Why are companies spending more money on sales promotion? Several factors have contributed to the rapid growth of sales promotion.
Sales promotion is the use of incentive techniques that create a perception of greater value among consumers, the trade and business buyers.
Factors Responsible for Rapid Growth of Sales Promotion
There are factors responsible for rapid growth of sales promotion discussed below.
1. Immediate Profits
Most companies have pressure for short-term profits, a drive that sales promotion satisfies.
Product managers are under pressure to generate quarterly sales increases.
Because advertisings benefits are often apparent in the long term only, companies invest more money in sales promotion when they want quick results.
2. Traditional Media Costs
Marketers also cite ‘economic cost‘ for the shift.
Traditional media costs, especially advertising, have escalated to the point where alternative types of media must be considered.
Bonus: How to Choose Right Advertising Media Decision (15 Key Factors).
Advertisers, therefore, are exploring marketing communication forms that cost less and produce immediate, tangible results.
Sales promotion is able to deliver these results.
3. Immediate Response
Another reason for sales promotion’s growth is that it is relatively easy and quick to determine whether a sales promotion strategy has accomplished its objectives because there is usually an immediate response of some kind.
4. Add Value
From the consumers perspective, sales promotion reduces the risk associated with a purchase by giving them something of added value such as a coupon, rebate, or discounted price.
Promotions typically offer the consumer added value.
Related: 17 Powerful Consumer Sales Promotion Techniques.
The consumer has become more deal-oriented.
5. Consumer Behaviour
Shoppers today are better educated, more selective, and less loyal to brand names than in the past, which means they are more susceptible to switching brands.
6. Pricing
Retail prices soared during the inflationary 1970s because of the increased costs of labour, raw materials, and manufacturing.
The increased costs led to low priced private label brands and the emergence of generic products, particularly in the highly volatile super, market industry.
Since then, consumers have come to expect constant short term price reductions such as coupons, sales, and price promotions.
7. Market Share
In most industries. the battle is for market share rather than general product growth.
Sales promotion encourages people to switch products, increasing market share. 15 Importance of Sales Promotion to Producers.
8. Parity Products
Sales promotions are often the most effective strategy for increasing sales of a product, particularly when the products in the category are largely undifferentiated.
In other words, the products are similar so promotions become the tiebreaker in the consumers’ decision making.
9. The Power of the Retailer
Dominant retailers demand a variety of promotional incentives before allowing products into their stores.
This is due to the power shift in the marketplace from manufacturers to retailers.
Companies that fail to comply with retailers demands for more trade support often have their shelf space reduced or even their product dropped.
10. Declining Brand Loyalty
Another major reason for the increase in sales promotion is that consumers have become less brand loyal and are purchasing more on the basis of price, value and convenience.
Related: 25 Major Benefits or Advantages of Branding.
11. Increased Promotional Sensivity
Marketers are making greater use of sales promotion in their marketing programmes because consumers respond favourably to the incentives it provides.
An obvious reason for consumers increased sensitivity to sales promotion offers is that they save money.
Another reason is that many purchase decisions are made at the point of purchase by consumers who are increasingly time-sensitive and facing too many choices.
12. Brand Proliferation
A major aspect of many firms marketing strategies over the past decade has been the development of new products.
Consumer product companies are launching nearly more new products each year.
Thus, promotional tools are used increasingly.
Related: Top 12 Strategies & Policies of Pricing in Marketing.
13. Increased Accountability
Many companies are demanding to know what they are getting for their promotional expenditures.
Sales demanding is more economically accountable than advertising.
In companies struggling to meet their sales and financial goals, top management is demanding measurable, accountable ways to relate promotional expenditures to sales and profitability.
Managers who are being held accountable to produce results often use price discounts or coupons, since they produce a quick and easily measured jump in sales.
14. Competition
Another factor that led to the increase in sales promotion is manufacturers reliance on trade and consumer promotions to gain or maintain a competitive advantage.
The markets for many products are mature and stagnant, and it is increasingly difficult to boost sales through advertising.
Advertising efficiency has declined because of rising costs, media clutter and legal restraints.
15. Fragmentation of the Consumer Market
As the consumer market becomes more fragmented, many companies are tailoring their promotional efforts to specific regional markets.
Sales promotion tools have become one of the primary vehicles for doing this, through programmes tried into the local flavour, themes, or events.
Related: 13 Factors Influencing the Designing of Sales Territory.
16. Media Clutter
A promotional offer in an ad can break through the clutter that is prevalent in most media today.
A premium offer may help attract consumers attention to an ad, as will a contest or sweepstakes.
Some studies have sown that readership scores are higher for print ads with coupons than for ads with them.
Thus, now you know the major factors responsible for rapid growth of sales promotion.
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