The Effectiveness of Sales Promotion Tools Among Indian Consumers: An Empirical Study
The Effectiveness of Sales Promotion Tools Among Indian Consumers: An Empirical Study
The Effectiveness of Sales Promotion Tools Among Indian Consumers: An Empirical Study
An Empirical study
Manish Mittal* Poojae Sethi**
Sr. Lecturers
Daly College Business School
Residency Area, Daly College Campus
Indore (M.P.)-452001
Ph.No. (00)91-731-702882
[email protected] *
[email protected] / [email protected] **
Ph.No. +91-731-702882
In the recent years with the influx of foreign companies in India, sales promotion has
been playing a very important role in Rs. 48000 crore FMCG industries (Economic
Times). Sales promotions are securing a greater portion of the promotion budget due to
FMCG, because it is the value for money that is the deciding factor for the purchase and
market, companies view sales promotion as being immensely helpful in sustaining the
tough period. The fact is vindicated by the statistics that 30% of TV advertising is
accounted for by the consumer promotion advertising (Singh, 2003). The rise in
frequency of sales promotion as a marketing tool in the recent years can be attributed to
the fact that sales promotion clearly generates sales response that is sizeable (Putsis,
1998).
What brand to buy? (Gilbert and Jackaria, 2002). Sales promotions can have an impact on
all three broad decisions (Gupta, 1988). The various advantages that companies seek to
achieve through promotions apart from the immediate boost of sales are - retaining
competitive products, maintaining sales of seasonal products and category expansion etc.
But some researchers feel that their effectiveness is limited in the sense that the sales
increments induced by various promotional activities are only temporary and tend to
bounce back to their previous level once the sale promotion campaign is taken off. They
believe that sales promotions are a Zero sum game as they simply shift purchase from
one period to another (purchase acceleration) from one brand to other (brand switching)
(Putsis, 1998). While the sales promotions can generate incremental sale of individual
inducing the desired sales response. The sales promotion techniques studied in this paper
are – price discounts, coupons, Bonus Packs, buy one and get some free and scratch
cards, while the behavioral responses selected are brand switching, purchase acceleration,
stock piling, product trial and spending more. The paper is divided into 6 sections. After
this introduction section, the next section of this paper reviews the relevant existing
literature on effectiveness of sales promotion tools. The research design, data and
methodology are discussed in Section III and Section IV is for results and discussions.
Section V provides limitations and scope for further research. Section VI concludes.
Conceptual Framework
Sales promotion has been defined as ‘a direct inducement that offers an extra value for
the product to the sales force, distributors or the final consumer with the primary
objective of creating an immediate sale’ (Haugh, 1983). Gilbert and Jackaria (2002)
define sales promotion as the offer of an incentive to induce a desired sales result.
Blattberg and Neslin (1990) define sales promotion as ‘an action-focused marketing
event whose purpose is to have an impact on the behavior of firm’s customer.’ Several
important implications may be drawn from these definitions. First, sales promotion
means an inducement provides an extra incentive to buy which is additional to the basic
benefits provided by the product or the brand (Schultz and Robinson, 1982; Strang, 1983;
cited in Laroche et.al, 2003). They are the acceleration tools which speed up selling
process and maximize sales volume (Neslin, Quelch, Handerson, 1984). Sales promotion
adapts short term, non-recurring method to boost up sales by offering incentives which
increases the perceived value of the product. These offers are not available through the
year.
Sales promotions can be classified as active or passive. Active promotions, like coupons,
require customer to undertake an active search for the promotional offers. Passive
promotions like, one-for-one, involve a limited search restricted to the store environment
(Schneider and Currim, 1991). Lichtenstein et. al. (1995) classifies sales promotions into
the same product at a lesser price (e.g. Price offs, coupons) while the other non price
promotions tend to increase the value for money (e.g. Premium, Bonus packs). Certain
promotions like scratch cards can provide either of the benefits. The various sales
1. Price Discounts/ Price off offer: In price discount offers the products are sold at
a price lower than the original price e.g. ‘Rs. 2/- off on purchase of Lifebuoy
soap’.
product and offer discounts to the holder of the coupons. These coupons are
them at purchase.
3. Bonus Pack offer: Under this the manufacturers offer the customers an
increased quantity of the same product. e.g. “Get 20% extra” or get 125 grams
4. Premium (Buy one and get some free offer): Here either the same product or
another product is offered free with the purchase of existing product. E.g. “Buy
toothpaste and get tooth brush free” or “buy one pack and get another pack of
5. Scratch Cards: Under this scheme customers scratch the particular marked area
on the packet and get the reward according to the message written there.
promotional responses (Schneider and Currim, 1991; Henderson, 1987; cited in Laroche
et.al., 2003)). A smart shopper might go for an active search and hence may be coupon
prone while an impulsive buyer might lead to be display prone (Blattberg and Nelson,
1990). Following this rationale, we have selected the following buying behavior
Brand Switching (Buy another Brand) - the extent to which the customer can be
Purchase acceleration (Buy Earlier) - the extent to which the customers are
motivated to buy the item earlier than required because of the sales promotion
Stock Piling (Buy More) - the extent to which sales promotion tools motivate the
Product Trial (Buy another Product) - The extent to which sales promotions tools
are effective in motivating customers to buy a new product which they have never
used earlier.
Spending More (than the Budget) - The effectiveness of sales promotion tools to
Section II
Literature Review
tools. According to Ndubisi and Moi (2005) sales promotion tools used strategically not
only increase brand awareness but also encourage consumers to buy new product. There
is substantial evidence that sales promotions are associated with increased purchase
quantities and shorter inter purchase times (Neslin, Henderson and Quelch, 1984).
Gardener and Trivedi (1998) have found premium offers effective as more of the product
is included at no extra cost, they found, that the consumers can easily be persuaded to buy
the product. Shimp (2003) and Fill (2002) have documented a link between the price
promotion and product trial. According to Gilberth and Jackaria (2002) pack with buy
one and get one free offers facilitate Brand recognition and Brand recall for future
purchases. They also suggested that the price discounts are effective in inducing purchase
acceleration and product trials. Blackwell et. al. (2001) showed that coupons encourage
consumers to try new flavored product than the same flavor they would normally buy at
full price. Coupons are easily understood by the consumers and can be highly effective in
trial purchase (Cook 2003). Robinson and Carmack (1997) found that Coupons could
Effectiveness of sales promotion varies across the product categories and Brands.
Chandon (1996) demonstrated that there are important differences across categories.
Promotional packs leads to faster consumption for fruit juices and biscuits but not for the
laundry detergents. Research findings suggest that promotions induce switching across
the brand in asymmetric fashion and that the weaker brands find it difficult if not
impossible to steal share from the stronger brands (Blattberg & Wisniewski 1989,
reversed if the weaker brand has advantage in terms of price relative to quality
Positive after-effects from promotions could occur if promotions attract some new
consumers who would repeatedly buy later. However the evidence suggests no long-term
favorable effects on brands. The reason being sales promotion attracts mostly existing
infrequent buyers and a small number of new buyers have the propensity to re buy
(Ehrenberg et al 1994). The moment sales promotions are taken off the customers switch
to their preferred brands rather than buying the promoted brand at full price. Research
evidence suggests that gains of a promoted brand are primarily at the expense of other
brands due to brand substitution. Gupta (1988) showed that out of the total increase in
sales due to promotion 84% is accounted for by brand switching. He concluded that the
impact of sales promotion is limited on the purchase time and purchase quantity, which
account for only 14% and 2% of the increased sales. In a similar research Bell et. al.
(1999) studied 13 different product categories and found that an average 75% of the
short-term effect of price promotion was Brand Switching and 25% was purchase
acceleration. Papatla & Krishnamurthy (1996) suggest that sales promotion reduce the
There is overwhelming evidence that consumer sales effect is limited to the time period
of the promotion itself. Sales promotion causes sales to increase but once the promotion
stops it returns to the original level. The promotions produce what Neilson calls
also fuels the flames of competition retaliation. Though the cost incurred on promotions
do not yield significant benefits in terms of enduring sales growth, yet it’s a catch 22
situation for companies. “If you do not some one else will and there goes the consumer”
says Hoshedar K Press, President of Godrej Consumer Care (Economic Times, 2006).
The long-term result of such retaliation would be elimination of all profits from total
market categories. The laundry detergents in Denmark during the ’60s and fruit
concentrate market in Britain had the similar fate (Jones, 1990). Promotions are also said
to devalue the image of the promoted brand in consumer’s eyes. This evidently happened
in the late 1970’s and the early 1980 when Burger King became locked in a promotion
war with Mc Donald’s (Jones, 1990). Kahn & Louie, 1990 found that promotion resulted
Sales promotion varies across countries too. According to Hallberg (n.d.) in the US, the
most promotionally developed nation, there is a striking imbalance between the price
buyers & the brand loyalist virtually across all the categories. The ratio is greater than
2:1! The price buyers will go in for any brand as long as it is the cheapest, as against
brand loyalist who would consider purchasing only one (their) brand. On the other hand
in Germany where price promotion is not only very recent but also limited the ratio is
4:3. In the developing country like India the situation is just reverse. Brand loyalists
outnumber price buyers by a margin of greater than 2:1. In the recent years sales
promotions have emerged as a very prominent and effective means to attract consumers.
advertising from 2004 – 2006 (AdEx, India, 2006) (Fig. 1). There has been an increase in
the advertisement spent on all types of promotional activities except the volume
promotions (AdEx India, 2006) (Fig. 2). The increase in advertisement volumes suggests
that marketers feel that the sales promotion tools are effective way to market products in
a developing country like India. While there have been numerous researches done abroad
which have provided insight into effectiveness of sales promotion, none of these have
focused on Indian Consumers. This is the reason why we have chosen this as the topic of
our research.
Section 3
The objective of the research is to study the effectiveness of various sales promotion tools
primary data collected through structured questionnaire. The respondents were residents
of Indore city. The questions were designed aiming at estimating the consumers’ five
different sales promotion tools generally used by marketers in India. The five point Likert
Scale was used to collect the responses (1-Strongly agree to 5- Strongly Disagree).
respondents. A pilot test was carried out with a sample size of 35 respondents. A Hindi
(National Language) version of the questionnaire was used to get the response from
people not comfortable with English. Convenient sampling was employed to select the
The effectiveness of promotional tools was analyzed in two different ways. Firstly, the
five different buying behavior habits induced by promotional tools were compared.
Through this comparison the five different behavior responses for each of the five tools
individual buying behavior. For each behavior, five promotional tools were ranked for
their effectiveness. This helped in identifying which tool is most effective in inducing a
particular buying behavior. Friedman related sample test was used to compare the
variables. The analysis was carried out using SPSS (Statistical Package for Social
Sciences).
Section IV
The total number of questionnaire administered were 550 out of which 364 questionnaire
were complete and capable of further analysis. Thus, the response rate was 66.18%.
Among 364 respondents, 176 were men and 188 were female. 82 had family income less
family income Rs. 20, 000 – Rs. 30, 000, and 88 of the respondents had family income
greater than Rs. 40, 000. There were 8 respondents who did not disclose their family
incomes.
Frequency Percent
Gender Male 176 48.4
Female 188 51.6
Total 364 100.0
Family Income Less than Rs.10000 82 22.5
Rs. 10001-20000 98 26.9
Rs.20001-40000 88 24.2
More than Rs.40000 88 24.2
Missing 8 4.2
Total 364
100
Occupation Business 30 8.2
Service 132 36.3
Housewife 44 12.1
Student 122 33.5
professional 34 9.3
Other 2 .5
Total 364 100.0
Regarding the educational qualification graduates were the largest in number, 148
(40.7%) the post graduates were 112 (30.8%) and 104 (28.6%) respondents were Higher
(9.3%) as professionals, and 132 (36.3%) as salaried employees and 122 (33.5%) as
students and the housewives were 44. The details are given in table 1.
0.7586 for buy some and get some free offers, 0.7151 for Bonus Packs and 0.8268 for
Scratch Cards.
Price Discounts
Friedman test was carried out to compare the five behavior responses to price discounts.
The result indicates significant differences among the five buying behavior responses as
the table 2. From the table it can be inferred that the behavioral response to price
Std.
Mean Rank Mean Deviation Sig.
Price Discount- Buy More than monthly Budget 3.73 3.8742 1.29257 0.000
discounts can be divided in two groups. Price discounts are found to be more effective in
inducing people to go for Stock Piling, Purchase acceleration, Brand Switching and New
product trial in that order, but are not effective enough to induce people to spend more.
Coupon Schemes
The behavioral responses to the coupon schemes are tabulated as shown in table 3. The
Friedman test indicates that people do vary in their behavioral responses to Coupon
Std.
Mean Rank Mean Deviation Sig
Coupon Scheme- Buy more than monthly budget 3.61 4.3642 3.51470 0.000
schemes (Sig. 0.00). The mean ranks obtained by the different responses indicate the
Coupon Schemes are particularly effective in inducing people to Stock Piling. They also
induce people for purchase acceleration and Brand switching and to some extent new
product trial. They as Price discount are not effective to make people spend more.
People respond differently to Buy one and get one free offer and the difference is found
to be significant as per the Friedman Test (Sig. 0.00). Buy one and get one free offer is
found to be particularly effective in inducing Brand switching. They are also found to be
effective in purchase acceleration and new product trial but are ineffective as a medium
Table 4: EFFECTIVENESS OF PREMIUM (BUY ONE GET SOME FREE) OFFER AS SALES
PROMOTION TOOL
Mean Std.
Rank Mean Deviation Sig
Buy and get some free- Buy another brand
2.33 2.6821 1.48491
Buy and get some free- Buy earlier
2.86 3.0265 1.31122
Buy and get some free- Buy more
3.05 3.2185 1.26961
Buy and get some free- Buy new product
2.88 3.1523 1.31021
for stock piling and spending more. The results are shown in table 4.
Bonus Pack
People’s responses to Bonus Packs are given in the table 5. Bonus packs are found to be
effective to induce brand switching, purchase acceleration new product trial and stock
piling. Like all the other sales promotion tools we have studied so far they are ineffective
to motivate people to spend more. The differences are between the various behavioral
responses are found to be significant as per the Friedman test (Sig 0.00).
Std. Sig.
Mean Rank Mean Deviation
Bonus Packs- Buy another Brand 2.68 3.0795 1.49454
Bonus Packs- Buy earlier 2.76 3.1060 1.22829
Scratch Card
Scratch Card induces the behavioral responses like Brand switching and purchase
acceleration and are found to be ineffective to respond people towards stock piling, new
product trial and spend more than the monthly budget. The Friedman test result shows
that these responses differ significantly. The results are depicted in table 6.
Std.
Mean Rank Mean Deviation Sig
The second part of our analysis focuses on comparing the effectiveness of the five
promotional tools in inducing individual buying behaviors. The five tools were ranked in
terms of the behavior induced by each. This highlights which tools are most effective in
To find out which promotional tool is more effective in inducing Brand Switching,
Friedman test was performed and the results are as given in the table 7. Premium (Buy
one and get some free offers are most effective in inducing Brand some free offers are
Std.
Mean Rank Mean Deviation Sig.
Price Discount- Buy Another Brand
3.05 3.1987 1.38574
Coupon Scheme- Buy another Brand
3.31 3.4768 1.31065
Buy and get some free- Buy another brand
2.44 2.6821 1.48491
Bonus Packs- Buy another Brand
2.84 3.0795 1.49454
Scratch Card- Buy another Brand
3.36 3.490 1.4508 0.000
most effective in inducing Brand switching followed by Bonus Packs. But other
promotional tools such as price discounts, Coupon Schemes and Scratch cards do not
Do sales promotion tools induce people to buy earlier than required? To know the answer
Friedman test was performed and the results are given in table 8. From the mean Ranks
obtained by different promotional schemes one can say that to induce purchase
acceleration the marketers should prefer Bonus Packs Schemes but they also have other
choices such as price discounts and Buy one and get some free offer. Coupon schemes
and Scratch card are not the right choices for purchase acceleration.
Std.
Mean Rank Mean Deviation Sig
Price Discount- Buy earlier
2.83 3.0662 1.25256
Coupon Scheme- Buy earlier
3.26 3.4305 1.18045
Buy and get some free- Buy earlier
2.86 3.0265 1.31122
Bonus Packs- Buy earlier
2.81 3.1060 1.22829
Scratch Card- Buy earlier
3.24 3.4172 1.31330 0.001
The effectiveness of different promotional tools to make people go for stock piling is
summarized in table 9. From the table one can conclude that Price discounts are most
effective tool for stock piling followed by buy one and get some free and Bonus Packs
offer.
The other tools i.e. Coupon Scheme and Scratch Cards are not as effective in motivating
people to go for Stock Piling. The difference between different tools is found to be
significant at 5%.
Many companies use sales promotion tools to motivate people for new product trial. The
consumers’ responses to different tools with respect to the motivation provided by them
for new product trial are tabulated in table 10.There exist significant differences between
Table 10: EFFECTIVENESS OF VARIOUS SALES PROMOTION TOOLS IN INDUCING NEW PRODUCT
TRIAL
Std.
Mean Rank Mean Deviation Sig.
Buy and get some free- Buy new product 2.71 3.1523 1.31021
the various sales promotion tools with respect to their ability in inducing new product
trial behavior. Buy and get some free is the best motivator of the tools studied for making
people to go for new product trial. The other promotional tools the marketer should
consider for new product trial are price discounts and Bonus Packs offer.
Spend More
The study reveals that Sales promotion tools are not very effective alternative to motivate
people to spend more than the monthly budget. The different sales promotion tools do not
Std.
Mean Rank Mean Deviation Sig.
Price Discount- Buy More than monthly Budget
2.85 3.8742 1.29257
Coupon Scheme- Buy more than monthly budget
3.06 4.3642 3.51470
Buy and get some free-Buy more than monthly
2.93 3.9603 1.28520
Budget
Bonus Packs- Buy more than monthly budget
2.95 3.9205 1.27291
Scratch Card- Buy more than monthly Budget
3.21 4.1391 1.14914
0.064
To study the Overall effectiveness of the various Sales Promotion tools the responses on
all the behaviors were summed and the Friedman test was applied on the sum and the
The results of the test reveal that the different sales promotion tools differ significantly
with respect to their effectiveness as Sales promotion tools. Buy one and get some free
emerged as the most effective tool of sales promotion while the scratch cards are the least
effective. Bonus Packs is ranked second while Price discounts are ranked third in terms
of their effectiveness as sales promotion tool. Coupon schemes and scratch cards were
not found very effective sales promotion tool. The table below summarizes the
responses.
Section 5
The Scope of this study was limited only to one city (Indore) of Central India. An
extended study encompassing more cities would enrich it further. Secondly, the customer
responses to the various sales promotions can vary across the product categories and
effects can be generalized across the product categories and product values. We limited
this study to only five promotion tools a further study may be undertaken to understand
the impact of other sales promotion tools like in–store displays, contests, refunds etc.
The sample size (364) and the sampling method (Convenient) were the other limitations
of study. A study with more number of respondents done with probabilistic sampling
Section VI
Conclusions
This research investigated the effectiveness of the sales promotion tools to induce
different buying response among the Indian Consumers. The study revealed that the
Premium (Buy one get some free) offers are the most effective tool of sales promotion in
India. Bonus packs and Price discounts have also been found effective, occupying the
as the other tools mentioned above, with scratch card being the least effective. The reason
may be because the top three promotional tools are easy to use and provide transaction
utility at the time of the purchase itself. For a country like India where the consumers are
less educated and are more concerned about the ‘value for money’ this argument seems
valid. Another point which our results suggests is that the Indian consumers by and large
favor passive promotions rather than active promotions like coupons and scratch cards
because they find it inconvenient to undertake an active search before taking the buying
decision.
Premium offers were found to be the most effective tool. As from the previous shopping
experience the consumer has an understanding of what the fair price of the product is.
When they realize that the effective price of the same product is much less than the fair
price they are most likely to respond to it quickly. They do not mind buying more than
the immediate requirement if they feel that they can use the product sometime in future.
The same hold true for Bonus packs as well. Price discount are more easy to understand
and does not result in buying more than the immediate consumption but are not as
effective as the premium offers because most of the price discounts are very low
(maximum in most cases is 25%) and hence the utility derived from them is lesser than
that derived from the premium offer where the effective price is 50% (or less) of the fair
price.
The study suggests that Coupons and scratch cards are not very effective tools of sales
promotion in a developing country like India because they involve active search which
the Indian consumers find inconvenient. With coupons, the Indian consumers are not
time of next purchase and buy something they do not intend to consume immediately.
The coupon deals also tend to be insignificant in providing the transaction utility because
of the fact that there is a time lag between the purchasing decision and enjoying the
benefit of the deal. Though the scratch cards are very popular they are least effective
possibly because of its overuse. Many supermarkets and small shoppers have used the
scratch cards as the promotional tools. These scratch card schemes promises very high
returns to attract the consumers but the consumers feel cheated when they get very
nominal actual returns/gifts. Other reason being that in all other promotional tool there is
an assured return but in the case of scratch cards the probability of returns/gift is very
low.
Companies have a specific goal when they choose to use any promotional tool. The study
revealed that Premium offers (Buy one and get some free) were particularly effective in
inducing brand switching and new product trial. Price discounts were found to be useful
in inducing stock piling and to a certain extent category expansion, while Bonus packs
are helpful in purchase acceleration among the Indian consumers. The promotional tools
were found to be effective for Brand switching, Purchase acceleration, Stock piling and
new product trial but are ineffective in motivating the consumers to spend more than their
monthly budget. The research validates that the sales promotions are a zero sum game.
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