THE IMPACT OF SALES PROMOTION ON PRODUCT COMPETITIVENESS OF FAST MOVING CONSUMER GOODS

CHAPTER ONE

1.0      INTRODUCTION

Sales Promotion, a key ingredient in marketing campaigns, consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade. It is a common tool used to push sales in the Fast Moving Consumer Goods (FMCG) Industry.

Sales Promotionaccording to Belch & Belch (2001) consists of a diverse collection of incentive tools, mostly short-term designed to stimulate quicker or greater purchase of a particular product by the consumers. It can also be seen as all promotional activities apart from personal selling, advertising and publicity which offers short term incentives designed to bend the demand curve in favour of a product through changing the habit of customers.

Whereas advertising offers reason to buy, sales promotion offers incentives to buy. It is one of the promotional tools used by manufacturers to reach target market. SalesPromotion is a necessary activity especially in a competitive market. It is not surprising therefore that sales promotion is recognised as a vital promotional tool in the marketing industry.   

Sales promotion is often undertaken by an organisation to promote an increase in sales, usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of the marketing communications or promotions mix). Sales promotions are varied. Often they are original and creative, and hence a comprehensive list of all available techniques is virtually impossible (since original sales promotions are launched daily!)

Idris (2008) explained that Sales promotion is one of the eight aspects of the promotional mix. The other sevenpromotools are:

·         Advertising

·         Personal selling

·         Public Relations

·         Direct Marketing

·         Packaging

·         Sponsorships

·         Point of Sales Display

Robin (2000) states that Sales Promotion tools offer three distinctive benefits:

a.       Communication: They gain attention and may lead the consumer to the product.

b.      Incentive: They incorporate some concession, inducement, or contribution that gives value to the consumer.

c.       Invitation: They include a distinct invitation to engage in the transaction now.     

Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, whereas a free management-advisory service aims at cementing a long term relationship with a retailer. Sellers use incentive-type promotions to attract new triers, to reward loyal customers, and to increase the purchase rates of occasional users. Sales promotion often attracts brand switchers, who are primarily looking for low price, good value, or premiums. Sales promotions generally are unlikely to turn them into loyal users, although they may be induced to make some subsequent purchases. In markets of high brand dissimilarity, sales promotion may be able to alter market shares permanently but in market of high brand similarity sales promotions can produce a high sales response in the short run but little permanent gain in the market share.

In addition to brand switching, consumers may engage in stockpiling - purchasing                                                                      earlier than usual (purchase acceleration) or purchasing extra quantities.

Sales promotions can be directed at, the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumers are called consumer sales promotions. Sales promotions targeted at retailers and wholesalers are called trade sales promotions.

A number of sales promotion benefits flow to manufacturers and consumers. Sales promotions enable manufacturers to adjust to short – term variations in supply and demand. They enable manufacturers to test how high a list price they can charge, because they always discount it. They induce consumers to try new products instead of never straying from current ones. For retailers, promotions may increase sales of complementary categories (cake mix promotion may help to drive frosting sales) as well as induce some store-switching by consumers. They promote greater consumer awareness of prices. They permit manufacturers to sell more than they would normally sell at the list price. Consumers themselves enjoy some satisfaction from being smart shoppers when they take advantage of price specials.

1.1 STATEMENT OF THE RESEARCH PROBLEM

 In this era of keen competition among producers, William (1999) observed that sales promotion has to be called upon, not only to highlight each company’s advantage but also to increase the number of sales and customers. He also observed that manufacturers have argued over the years that there is no real or tangible benefit derived from sales promo. They complained that it is a waste of time and resources and that “sales don’t get actually promoted”

It is on this premise that this research work wants to investigate the fact that sales promotion is considered as a mere waste of money and not a tool that increases product competitiveness.

1.2 RELEVANT RESEARCH QUESTIONS

In order to achieve the purpose of this study, key research questions that were formulated include the following:

1.      What is the impact of sales promotion on consumers’ brand preference?

2.      How does sales promotion impact on a product’s competitiveness?

3.      Do consumers buy more of a product during sales promotion?

4.      What are the common types of sales promotion known to the consumers?

1.3 STATEMENT OF HYPOTHESES

1.      Sales promotion impacts on a consumer’s brand preference and at such increase a product’s competitiveness.

2.      People buy more of a product during sales promotions.

1.4 PURPOSE AND OBJECTIVES OF THE STUDY

Following from discussion under the background to this project work, it is clear that this research workaims at analysing the strength of sales promotion and its impact on product competitiveness.

We shall analyse and examine the impact of sales promotion on the sales of fast moving consumer goods (FMCG) with particular interest on Dansa Foods Limited.

The FMCG Industry is getting more competitive by the day; new companies are making grand entrance by the day and cutting into each other’s target market. Different companies have had to come up with “better products”, better offers, better pricing all in the bid to sway customers and increase their bottom line.

The purpose of the study is to investigate the impact or otherwise of Sales Promotion on product competitiveness in the fast moving consumer goods (FMCG) sub sector. In doing this, the following are the specific objectives to be achieved by the study:

1)      To distinguish between Sales Promotional activities and other promotional activities (or promotools)

2)       To briefly examine the different Sales Promotional techniques

3)      To examine the need for sales promotion as an effective promotool

4)      To examine the impact of sales promotion on the competitiveness of fast moving consumer goods.

1.5 SCOPE OF THE STUDY

Every organisation has its own unique ways of combating in this keen competition era. Of course there are various methods of getting the attention and retaining the loyalty of the target audience, this study will however limit itself to the option tenable in sales promotional activities.

This study will extensively look at the impact of well planned, customer inspired, well researched, corporate goals motivated activities all tailored to satisfy the needs of the heterogeneous consumers.

The scope of this research work will be strictly concerned with the sales promotional activities of Dansa Foods Limited particularly those directed at the Juice category.

1.6 LIMITATION OF THE STUDY

Obtaining all relevant data in most research work is usually met with a number of limitations; this exercise is no exception owing to its scope and nature.

The first limiting factor is time; there wasn’t enough time to carry out a long elaborate research, hence this research focused on promotional activities during a particular period of time. It considered a six months period from 1^st of December, 2008 to 30^th of May, 2009.

As earlier stated, there are various expressions of consumer sales promotion, it will be tedious to consider all these types, this research therefore focused on two popular types; namely

1.      Free gift

2.      Buy-One-Get-One-Free (BOGOF )

It will also be cumbersome to sample the opinions of all customers of Dansa Fruit Juices; we therefore restricted the research to consumers in the city of Lagos.

1.7 OPERATIONAL DEFINITION OF TERMS

In the course of this study, various terms were used as appropriately as possible. Following are a glossary of some of such terms:

·         Marketing: The group of actual or potential buyers for a product.

·         Promotion/Promotools:It involves all set of organizational activities involved in the process of making a product or service available for use. Fred (2003) explains it as everything that is done to help sell a product or service in every step of the sales chain, from the presentation materials a sales person uses during a sales call to the television commercial that tries to get the customer to think favourably about what is being offered.

·         Sales Promotion: Duncan (2002) describes Sales Promotion as the marketing communication function that encourages action by adding tangible value to a brand offering, it is usually short term aimed at encouraging and accelerating response.

·         Impact: The powerful effect that something has on somebody or something

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