhibitions, couponing, sampling, premiums, demonstrations, discounts and allowances, displays, etc. are included in the sales promotion activities. Manufacturers use these techniques intending intermediaries/dealers ‘push’ and consumers ‘pull.’

Manufacturer uses consumer oriented sales promotions as well as trade oriented sales promotions towards the intermediaries. In the retailing context, only consumer oriented sales promotions are applicable, i.e., sales promotion techniques used by the retailers to attract more number of ultimate consumers.

Meaning of Sales Promotion (with Factors)

A simpler way of viewing sales promotion is to say that it means special offers. Special in the sense that they are extra as well as because they are specific in time or place- offers in the sense that they are direct propositions, the acceptance of which forms a deal. As in most aspects of marketing, the rationale of sales promotion is to provide a direct stimulus to produce a desired response by customers. It is not clear, however, what the distinctions are between sales promotion and advertising, personal selling, and publicity.

Promotional advertising is the communication of ideas about a firm and its products through the standard commercial media. Some of the content of advertising messages may well be sales promotion in character. Public relations involves the installation and maintenance of mutual understanding between a firm and all who are likely to come into contact with it. Very little of the make-up of public relations concerns sales promotions, although it can spread the news of a successful scheme by insuring that it gets editorial mention, for instance.

Quite often, however, as in the case of fairs and house journals, the borderline between sales promotion and public relations becomes obscure. Another area where the boundary is not so clear is that of involving product and pricing tactics. Suppose that Nestle decides to tape three packs of their Maggie Noodles canned biscuits together and sells them for a price slightly cheaper than three sold individually.

Is this a banded multipack special offer and therefore promotional? In order or is it just an example of a giant-sized economy pack and therefore a product or packaging tactic? In order to sort out which it is, the question has to be asked “Is it intended to be a permanent feature of the manufacturer’s product policy to have the family pack as a component of the product?” If it is not, it is a sales promotion scheme.

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The same sort of problem comes up when studying strategies run by firms in service industries. If a hotel offers cut-price accommodations at off peak-times of the year, is it a feature of the hotel management’s pricing policy or is it a promotional tactic? If the hotel management provides price reductions on tickets to local theatres for their guests, is it part of the product or is it a device to attract customers for a limited period only?

Again, the answer can only be given once the question about permanence is asked. Although industries such as food, drink tobacco, car, soap and detergent, pharmaceutical, domestic appliance, and oil are the best- known users of sales promotion, they are by no means the only ones. The aircraft manufacturing, ship-building, engineering, chemical, and retailing industries are also great sales promoters, even though they may not all be great advertisers.

Sales promotion is not just confined to consumer goods, although it appears to be more widely used with consumer goods as the casual observer seldom comes into contact with capital goods firms and so tends to think that these techniques are confined to firms making goods sold to the ultimate consumer. There is little doubt that a growth of sales promotion has been quite substantial during recent years. On an average 20-30 per cent of typical company’s promotional budget give towards sales promotion.

There are several possible factors that may have contributed to this dramatic growth:

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1. There is a greater acceptance by top management of sales promotion as a sales-generating device.

2. Product managers have learned to implement sales promotion as part of their overall product strategy.

3. Inflation and other economic factors have made the appeals of sales promotion more attractive to the average consumer.

4. There is increased pressure on management to show a faster return on the promotional investment, which sales promotion can do.

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5. These same factors have brought greater pressure from middle agents for sales promotion deals.

6. The increased competitive situation has forced companies to look for new advantages in the form of sales promotion.

Many forms of sales promotion exist. Consequently, it is virtually impossible to establish a standardized set of reasons or objectives that apply to all sales promotion. While the intent of running a Rupees-off coupon in a local newspaper is intended to stimulate product purchase, free marketing research provided to a wholesaler may have an entirely different purpose. Suffice it to say that the ultimate objective to all sales promotion is to positively influence sales either directly or indirectly.

Yet there is a benefit in delineating the advantages sales promotion can offer the marketing manager. Perhaps the greatest strength of sales promotion is that it can be effectively, employed by businesses of all sizes. Because sales promotion devices can be relatively inexpensive and easily customized, sales promotion can be used by the smallest of marketers. For example, a small gift shop can easily employ gift vouchers, free samples, special offers, or double-stamp days if they see fit. Businesses is their creative skills in designing an appropriate sales promotion vehicle.

A second advantage in using sales promotion is its effectiveness in highly competitive market situations. Today, there are extensive choices available to each buyer, not only between brands of the same type of product, but between different types of products providing the same sort of satisfaction.

Competition works itself out in the market place and particularly at the point of sales where the final deals are made and the act of exchange takes place. It is at the point of sale that a homemaker may actually made her decision on which toilet paper to buy, or a managing director decides whether to accept the terms and conditions of sale of a multi thousand-pound deal involving capital equipment that will be consumed over many years.

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The third advantage for sales promotion is closely aligned with the tremendous increase in capital investment found in most industries. Because so many companies are capital intensive today, it is critical that economies of scale be reached in production as soon as possible. As a result, very high levels of production have to be maintained throughout the life of the product. Unfortunately, with increased competition and saturated markets, it is much more difficult to find outlets for these products.

Sales promotion has provided a partial solution to this dilemma in two ways. First, it has increased product turnover rates, thus improving the cash flow problem. Second, it has opened new outlets for these surplus products. For example, companies such as Titan and Phillips have found brand new markets for their products by offering them to companies as part of their employee incentive programs. As a result, thousands of watches and music systems have been offered as rewards for exceptional service or as prizes for sales contests.

A fourth justification for sales promotion is when an oligopolistic market situation exists. In this situation, just a few companies exist in the market, but competition is very intense between them. In the developed countries, conditions of oligopoly apply in industries such as oil, motor vehicles, aerospace, electrical and chemical products, processed foods, and toiletries, and also in the brewing industry banking, retailing and transportation. In all these industries, there is widespread use of sales promotion techniques.

In the oil industry, there are the multitude of schemes offered through service stations, special contract terms negotiated with large users industry of fuel oil, free map and guide services, and so on. In the car industry, trade-in allowances on secondhand cars are customary as is plenty of discounting activity just before the introduction of new models. On the computer side, promotion takes the form of special rental arrangements and the provision of tailor-made software.

Banking has become active in sales promotion through techniques such as free advice to customers, competition in deposit rates, money market rates, bank charges, and the provision of special offers to students, working women, and the elderly.

Why is sales promotion so prevalent in industries that are oligopolistic? The reason is not merely because of the size of each firm, but for this other good reason as well: no firm operating under these conditions likes to compete on price. If price competition arises, every firm is adversely affected because all other firms in the industry have roughly the same costs and are forced to match the price reduction to maintain their market share.

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One major competitor determining when price changes are to occur-price leadership is normal practice, even if there is no formal price conspiracy in operation. Thus if they believe they have some fairly permanent advantage over their rivals that would make it difficult for them to follow.

Instead of price competition, rivalry takes the form of trying to increase business by expanding the share of market by better distribution, service, salesmanship and promotion. This is particularly true of industries where the total market is more or less static and saturated. It is when the battle is joined for replacement or repeat sales, as well as for competitors’ customers, that the sales promotion war really heats up. This also effectively prevents newcomers from breaking into the market easily on a large scale because they cannot afford the selling costs.

As there are only a few firms in an oligopolistic industry for each participant to study, once a competitor’s weaknesses become known its rivals are able to exploit them by skilful promotional methods. Then, the promotional battle tends to escalate automatically, especially when budgets are set using competitor’s expenditures as a base which must be exceeded.

Promotional campaigns can be specifically aimed at competitor’s weaknesses, and with much greater effectiveness if an industry consists of only a few firms. A fifth justification for sales promotion revolves around the perceived high risk the customer associates with committing resources in the purchase of a product.

Although there is little evidence that sales promotion can change attitudes, there is evidence that most consumers see individual sales promotional schemes as quite distinct phenomena from the products with which such schemes are associated. That is to say, brand image is affected neither positively nor negatively by the value of a scheme to the buyer. It is simply an extra inducement to buy-its function is to change behaviour by providing a stimulus to buy.

Risk felt by potential customers is most likely to be present in the buying situation when:

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1. The product is new and untried.

Sales promotional remedy—sampling, de-monstration, trial run, guarantee of benefit, free trips for customer to visit the factory or other users.

2. Benefits will not be felt or completed for some time.

Sales promotional remedy—delayed invoicing, premium offers, linked services.

3. The product on its own is not quite perceived to be adequate value-for-money.

Sales promotional remedy—premium offers, couponing, collection schemes, and contests.

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4. The buyer is afraid that new products will be launched thus rendering the one bought obsolete before it is fully depreciated.

Sales promotional remedy—leasing agreement with discounts for trading-up, guaranteed buy-back arrangements.

5. The product will not be compatible with the buyer’s consumption system.

Sales promotional remedy—tailor-made package deal, training facilities, container premiums.

The final advantage in sales promotion is the existence of a large number of marginal customers. Marginal customers are those buyers who are almost at the point of purchase but not quite. Every other element of the proposition put to them has been assembled and still the deal has not quite been completed, just an extra push will do it. Sales promotion schemes provide a last minute and specific inducement that is possible to introduce without disturbing any other element of the deal.

To summarize, sales promotion is no longer viewed as just a supplement to advertising and personal selling. In many instances, sales promotion is the major thrust of the promotional effort. Thus much of sales promotion is aimed directly at influencing behaviour. It does so by providing a last-minute stimulus to act in one way rather than another.

It does not work upon a customer’s felt need for a product in itself, neither does it attempt to argue a case; instead, it offers a direct inducement to act by providing extra worth over and above that represented by the permanent bundle of values built into the product at its normal price. It is essentially part of the deal because, by definition, these temporary inducements are offered at the time and place the buying decision is made.

They are therefore the last set of influences brought to bear upon that decision, having left behind not only advertising, but also personal sales techniques and packaging as major factors in the decision. This means that promotional inducements are powerful simply because they are the most recent of all influences; they do not need to be remembered; they are direct in their appeal and in the proposition that they make; and above all they seek a favourable response by demanding it.

The average consumer is always looking for a deal. This is true in respect to all phases of our lives, including jobs, products, and relationships. Sales promotion is effective in attaining that something-for-nothing benefit we are constantly seeking.

It appears that sales promotions tend to be most effective when they are offered as a temporary inducement. Even the most naive consumer becomes skeptical when a retail outlet runs a year-long sale. Thus sales promotions should be offered sparingly and for short durations of time.

Meaning of Sales Promotion: As Defined by American Marketing Association

Sales promotion is a set of marketing activities undertaken to boost sales of a product or service, by persuading or giving incentive to a potential customer, to buy that product or service.

According to American Marketing Association (AMA) sales promotion can be defined as, “sales activities that supplement both personal selling and advertising and coordinate them and help them effectively, through displays, shows and expositions, demonstrations and other non-recurrent selling efforts not in the ordinary routine.”

The definition implies that sales promotions are different from advertising, personal selling and publicity but complement personal selling and advertising. For instance, advertising and personal selling can be used to inform potential customers about the incentives offered for sales promotion. Thus, sales promotion consists of all activities other than advertising and personal selling that helps to boost sales of a particular commodity.

Sales promotion adopt short term, non-recurring methods to increase sales. These offers are not available to the customers throughout the year and are generally found during festivals, end of the seasons and some other occasion.

Sales promotion is important for producers and manufacturers because it helps to increase sales in a competitive market and thus, increases profits. It also helps to introduce new products and to communicate new uses of an existing product to the customers. It is often used to maintain sale of seasonal products like air conditioners, refrigerators, cooler etc., by offering off-season discount. Sales promotion measures have also become essential to retain the market share of the seller, in the era of intense competition.

Sales promotion is important for consumers as well because they get the product at a cheaper rate. Sales promotion also enables the consumers to get all information about the quality, features and uses of different products, helping them to raise their standard of living. By exchanging their old items, they can use latest items available in the market.

Meaning of Sales Promotion

Sales promotion is a set of marketing activities undertaken to boost sales of a product or service, by persuading or giving incentive to a potential customer, to buy that product or service.

Meaning of Sales Promotion

Marketing communications is one of the four major elements of the company’s marketing mix. Marketers must know how to use advertising, sales promotion, direct marketing, public relations, and personal selling to communicate the product’s existence and value to the target customers.

The communication process itself consists of nine elements – sender, receiver, encoding, decoding, message, media, response, feedback, and noise. Marketers must know how to get through to the target audience in the face of the audience’s tendencies toward selective attention, distortion, and recall.

Developing the promotion program involves eight steps. The communicator must first identify the target audience and its characteristics, including the image it carries of the product. Next, the communicator has to define the communication objective, whether it is to create awareness, knowledge, liking, preference, conviction, or purchase. A message must be designed containing an effective content, structure, format, and source.

Then communication channels both personal and non-personal must be selected. Next, the total promotion budget must be established. Four common methods are the affordable method, the percentage-of-sales method, the competitive- parity method, and the objective-and-task method.

The promotion budget should be divided among the main promotional tools, as affected by such factors as push-versus-pull strategy, buyer readiness stage, product life-cycle stage and company market rank. The marketer should then monitor to see how much of the market becomes aware of the product, tries it, and is satisfied in the process. Finally, all of the communications effort must be managed and coordinated for consistency, good timing, and cost effectiveness.

Modern marketing calls for more than just developing a good product, pricing it attractively, and making it available to target customers. Companies must also communicate with their customers and what and how they communicate should not be left to chance. For most companies, the question is not whether to communicate, but how much to spend and in what ways.

“Promotion is the co-ordination of seller’s aim to set up channels of information and persuasion to facilitate the sales of goods/services or acceptance of an idea”.

“It includes all those activities which are aimed at creating and stimulating demand”

In our daily life we all are exposed to various tools of promotion aiming at communicating one thing or the other to us.

For our convenience, all those promotional tools can be categorised in five major components, constituting the promotional mix – advertising, sales promotion, public relations, personal selling and direct marketing.

Promotion serves three essential roles – it informs, persuades, and reminds prospective customers about the company and its products. Ultimately, using all these three in various ways, the company tries to modify the behaviour of the consumers to suit its objectives, viz., to buy its products/services.

Meaning of Sales Promotion (With Important Elements)

Sales promotion is an action which increase the volume of sales. In a broad sense, the term ‘sales promotion’ refers to promotion because all the activities of personal selling, publicity, advertising and sales promotion lead to the enhancement of sales.

Sales promotion aims directly at inducing purchasers to buy a product. It involves demonstrations, contests, prices-off, coupons, free samples, special packaging and money refund offers. Sales promotion activities are designed to encourage resellers and sales people to sell the product.

It is different from personal selling and advertising in the sense that sales promotion is non-recurrent in nature and is for a short period. This type of promotion mix is complementary to the other kinds of promotion mix.

The term ‘sales promotion’ has become widely accepted as covering special promotional schemes, usually of limited duration, at the point-of- sale or point-of-purchase. Such schemes were formerly referred to as – ‘merchandising’, and the old term is still used in some quarters, for example by the sales departments of television companies.

However, with the growing influence of the Institute of Sales Promotion, the existence of the British Code of Sales Promotion Practice, and the appearance of sales promotion features in the trade press, the old expression ‘merchandising’ in the promotional sense is falling into disuse. Sales promotion has also acquired two other names, scene advertising and tactical advertising.

Sales promotion is a direct inducement that offers extra incentives anywhere along the marketing route to enhance or accelerate the product’s movement from producer to consumer. There are three important elements to this definition.

Sales Promotion:

(i) Is designed to speed up the selling process.

(ii) Normally involves a direct inducement (such as – money, prizes, extra products, gifts, or specialised information) that provides extra incentives to buy, visit the store, request literature, or take some other action.

(iii) May be used anywhere along the marketing route – from manufacturer to dealer, dealer to customer, or manufacturer to customer.

Some marketers consider sales promotion supplementary to advertising and personal selling because it binds the two together, making both more effective. In reality, however, sales promotion is far more than supplementary. Sales promotion expenditures in some companies consume 75 percent of the advertising/promotion budget, compared to 25 percent for advertising.

Sales promotion is expensive. But it’s also effective. Unfortunately, it has serious drawbacks, which lead to furious battles in marketing circles between proponents of sales promotion and proponents of advertising. Each has an important role, but advertisers must consider the positives and negatives and get the balance right.