Sales Promotion

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An Empirical View of the Different Types of Consumer Promotions in India

Authors: Priya Jha-Dang and Abraham Koshy

Abstract The paper provides an empirical view of the range of promotions launched in the Indian market place from 1996 to 2003. The different promotions include free gift offers, price offs, extra product offers, exchange offers, buy-more-and-save offers, contests and sweepstakes. The most frequently launched promotion is the free gift offer followed by the sweepstake offer and extra product offer. Some differences in trends are found across FMCG, Consumer Durable and Service sectors. A detailed description of each type of promotion is provided in order to highlight the different incentives offered by such promotions.

An Empirical View of the Different Types of Consumer Promotions in India Expenditure on sales promotion by various marketing companies in India is estimated to be Rs. 5,000 crore and is growing at a robust pace every year (Economic Times June 15, 2003). Companies in an attempt to drive sales offer various kinds of consumer promotions from price offs, extra product, freebies, scratch cards. In the year 2001, there were as many as 2,050 promotional schemes of all kinds in the Rs 80,000 crore FMCG industry. In the year 2000, the number stood at 1,954 schemes (Financial Express, 2000). There have been very few discussions in sales promotion literature about how different types of promotions may be classified. One dimension, which has been suggested to classify different promotions, is the price versus non-price nature of the promotion (Campbell and Diamond, 1992; Blattberg and Neslin, 1990). Price promotions are defined as ‘promotions such as coupons, cents off, refunds and rebates that temporarily reduce the cost of the goods or service’ (Cooke, 1983). These promotions focus on the reduced economic outlay required to obtain a good or service. Non price promotions are defined as ‘promotions such as giveaways or contests in which value is temporarily added to the product at full price’ (Cooke, 1983). Studies, which have compared consumer response to different promotions, have followed this classification in differentiating between types of promotion. A list of the different types of price and non price promotions and their definitions is shown in Table 1.

Table 1 Classification of Different Promotions Nature of Promotion Price Promotions Offer Price-off Definition Offers a discount to the normal selling price of a product Non-price Promotions Offer Extra product Definition Offers an increased quantity of the product without an increase in normal retail price Offers a free gift in addition to the main purchase Provides a chance to win a large prize through skill Provides a chance to win a large prize based on chance

Coupon

Offers a certificate that provides a price reduction at point of purchase Offers cash back from the manufacturer on a purchase

Premium

Rebate

Contest

Sweepstake

Definitions paraphrased from Blattberg and Neslin, 1990 Although a wide variety of price and non-price promotions are launched in the market, most of the academic research on promotions has focused on price promotions, namely price offs and coupon offers (Blattberg, Briesch and Fox, 1995). Promotional tools such as free gift offers, extra product offers that are increasingly being used in the market place. However very little academic theory or research has looked at how consumers perceive and respond to such promotions. In recent years, researchers have started comparing consumer response to different promotions e.g. price promotion versus premium promotion (Nunes and Park, 2003) or extra product promotion versus price

promotion (Smith and Sinha, 2000). These researchers have found that different types of promotions evoke differential response. However, studies have not attempted to systematically identify the entire range of promotions launched in the market place. A first step towards...
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