19-12-2012, 06:11 PM
Impact of Sales Promotion on Organizations’ Profitability and Consumer’s Perception in Pakistan
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Abstract
This paper focus on Impact of Sales Promotion on Organizations’ Profitability
and Consumer’s Perception in Pakistan.Literature from different researchers is
also reviewed. The study is aimed at finding the relationship among sales promotion
strategies and the profitability of the firms along with the perception about sales promotion
of the consumers and its relationship with the brand loyalty of that particular brand or
company.
INTRODUCTION
The ultimate objective of every business is to increase the sale of goods that it deals in.
Several methods can be adopted for the achievement of this goal; some direct while others
indirect. Sales promotion is one of them. Sales promotion is defined as a “diverse collection
of incentive tools, mostly, short term designed to stimulate quicker and/or greater purchase
of particular products/services by consumers” (Kotler, 1998).
Sales promotion has become a valuable tool for the marketers and importance of it has been
increasing rapidly over the past few years. Sales promotions expenditure, in India, by
different marketing companies is projected to be Rs 5,000 crores and focus on activities of
sales promotion by the industry of Indian has increased by the figure of 500 to 600 percent
during the last 3 to 5 years (Economic Times, June 15, 2003). In year of 2001, there were as
many as 2,050 schemes of promotion of amount Rs 80,000 crore in the FMCG Industry
(Dang et. al, 2005).
LITERATURE REVIEW
Sales promotion when implemented effectively often results in an increase in short term
sales figure. This explains the inclination of corporations to put in a large percentage of
their funds in carrying out various sales promotion activities. However variations occur in
effects of sales promotion based on the attractiveness of the concerned brand (Alvarez,
2005). Sales promotions are useful tools which act as demand booster that do not sustain
the risk associated with the new products. (Blattberg, RobertC., & Neslin, 1990)
Sales Promotion
The International Chamber of Commerce (ICC) defines sales promotion as:
"Marketing devices and techniques which are used to make goods and services more
attractive by providing some additional benefit, whether in cash or in kind, or the
expectation of such a benefit ". (Boddewyn & Leardi, 1989, p. 365)
Consumer Promotion
Consumer promotion is a category of sales promotion including free samples, winning
contests, different price packs, and sweep stakes. Sales promotion is projected to increase
the sales of final ultimate consumers of the product (Kotler and Armstrong, 2002). Some kinds of sales promotion are based on some sort of benefit whereas some are very
communicative in type. (Kotler et al. 1999: Tellis 1998).
Price Perceptions
In the field of marketing it is often believed that perceptions are stronger than reality;
because consumers make decisions based on their perceptions of various stimuli. The
concept of consumer perception of the marketing mix element price is a concept intricately
linked with the consumer perception about sales promotion, because sales promotion is in
fact ultimately a reduction in the price of the product or the amount of resources spent by
the consumer. Schiffman and Kanuk (2004) have explained the perception about the price
of a particular brand or product. This means that how they evaluate a particular brand’s
price as fair or low or high. It is also stated by them that perception about unfairness of
price of a particular product lays an impact on the consumers’ decision to buy or not to buy
a particular product. Moore et al (2003) has explained that negative perceptions and
positive perceptions have an important impact on the decisions about the marketplace.
Different other studies have explained the perception of price as an element which can play
an important role in the success of a firm (Jiang and Rosenbloom, 2004). Moore et al.
(2003) has described that positive perception of consumers about a particular brand is an
indicator of status, quality and prestige; i.e. factors other than price. This aspect is also
covered in our research through the study of extraneous variables.
Brand Loyalty
Schiffman and Kanuk (2004) have stated brand loyalty as one of the desired outputs of
learning of the consumers. It is the probability of positive behaviors and attitude towards a
brand, thus it could result in positive word of mouth and repeat purchase (Rawly and
Dawes, 1999). Quester and Lim (2003) have explained the two major types of brand
loyalty. Behavioral loyalty explains the repeat buying behaviors of the consumers, whereas
attitudinal loyalty is the favorable behavior of the consumers towards a specific product
(Dikempe et al., 1997).
METHODOLOGY
The study is aimed at finding the relationship among sales promotion strategies and the
profitability of the firms along with the perception about sales promotion of the consumers
and its relationship with the brand loyalty of that particular brand or company.
In the consumer survey the selection of customers as unit of analysis was done by the
“Stratified sampling”. Sample size for the consumers is 100 consumers of each company,
i.e. Bata and Servis. Customer’s perception about sales promotion and Brand Loyalty was
measured through a questionnaire consisting of Likert Scale. In the questionnaire the
questions numbered from 1-6 measured the consumer’s perception about sales promotions.
The scale being selected was developed by Astous and Jacob (2002) and has reliability of
0.95. In addition the questions numbered from 7-16 measured the Brand loyalty of
Consumers. This scale was developed by the Quester and Lim (2003).
Conclusion
There are many researches that investigated the consumers’ perception about sales
promotion and brand loyalty of the brand to analyze their impact on increase in sales and
firm’s profitability along with all contributing factors of the firms’ profitability. The
financial analysis clearly depicted that the company’s sales significantly increases in the
period of sales promotion. Results of the consumer survey indicated that consumers’
perception about sales promotion has a significantly positive relationship with brand
loyalty, so that the research hypothesis is supported for each company. Therefore both the
short term and long term impact of sales promotion can be observed through the analysis of
two companies from the Shoe industry of Pakistan.