Sales Promotion

Sales Promotions – Good or Bad?
Dr. James Manalel* Jose M. C.** Siby Zacharias*** Introduction Sales promotions have become a vital tool for marketers and its importance has been increasing significantly over the years. In India, sales promotions expenditure by various marketing companies is estimated to be Rs 5,000 crores and the emphasis on sales promotion activities by the Indian industry has increased by 500 to 600 percent during the last 3 to 5 years (Economic Times, June 15, 2003). In the year 2001, there were as many as 2,050 promotional schemes in the Rs 80,000 crore FMCG Industry (Dang et. al, 2005). Given the growing importance of sales promotion, there has been considerable interest in the effect of sales promotion on different dimensions such as consumers’ price perceptions, brand choice, brand switching behaviour, evaluation of brand equity, effect on brand perception and so on. One of the purposes of a consumer promotion is to elicit a direct impact on the purchase behaviour of the firm’s customers (Kotler, 1998; Blattberg and Neslin, 1990). Research evidence suggests that sales promotions positively affect shot-term sales (Priya, 2004). Research on price promotion has consistently reported high sales effect and high price elasticity for brands which are on promotion (Blattberg, Briesch and Fox, 1995). Studies have shown that price promotions enhance brand substitution within a product category (Dodson et al, 1978), affect aggregate sales (Gupta, 1998), and significantly affect stock piling and purchase acceleration (Blattberg, Eppen and Lieberman, 1981, Neslin, Henderson and Quelch, 1985). However, there have also been studies that suggest that sales promotion affects brand perceptions. Researchers have found out that promotions, especially price promotions, have negative effect on brand equity (Mela et al, 1997). In another study, Schultz (2004) argues that over dependence on promotions can erode consumers’ price-value equation. The results of a... [continues]

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