07-07-2012, 10:55 AM
ROLE OF SALES PROMOTION ON FMCG
FINAL GP ON FMCG FOR PRINT.doc (Size: 561 KB / Downloads: 346)
Introduction
FMCG Concept and Definition:
The term FMCG (fast moving consumer goods), although popular and frequently used does not have a standard definition and is generally used in India to refer to products of everyday use. Conceptually, however, the term refers to relatively fast moving items that are used directly by the consumer. Thus, a significant gap exists between the general use and the conceptual meaning of the term FMCG.
Further, difficulties crop up when attempts to devise a definition for FMCG. The problem arises because the concept has a retail orientation and distinguishes between consumer products on the basis of how quickly they move at the retailer’s shelves. The moot question therefore, is what industry turnaround threshold should be for the item to qualify as an FMCG. Should the turnaround happen daily, weekly, or monthly?
One of the factors on which the turnaround depends is the purchase cycle. However, the purchase cycle for the same product tend to vary across population segments. Many low-income households are forced to buy certain products more frequently because of lack of liquidity and storage space while relatively high-income households buy the same products more infrequently. Similarly, the purchase cycle also tends to vary because of cultural factors. Most Indians, typically, prefer fresh food articles and therefore to buy relatively small quantities more frequently. This is in sharp contrast with what happens in most western countries, where the practice of buying and socking foods for relatively longer period is more prevalent. Thus, should the inventory turnaround threshold be universal, or should it allow for income, cultural and behavioral nuances?
Characteristics of FMCG Products:
• Individual items are of small value. But all FMCG products put together account for a significant part of the consumer's budget.
• The consumer keeps limited inventory of these products and prefers to purchase them frequently, as and when required. Many of these products are perishable.
• The consumer spends little time on the purchase decision. Rarely does he/she look for technical specifications (in contrast to industrial goods). Brand loyalties or recommendations of reliable retailer/dealer drive purchase decisions.
• Trial of a new product i.e. brand switching is often induced by heavy advertisement, recommendation of the retailer or neighbors/friends.
• These products cater to necessities, comforts as well as luxuries. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers.
Introduction to the topic
Introduction:
The importance of consumer sales promotion in the marketing mix of the fast moving consumer goods (FMCG) category throughout the world has increased. Companies spend considerable time in planning such activities. However, in order to enhance the effectiveness of these activities, manufacturers should understand consumer and retailer interpretations of their promotional activities. The study here pertains to consumer’s perceptions regarding sales promotion. Some past researches have suggested that promotion itself has an effect on the perceived value of the brand. This is because promotions provide utilitarian benefits such as monetary savings, added value, increased quality and convenience as well as hedonic benefits such as entertainment, exploration and self-expression.
Broadly speaking most of the companies using Marketing Mix which includes…
Price
Place (Channel of Distribution)
Product
Promotion
These are the four basic pillar of marketing mix. Most of the marketing strategies are built on the basis of these criteria.
Promotion is one of the important elements of marketing mix. There are so many elements of promotion such as …
Advertising
Direct Marketing
Public Relations
Sales Promotion
Traditionally, sales Promotions have been used by marketer to increase sales in the short term. However, in the last few decades this communication tool has evolved and now is considered from a strategic point of view. For this reason, it is necessary to realize new studies in this area and study how consumers evaluate sales promotions.
Sales promotions have grown in both importance and frequency over the past few decades. Although an accurate estimate for total sales promotions expenditures does not exist, we can be sure that the trend is up.
Sales promotion serves three essential roles: It informs, persuades and reminds prospective customers about a company and its products. Even the most useful product or brand will be a failure if no one knows that it is available. As we know, channels of distribution take more time in creating awareness because a product has to pass through many hands between a producer and consumers.
Therefore, a producer has to inform channel members as well as ultimate consumers about the attributes and availability of his products. The second purpose of promotion is persuasion. The cut throat competition among different products puts tremendous pressure on their manufacturers and they are compelled to undertake sales promotion activities. The third purpose of promotion is reminding consumers about products availability and its potential to satisfy their needs.
From these elements Sales Promotion is the element which is in the focus of this project. Further Sales Promotion is quite broad term it includes …
Consumer Oriented Sales Promotion
Trade Oriented Sales Promotion
Consumer Oriented Sales Promotion
Consumer Oriented Sales Promotion is the main topic of this project. Here emphasize is given to motivate consumer to increase sales. Consumer Oriented Sales Promotion includes Sampling, Couponing, Premiums, Contest, Refunds, Rebates, Bonus Pack’s, Price-off, Event marketing etc.
Definition:
For the purpose of this study, following definitions of sales promotion were kept in mind.
Kotler defines sales promotion as: “Sales promotion consists of a diverse collection of incentive tools, mostly short-term designed to stimulate quicker and/or greater purchase of particular products/services by consumers or the trade.”
Roger Strang has given a more simplistic definition i.e. “sales promotions are short-term incentives to encourage purchase or sales of a product or service.”
Hence, any forms of incentives (price cut or value added nature) offered for short period either to trade or consumers are considered as sales promotion activities.
Marketer’s uses consumer oriented sales promotion tools for the following reasons:
• To increase short term sales
• To induce trial
• To reduce inventory
• To establish a brand name
• To make cross selling
• To cope up with competition
• To avoid advertising clutter
Tools of Consumer Oriented Sales Promotion:
There are so many tools or technique available to the marketers for achieving objective of sales promotion. These tools should be used considering all other factors affecting such as cost, time, competitors, availability of goods etc. These tools are as under…
1. Coupons
2. Price-Off
3. Freebies
4. Scratch Cards
5. Lucky Draws
6. Bundling Offer
7. Extra Quantity