NATURE AND SCOPE OF SALES PROMOTION

Meaning and Definition of Sales Management:

A sales promotion is a marketing strategy in which a business uses a temporary campaign or offer to increase interest or demand in its product or service.

 

There are many reasons why a business may choose to use a sales promotion (or ‘promo’), but the primary reason is to boost sales. Sales boosts may be needed to reach a quota as a deadline approaches, or to raise awareness of a new product.

 

Promotion is a comprehensive term and covers the entire gamut of advertising, publicity, public relations, personal selling and sales promotions.

 

Sales promotion is thus a part of promotion, and is restricted to direct inducements on a short-term basis given to consumers or trade so as to stimulate purchases of products and services

 

Nature of Sales Promotion:

Sales promotion is designed to speed up the selling process and maximize sales volume. By providing an extra incentive, sales promotion techniques can motivate consumers to purchase a large quantity of a brand of shortening the purchase cycle of the trade or consumers by encouraging them to take more immediate action.

Irregular/ Non-Recurring Activity: Sales Promotion is an Irregular and Non-Recurring Activity to increase sales.

Target Action: It can be targeted to three distinct audiences. The first is internal and is usually the marketer’s own salespeople. There may, however, be other employees targeted such as technical sales support people or telemarketers.

Motivation and Extra Incentive: It involves some type of incentive that offers a reason to buy. This incentive is usually the key element in a promotional program and is an effort by which consumers, traders, and Salesforce are motivated towards maximum sales.

Acceleration Tools: It is designed to speed up the selling process and maximizes sales volume. Sales promotion can be implemented quickly and gets sales results sooner than advertising.

Non-Media Activity: It is referred to as a non-media activity as sales promotion is differentiated from advertising and publicity, and also includes them as part of the overall promotion mix.

Planned Activity: It is generally planned as a specific marketing event. In other words, it is a ‘stand-alone activity that, although incorporated into the marketer’s overall marketing communication strategy, is planned as a unique event.

Versatile: It is extremely versatile. The different forms of sales promotion are capable of being used with various groups and designed to achieve different effects. It can be used throughout the product life cycle.

 

Scope of sales promotion:

Sales promotion is a supplementary effort to advertising and personal selling. It does not include

advertising and personal selling, publicity and public relations. 3. Motivation – It is an effort by which the consumers, traders and sales force are motivated towards maximum sales.

 

Sales Promotion Operates at Three Levels:

(i)       At the level of consumer, it is called consumer promotion, e.g., free gifts, samples, price-offs.

(ii)         At the level of dealers and distribution, it is called trade promotion, e.g., free goods, display contests, dealer sales contests, push money, etc.

(iii)        At the level of salespersons, it is called sales force promotion, e.g., salesmen’s contests, bonus and sales rallies.

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INFLUENCING FACTORS

Factors Influencing on Sales Promotion:

Type of Product: Type of product plays an important role in deciding on promotion mix. Product can be categorized in terms of branded products, non-branded products, necessity products, luxury products, new products, etc. All these types of products need different promotional tools. For example, advertising is suitable for the branded and popular products. Personal selling may be fit for non-branded products. Advertising, personal selling, sales promotion and publicity – all four tools – are used for a newly launched product to get a rapid consumer acceptance.

Use of Product: Product may be industrial product, consumable and necessity product, or may be luxurious product that affects selection of promotion tools and media. For example, advertising and sales promotion techniques are widely used for consumer goods while personal selling is used for industrial goods.

Complexity of Product: Product complexity affects selection of promotional tools. Personal selling is more effective for complex, technical, risky, and newly developed products as they need personal explanation and observation. On the other end, advertising is more suitable for simple and easy-handled products.

Purchase Quantity and Frequency: Company should also consider purchase frequency and purchase quantity while deciding on promotion mix. Generally, for frequently purchase product, advertising is used, and for infrequently purchase product, personal selling and sales promotion are preferred. Personal selling and advertising are used for heavy users and light users respectively.

Fund Available for Market Promotion: Financial capacity of company is a vital factor affecting promotion mix. Advertising through television, radio, newspapers and magazines is too costly to bear by financially poor companies while personal selling and sales promotion are comparatively cheaper tools. Even, the company may opt for publicity by highlighting certain commercially significant events

Type of Market: Type of market or consumer characteristics determine the form of promotion mix. Education, location, income, personality characteristics, knowledge, bargaining capacity, profession, age, sex, etc., are the important factors that affect company’s promotion strategy.

Size of Market: Naturally, in case of a limited market, personal selling is more effective. When market is wide with a large number of buyers, advertising is preferable. Place is also an important issue. Type of message, language of message, type of sales promotion tools, etc., depend on geographical areas.

Stage of Product Life Cycle: Product passes through four stages of its life cycle. Each stage poses different threats and opportunities. Each stage needs separate marketing strategies. Each of the promotional tools has got different degree of suitability with stages of product life cycle.

It can be concluded that, in normal situations:

(1)           Advertising, personal selling, and, even, sales promotion are used during the introduction stage.

However, advertising is given more priority

(2)      More intensive advertising and sales promotional techniques are used during the second stage,

(3)      More rigorous advertising along with personal selling are followed in the third stage, and

(4)      Company prefers to curb the expenses in forth stage, and promotional efforts are reduced.

Level of Competition: Promotional efforts are designed according to type and intensity of competition. All promotional tools are aimed at protecting company’s interest against competition. Level of promotional efforts and selection of promotional tools depend on level of competition.

Promotional Objectives: It is the prime factor affecting promotional mix. Different objectives can be achieved by using different tools of promotional mix. If company’s objective is to inform a large number of buyers, advertising is advisable. If company wants to convince limited consumers, it may go for personal selling. Even, when company wants to influence buyers during specific season or occasion, the sales promotion can be used. Some companies use publicity to create or improve brand image and goodwill in the market.

Other Factors: Over and above these factors, there are certain minor factors that affect promotion mix. These factors may include:

i.   Price of Product

ii.    Type of Marketing Channel

iii.    Degree of Product Differentiation

iv.   Desire for Market Penetration, etc.

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SALES PROMOTION AND CONTROL

Sales control is one of the functions of sales management which ensures the sales achievement and profit objectives of the company by coordinating effectively and efficiently the different sales functions. The main goals of sales control is optimization of number in sales.

 

Importance of Sales Control:

Every business function needs a control mechanism. Sales management is a broad field and consists of various aspects and functions. Like all other process control set of procedures need to be established, performance should be evaluated periodically and digression from the standards should be addressed swiftly.

Sales control process can be executed either through behavioral aspects like sales efforts or by allocation of selling time or through cost aspects like performance expenses and sales-function administration. Sales personnel need to be trained sufficiently to maintain a consistent effort in sales and also productivity of the sales person should be maintained.

Sales control doesn’t focus only on managerial action related to sales, it also encompasses all activities which ensure the even flow of products or services from the producer to the consumer.

Types of Sales Control:

Sales budget and sales programs are the basic available tools to control the efforts. Other available tools are

1.  Sales Budget

2.  Sales Programs

3.  Sales Audit

4.  Sales Analysis

The above tools can be used in identifying the strength and weakness of the internal processes and opportunities and threats from the external environment. Further it will help the management in locating the defect in the functioning of the sales department and take corrective measures.

Sales Budget: Sales budget creates a overall constraint for the sales team to operate within. Budget in terms of expenses and efforts spent can control the sales activities well and align them with company's sales objectives and profit targets. A sales team may be able to perform well and meet sales target but if the cost spent to achieve the same is very high then the profit would be less. Hence companies assign a sales budget for the sales activities.

Sales Programs: Sales program are a set of activities, training and best practices which a company follows for performing sales activities. A sales program can train the sales force well on the companies values so that the sales team follows them when they go on field to sell the products and services. Through a program it can be ensured that all the sales team members follow similar approach and system to achieve it.

Sales Audit: Sales audit is the systematic and unbiased review of the basic objective and policy of the selling function of an organization. Sales audits help in improving the effectiveness of the sales arm of the organization. Audits normally examine six aspects such as

•  Objective of the company

•  Internal policies

•  Structure of the organization

•  Sales methods

•  Procedures

•  Sales personnel

Sales Analysis: Sales analysis is the study of sales volume operations to find the sales and profit trend. It helps in achieving better sales performance. It also provides insights on the sales territories, type of customers and products.

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STRENGTHS AND LIMITATIONS OF SALES PROMOTION

Strengths of Sales Promotion:

 

Helps to Differentiate: One of the most important aspects of a sales promotion is creating differentiation. If it’s not different, it won’t get noticed. Even though we may be marketing to the same audience, we can still make our promotion more appealing to them by highlighting features they don’t already have or aren’t offered with what they’re already buying.

Creates Opportunity for Communication: Every company should have a plan for sales promotion. Whether we sell products or services, we need to create communication opportunities with our customers. This involves advertising, promotions, sweepstakes and social media marketing. Moreover, it can also improve the company’s ROI by increasing customer retention, customer engagement, and customer satisfaction.

Promotes Word-of-mouth: The most important feature of sales promotion is word of mouth. Most people trust the claims and recommendations of people that they know, particularly when it comes to something like a product or service. Sales promotion has many benefits such as building customer loyalty and increasing sales volume, but it can also be used by businesses to establish their brand identity. As a result, this type of marketing is often more cost-effective than other forms.

Ideal for Cross-selling and Upselling: One of the most important tools that marketers have is the ability to

create cross-selling and up-selling opportunities. When they do this, they are able to maximise their sales without having to go through a lot of extra work. They can also create promotions and incentives for customers who buy products as well as create discounts for those who already own certain products.

Gives a Reason to Buy: Another advantage of sales promotion is the creation of a reason to buy. It sparks interest in the recipient’s mind so that they believe that there is a good reason to purchase the product. This can be done through various methods such as AIDA (Attention, Interest, Desire, and Action) or the PAS model (pain-agitate-solution)

Promotes Focused Marketing: When it comes to marketing, everyone is looking for that one magic bullet. The answer most people are searching for is that one tool that will help them get more sales or better results with less effort. Unfortunately, there’s no such thing as a “one size fits all” solution and each company has to find the unique approach that works best for their particular industry and product.

Probability for Higher Revenue: Creating a sales promotion is the best way to increase our revenue. Offer discounts, coupons, and other incentives to encourage people to buy more items. It is important that you create a promotional strategy so that we can reach as many people as possible with this marketing tool.

Provides Information for Our Customers: The main advantage of using online sales promotion is that we can create a source of information for your customers. It’s easy to post pictures, videos and descriptions of our products on social media sites like YouTube, Instagram, Twitter, Facebook, etc. This will help increase the number of visitors to our website and make it more visible to people in the search engines. These features also help us promote your brand as well as attracting new customers.

Limitations of Sales Promotion:

 

Increased Sensitivity to Price Change: A common disadvantage of this strategy is that the customer becomes more price sensitive and will look for a way to save money, even if it doesn’t affect their quality of life.

Might Cause a Negative Brand Image: Sometimes sales promotions have a negative impact on the quality of the company’s image. For example, if people see a sale on an unhealthy product like potato chips or a soup, they may gossip about it to friends and colleagues. Customers might also think that the company is offering low-quality products if the discount on the product is very high.

Short Term Strategy: Sales promotion is not a long-term solution. It should be used to ensure immediate success, but it shouldn’t be the only focus of our marketing strategy. Sales promotion is too short-term in nature and doesn’t address long-term issues for the company such as customer relations, product pricing, innovation, etc.

Sales Promotion might not be able to Change Customer Perception: One of the biggest mistakes that companies make is to think that presenting a promotion will transform a customer’s opinion about their product. If people don’t believe in our product, then our product or even the company may perish. For instance, the popular Note series mobiles from Samsung were found to be a fire and an explosion hazard. This dented the company’s image for a few years.

Sales Promotion Cannot Save a Bad Product: Sales promotion cannot overcome product problems. For example, a lack of distribution channels or poor product quality will affect the effectiveness of sales promotion.

Sales Promotion Cannot Compensate for a Poorly Trained Sales Force: There are many reasons why sales promotion is not the perfect solution for all businesses. For one, it can’t compensate for a poorly trained

sales force. If a company’s salespeople aren’t properly prepared for their roles, selling with promotions can actually be counterproductive.

 

Extra Stock could Accumulate: Sales promotion may affect our company negatively because it could cause the extra stock to stay out in the market for too long or it could cause other companies to make unauthorized sales of our product.

Other Limitations of Sales Promotion

Difficult to Differentiate Product. Affects Consumer Attitude Formation. Creating a Price Orientation.

Borrowings from Future Sales. Time and Expense.

Legal Consideration.

Erodes Brand Loyalty.

Useful Only in Mature Markets.

 

 

 

Concept of Sales Organization:

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SALES ORGANIZATION

A sales organization is responsible for the sale and distribution of goods and services. It represents the selling unit as a legal entity. It is responsible for product guarantees and other rights to recourse, for example. Regional subdividing of the market can also be carried out with the help of sales organizations.

Sales organization consists of human beings or persons working together for the effective marketing of products manufactured by the firm or the products purchased for resale. Sales organization co-ordinates the efforts of members of a group to bring about a desirable result. It provides an efficient, economic and flexible administrative set up to ensure timely movement of products from the warehouse to the ultimate consumer. Thus, it provides satisfactory job to buyers and sellers.

A sales organization has a number of departments. It has a planned and well co-ordinated structure. It performs the functions of planning, organizing and controlling marketing and distribution of products. Sales organization is a foundation for effective sales planning and sales policies. Systematic execution of plans and policies and programs of a sales organization control all the sales activities. As such it ensures maximum efficiency and profitability without losing consumer service and satisfaction.

Scope of Sales Organization:

Sales organisation establishes a link between the producers and consumers. Selling departments are the ears of the business concern. They convey the complaints and suggestions of the customers to the producers for the further improvement in the goods and also for providing efficient service to customers.

 

They also convey the viewpoint of producers to their customers. This helps in establishing closer link between the two viz., producers and customers.

Functions of a Sales Organization:

(i)       Study of distribution trends.

(ii)        Research of markets.

(iii)        Development of policies.

(iv)       Investigation of sales methods.

(v)       Analysis of operations.

(vi)       Creation plans and programmes.

(vii)         Sales promotion and advertisement.

(viii)         Recruitment, selection, training and remuneration of sales force.

(ix)       Sales control.

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SETTING-UP OF SALES ORGANIZATION

There are Five Major Steps in Setting up a Sales Organization:

 

1.   Defining Objectives: The first step is to define the sales department’s objectives. Top management defines the long-term objectives for the company, and from these, the objectives for the sales department are derived.

 

Top management, for instance, may want the form not only to survive but to achieve industry leadership, develop a reputation for outstanding technical research, diversify its product lines, provide excellent service to customers, furnish investors with a generous return, establish an image of public responsibility, and so on.

2.  Determination of Activities: Only after determining all necessary activities and estimating the volume of performance is it possible to answer such questions as What executive positions are required? What should be their relationships to other positions? What should be the duties and responsibilities of the person so fill these positions?

Determining the necessary activities and their volume of performance is a matter of analyzing the sales department’s qualitative and quantitative objectives.

The activities involved in modern sales management are similar from firm to firm, and although individual sales executives think that their operations are different, most differences are more apparent than real.

3.  Grouping Activities into Positions: Next, the activities that are identified as necessary are allocated to two different positions.

Activities are classified and grouped so that closely related tasks assigned to the same position.

Each position should contain not only a sufficient number of tasks but sufficient variation to provide for job challenge, interest, and involvement, only in very large organization, where extreme specialization is practiced, should a position comprise only a single activity, and even here the burden of proof should be on those

4.  Assignment of Personal to Positions: The next step is to assign personnel to the positions.

This brings up the question of whether to recruit special individuals to fill the positions or to modify the positions to fit the capabilities of available personnel. This is a question that has long been controversial.

5.  Provision for Coordination and Control: Sales executives who have other reporting to them (that is, those with line authority) require means to control their subordinates and to co-ordinate their efforts.

They should not be so overburdened with detailed and undelegated responsibilities that they have insufficient time for coordination.

Best Sales Organizational Structure and Changes in Sales Team:

Reduce conflict between team members

Increase engagement from the sales team members

A more knowledgeable sales team that is ready to face a variety of situations Better coordination of activities between team members

Better communication between coworkers

Clearer communication of expectations and goals for the team

Improved decision-making based on the team's expectations and goals set prior Possibility for more customers and more sales with a more cohesive team.

 

We will be able to reap all of these benefits of a more organized team by taking the time to evaluate our industries, clients, and geographical locations. Once we evaluate this information, we can then place the right people in the right roles based on their individual strengths.

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TYPES OF SALES ORGANIZATION

The following are the basis of forms of sales organization:

1.  On the Basis of Geographic Areas: In the case of a large sized firm, sales organization may be made on the basis of geographical area. In this case duplication of selling agents is eliminated. A single trader or salesman sells the products of a producer in a particular area or locality. Producers selling the production at a national or international level prepare their sales organization on this basis.

2.  On the Basis of Products: In such a form of sales organization departments for the sale of different types of products are established. This is used in a firm which produces or sells different types of goods. Salesmen are given training for the sale of a particular product and they are specialists in that.

3.  On the Basis of Customers: A company produces goods of specific nature such as special tastes, interest or fashions of the customers. Sales organization should be made on the basis of customers. Personal and intimate relations between the salesmen and customers help in the utmost satisfaction of the individual customers and in increasing sales.

Salesmen should know the behavior and personal likes and dislikes of each of their customers in order to serve them efficiently.

 

4.  On the Basis of Sales Activities: For a large-sized enterprise that has succeeded in developing extensive sales both within and outside the country, the organization chart given below portrays organizational arrangements of the marketing department.

Sales managers, both for home and export sales, are entrusted with command or line authority by the general sales manager and they are accountable to the general sales manager for achieving predetermined goals of sales.

In their marketing work, sales managers are assisted by a number of area sales managers and overseas agents. To give necessary advice and service for facilitating the actual selling work, four staff positions are created in the organization, namely, the advertising manager, the sales promotion manager, the merchandising manager and the market research and development manager.

These managers have staff authority along with functional authority vested in them and they are not directly responsible for actual selling. They confine their activities to giving advice and service to the managers with line authority. The role of the advertising manager and sales promotion manager is that of demand creation, expansion of sales etc. The merchandising manager makes the products ready for sales by overseeing the work of designing, packaging labelling and branding.

He also makes for warehousing and transporting arrangements for the dispersal of products throughout market areas. The market research and development manager gather relevant market information, classifies market data and presents facts for the guidance of marketing efforts.

But the lower volume of sales in the case of smaller concerns does not warrant the creation of so many managerial positions. In such cases, the general sales manager may perform the functions of other managers himself and the entire marketing work may be carried on with the help of one or two area managers, one advertising manager and an additional manager for sales promotion and marketing research.

For staffing the sales organization, the selection and training of personnel are usually made by the personnel manager. The sales manager engages the available men and makes appropriate placement of personnel.

Small enterprises which do not set up a separate personnel department authorize the marketing manager to make his own arrangement for selecting, training and developing the sales force.