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The Government of India (GOI) has passed a mandate that all cable services in the four metros be digitized by 30th June, 2012. From 30th June, the four metro cities will cease to receive analogue television broadcast signals. The target for complete digitization in urban areas is September 31, 2014 while the entire country is expected to achieve digitization by December 31, 2014.
Currently, the cable operators transmit the channels in analog signal mode which is very hazy. In a digital signal, the receptivity is much clearer and all the channels have the same reception quality. As both the signals are received at the same time, there are no issues with the synchronization of sound with video. There is a huge cost involved in digitization of cable signals and many cable operators are shying away from this kind of investment, barring few organized and large scale cable operators.
Meeting the deadline is very difficult
Following government directives broadcasters will relay only encrypted digital signals that will then be accessible to customers with set top boxes (STBs). However, meeting this deadline is just impossible. This deadline implies installing over 1.5 lakh STBs per day in the four metros. Currently, the number of daily installations in the four metros together is only 10,000.
Benefits to Viewers
Unlike the earlier scenario, wherein subscribers were forced to choose whole packages of channels even if they did not watch them all, in the new regime, they will be allowed to choose channels on a la carte basis. In other words subscribers will have much better choice at picking only the channels that they want. This will surely bring in price regulation for both the Direct To Home (DTH) & digital cable operators. Also, the Cable TV networks are now free to recover digitization costs from broadcasters through ‘Carriage Fees’. Earlier they were charging the consumers for it. Carriage fees borne by broadcasters are estimated to be around Rs. 4,000 Crores (US$ 752 Million) annually.
Impact on Viewership Ratings
One of the expected benefits of digitization is much better transparency on viewership. This is one of the reasons why the legislation involved has been so contentious. Many channels are highly creative with their viewership numbers. Most like to retain that freedom to stay fuzzy. With digitization, data on media content consumption is much more concrete.
Globally, in most countries, TV channels earn 70% of its revenue from its subscription and only 30% from advertising. In India, the revenue split is exactly the reverse, with 70% of the channel revenues coming from advertising. Digitization is expected to bring down carriage fees and reduce dependence on television rating points. TV Channels fighting for high TRPs to woo the advertisers will see a decline, with reduced dependence of revenues from advertisers. With HDTV providing more control to viewers to filter the content (esp. advertisements), there is a fear that viewers may chose to cut advertisements for an additional subscription fees.
This is a double edged sword. On the one hand, digital broadcasting can help launch high-quality niche channels that cater to a specific, paying customer base. The lack of Indian equivalents of the UK’s BBC and America’s Public Service Broadcasting Service, with their formidable non-fiction programming is frequently lamented.
Friction-free access to new channels can remedy this and chances are that as the medium evolves in the years ahead, the paucity of quality programming may turn out to be a matter of the past. But,on the other hand, this can end up as a new war for eyeballs. And that will lead to the same approach to content that plagues our print media: where readers often pay little to nothing to be fed dubious content. This move is supposed to democratically benefit all stakeholders in the value chain. Only time will tell: Will it benefit all equally or Will it lead to new power-players?
Constructing Routes to Market
Posted on: April 25, 2012
I don’t have any experience in constructing route to markets. But, this according to me is one of the most important factors in product and marketing management. I am just writing this blog based on some theoretical knowledge and framework of this vital concept.
To develop a Route-to-Market (RTM) plan, it is important to:
- understand current position of the category and the brand in the market and in the target segments
- know all your customer segments and their behavioral specifics
- have an understanding of all the available sales and distribution channels to the customer segments
- understand the adv/disadvantages of each of the channels for the brand to reach the customer segments
Steps:
1. Where and how will your customers would want to buy the product
2. Incorporate a supply chain perspective to optimize the customer value
3. Recognize the catalysts and obstacles to change and do a feasibility analysis
4. Understand the distribution contracts to address exclusivity, pricing, margins, and competitive issues.
5. Understand the components of the distribution
6. Recognize the strengths and weaknesses of each channel and align the products/services with the channel
7. Define the ideal distributor for you and how the existing disrtibutors are different
8. Outline the financial and non-financial motivators for the distributors
9. Recruit the distributors and resellers
10.Train the distributors on the products and build expertise
11.Implement effective programs like cross-promotions, deals, etc.
12.Engage the distributors in the advisory councils
A company’s RTM strategy will be based on the target consumer segments, channel dynamics, competition, internal capabilities and the business environment. After the decision is made, and the routes to market are decided, it is important to actively manage it and always look for new sales points, and channels to drive growth.
The primary challenge is for a company to make certain it has put the consumer first—that it is designing a go-to-market strategy that starts from the customer perspective. Many companies build their go-to-market model from the inside out. But there is a lot of leverage in constructing it from the outside in, or at least in modifying it on the basis of knowing what customers want to have change.
Earlier,
100% FDI is allowed only in the wholesale (cash & carry) market
51% FDI is allowed in Single brand retailing like Adidas, Tommy Hilfiger, etc.
FDI is not allowed in the Multi-brand retailing like TESCO, Carrefour, and WalMart
Now,
100% FDI is allowed in Single brand retailing. This means now companies like Adidas, Tommy Hilfiger are allowed to own 100% of their retail businesses in India. Earlier, they had to come with some partner like Nike entered partnering with Sierra Industrial Estate Private Limited and Bridgestone entered in partnership with ACC limited.
51% FDI is allowed in multi-brand retailing with some investment conditions to protect the kirana stores, and farmers and some mandates on back-end investments. This means retailers like TESCO, Wal-mart can set up their retail stores in India in a JV format and enter the $500 bn Indian Retail Market.
The policy of allowing 100% FDI in single brand retail can benefit both the foreign retailer and the Indian partner – foreign players get local market knowledge, while Indian companies can access global best management practices, designs and technological knowhow. However, there are some serious concerns that the global retailers may wash the mom and pop kirana stores of India which caused a lot of discussions in the Parliament.
Also the economic think tank of India, ICRIER has rejected the idea of opening up FDI gates, as they said it will cause harm in the long term to the small traditional retailers in India. This is a very big move by the Govt. of India, and its affects have to be seen in the next few decades.
Many think that this will help us improve the back-end infrastructure and the supply-chain which may help reduce wastage and curb inflation. However, there are other reasons to worry on how it would affect the food security for India. There are some talks that it will create 10 million jobs and it will not kill the mom-and-pop stores. One thing that is certain is that the global retailers are going to give more varied choice, value, and experience to the Indian consumers. However, will this benefit us economically in the long-term? Lets wait and watch!
- In: Brand Management | FMCG | Marketing | Strategy | Uncategorized
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Product Range Management
A product range is the total product offering expressed in terms of width and depth. The width of a product range depends on the variety or number of types in a product category. The depth of a product range refers to the amount of choice offered in terms of product and brand variation within a product category. A product range with a lot of depth allows you to cover a range of price points. Similarly, the width allows providing a great variety and choices to the consumer with line extensions.
Brand Extension: The brand Rasna extended into another category like packaged juices.
Line Extension: The brand Maggi launched new flavours of Maggi. Here Maggi is still in the same category, but the variation comes within the offering. Line extensions are not necessarily in flavours, but happen in any of the product attributes.
Grammage Range Extension: When Surf Excel extends its Grammage range. Earlier it used to launch 50 gm and 100gm, and now it launched a 20gm and 250gm. Also, remember most Grammage extensions are considered as line extension.
How promotions help?
For example, let us suppose there is a biscuit company XYZ in India which is a very big brand. XYZ currently offers its packs in 90 and 150 gm packs. The challenge it faces in North India is from local competition. There are a few strong local players who offer more volumes at low price points. The local companies offer very large pack sizes and doing very well. The consumer behaviour in the North India shows that people tend to buy large packs, and generally don’t prefer to buy small packs.
Challenge1: The Company XYZ doesn’t have production capacity for large packs.
Challenge2: It is very difficult to create trials when consumers tend to buy large packs.
So, the company decides to have a two-pronged approach:
- Give a rider promo (give your small pack biscuit free with another category) to induce trials.
- Introduce large combo-packs to attract the large-pack buyers
To give a rider-promo, is to give a product with another popular product based on the target consumers you want to reach. Marketers ask the question: Which is the product in my existing portfolio that reaches the maximum target group of the new biscuit product? This will help them leverage the existing distribution. If there is no product that is present in your existing portfolio then you may negotiate with other companies who operate in similar categories. Though there are other considerations, leveraging the distribution is one of the most crucial factors in a promotion, if the intention of the promotion is to induce trials. Because one of the most important factors to create trials is that the product should be present in the stores.
Steve Jobs himself said it: it’s smart to take an existing idea and enhance it beautifully. Apple did it. So have some of the most successful brands worldwide. The same story can even apply to selling washing powders. ET on Sunday analyses brands, companies and countries that have imitated their way to innovation.
Each time he came on the stage, he promised the world something “new”, “magical” or “awesome”. Each time he delivered: the Mac, iPod, iPhone, iTunes and the iPad, products we craved to touch, own and experience, until he told us it was time for something ‘newer’. Yet, nothing that Steve Jobs (and therefore Apple) unveiled was a first. IBM gave the world the computer, Sanyo a portable MP3 player, BlackBerry invented the smartphone and Microsoft came up with the tablet. That was before Jobs prefixed them all with an ‘i’.
Apple has almost always imitated its way to the top. Starting from the days of Macintosh, when it adopted Xerox’s graphical user interface as its own. Jobs never denied the charge. In fact, he revelled in it: “It comes down to trying to expose yourself to the best things humans have done and then trying to bring those things in to what you are doing. Picasso had a saying…good artists copy, great artists steal…we have always been shameless about stealing great ideas.”
Whether Picasso said it in the same vein is debatable. But Jobs’ interpretation makes great business sense: for some fleeting moments in August, Apple’s gadgets were worth more than Exxon’s oil. Last checked, the company was valued at $350 billion.
But how can an imitator best an innovator? At home and in school, we have been taught to abhor copying. Be original – all the generations living today have been told. How can something wrong give better results than the good?
Ask companies like American Express, Walmart and McDonald’s. Diners Card was the one which came up with credit cards but threw away the first-mover advantage to American Express. McDonald’s copied White Castle and Walmart followed Korvette. We don’t remember the innovators because they didn’t turn their ideas into successes. The imitators did. How?
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The Follower’s Advantage
In business, imitation gains potency from amoral quarters. “It is a lot less risky. An imitator knows that his product or service has worked in the market before. He is also equipped with the analysis of how the market received the innovation,” says Rakesh Basant, professor of industrial policy at Indian Institute of Management, Ahmedabad.
Hindsight was leveraged effectively by Hindustan Lever as it took on the craze of Nirma in the 1980s, and came up with Wheel, its own ultra-cheap washing powder. Imitation is really a short cut. Instead of doing the hard work and spending money for years on research and development, just take what others create – and, if you are smart, improve on what exists. So, obviously, illegal rip-off artists don’t figure here. But some really big economies do.
The story of Japan, Korea and China: their companies exploited cheap labour to reassemble and remake products at a fraction of European and US prices.Samsung tore apart microwaves imported from Japan and the US. Hyundai showed down giants like Ford and Mitsubishi by using their expertise shared through alliances. In China, copying can range from specific products to entire stores, including that of, well, Apple.
Betting on Low Costs
The story is the same in this part of the world. Spencer’s Retail brought the department store to India. But Big Bazaar made it big. Zee Networks thought up the Indian Cricket League (ICL) on the lines of European football clubs. However, the Board of Control of Cricket in India (BCCI) stole the thunder. Karsanbhai Patel saw the opportunity in low-cost detergents. But Wheel bulldozed Nirma to capture 21% of the current market pie (about Rs 12,000 crore).
Indian imitators also have a choke hold on the domestic market due to price advantage. Pharmaceutical companies Ranbaxy, Cadilla and Cipla, chiefly in the business of generics, have forced global giants like Glaxo, Pfizer and Merck to slash prices to stay in the reckoning. Some foreign companies have given up the fight. This is why Lipitor, the world’s largest-selling drug, is not available in India. Tens of desi versions come at a fraction of Lipitor’s price. Viagra, the iconic blue pill, had the same fate. Mankind Pharma’s Manforce, sold at a much lower price, has captured half the market.
These companies have also leveraged competitive pricing overseas. For instance, Cipla’s HIV cocktail, much in demand in African countries, comes at almost one-twentieth the cost of its innovator peers.
Innovate on What You Borrow
It is ironic that even though innovation is worshipped today, the environment is most conducive to imitation. Technology has brought people extremely close. They share ideas, information and even have similar sets of needs. So there is ample scope for multiple companies to make it big by copying one another.
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But how long can imitators ride on low prices and faster turnaround time? Indefinitely, thinks Oded Shenkar, author of Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge. “The rationale behind imitation is that you don’t have to reinvent the wheel. The company may not build on it further. It can thrive by simply importing the innovation into a new market,” he says.
Other experts believe cookie-cutter imitators have a short shelf life. They must add value to the innovation for surviving in the long run. Raveendra Chittoor, professor of competitive strategy at the Indian School of Business, Hyderabad, cites Biocon and Glenmark as examples. “These companies are evolving into innovators because it is essential for growth. There is no evidence of this transition now. But that is because new molecules are in different stages of development.”
A quick check on the world’s sma-rtest imitators corroborates Chittoor’s view. Apple added an internal hard drive and a classy build to outdo the original MP3 player. Google integrated Microsoft Office functions and unlimited space into Gmail to distinguish it from others. Similarly, all successful imitations have an element of innovation built into them. Be it Big Bazaar expanding Spencer’s Retail’s product portfolio. Or Wheel adding new variants to the low-end detergent. Academics have a new term for such innovation+imitation: imovation.
Still a Dirty Word
If imitation is so successful, why don’t its followers come out of the closet? Is it a secret strategy restricted to executive suites? “No, it is a dirty word. The stigma attached to the concept blots it out of conversations. Avid imitators won’t admit to it and B-schools won’t teach it,” explains Shenkar.
That’s understandable. We aren’t willing to credit imitators with any success either. But if you lay any worth by philosophers, it is surprising how most of them weren’t shy of giving imitation due credit. Be it Charles Darwin when he explained evolution or Aristotle when he included it in the list of ingredients that make a great story.
Please refer to http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/how-steve-jobs-hindustan-lever-apple-hyundai-samsung-ranbaxy-cadila-and-others-imitated-their-way-to-innovation/articleshow/10282361.cms?curpg=1 to read the complete post by The Economic Times
Cadbury India’s debut in the Rs. 12,000-crore biscuits market with Oreo has been beset with challenges from the start. In March, as the company readied for the launch of its global best-selling Oreo from the Kraft stable, rival Britannia 
Industries came up with an me-too product called Treat-O, another chocolate-flavoured sandwich cookie. Cadbury India retaliated and sued Britannia for trademark and copyright infringement of intellectual property rights. While the court battle will take its own course, Cadbury India will have to ensure that it makes the right marketing moves in terms of putting together an apt positioning for Oreo to win the final war. The Indian biscuit industry is dominated by major brands such as Parle, Britannia, and Sunfeast. Also, the category has strong regional brands such as PriyaGold in the north, Cremica in the north and west, Dukes in the south and Anmol in the east and north. Currently, Britannia and Parle each command one third of the biscuit market.
Though it has lost its first-mover advantage, Oreo hasn’t refrained from launching a high-decibel marketing campaign. The sandwich biscuit brand, launched with its global ‘Twist, Lick, Dunk’ communication, broke across media, including television, print, outdoor, radio, below-the-line, and digital.
“Oreo’s global positioning is based on moments of togetherness,” says Chandramouli Venkatesan, director – snacking, India and strategy – South Asia Indo China, Cadbury India. Ideated by Interface Communications, the brand’s TV ad features an interplay between a father and son. The son explains the ‘twist, lick, dunk’ ritual of consuming the biscuit. “It’s an interesting way of bonding and so far, this simple insight seem to have worked in favour of our brand,” he adds.
But other biscuit brands have been experimenting with the positioning around the theme of family in the past. Will this approach work for Oreo in the future? According to Venkatesan, there are not many black biscuits in the world and consistency in communication on a global level is important for the brand.
Robby Mathew, national creative director, Interface Communications shares that in the film, the brand is talking to the Indian mother who is on the marketer’s radar. “In future, we will be exploring other relationships seen in the Indian families. We will build the campaign with digital and on-ground activities,” he says. There is a special focus on in-store visibility through a ‘wall of blue’ (racks full of Oreo packs) in kiranas and modern retail. In fact, this helped in initiating more trials for the brand.
Today, every brand toys with the idea of creating a movement and Oreo is no exception. Recently, Cadbury commissioned a survey titled ‘Oreo Togetherness Quotient’, that mapped Indian families’ views on the evolving parent-child relationship in the dynamic Indian society. Conducted by research firm Nielsen across six cities (Mumbai, New Delhi, Bengaluru, Chennai, Hyderabad and Kolkata) in India and comprising of 1819 respondents, the survey reveals that the role of the father in a family cannot be underplayed. The brand is sharing these findings with parents who later are signing up for ‘Oreo togetherness pledge’ by promising to spend more quality time with their children.
Also, as part of an on-ground initiative, ‘Oreo Togetherness Bus’ is currently running across the country, providing a platform for parents and children to catch fun family moments. Stationed at entertainment hubs of the city, the bus is loaded with fun games, photo opportunities, a cookie corner, and more. Anyone can hop into the bus with their kids to have fun, and try their hand at games. The bus is to travel across nine cities. The progress of the activity is being reported on the brand’s Facebook page.
With a competitive price strategy, one wonders if the brand plans to penetrate smaller cities and rural markets in the near future. “Oreo is a universal offering. Success in rural markets will not come easy. First, we will build our brand in urban markets and head there later,” says Venkatesan. Globally, Oreo generates revenues of over US$ one billion annually.
Without getting into numbers, Venkatesan says, “Oreo has big targets to achieve in India. Most importantly, we want to earn respect and stature in the biscuits category.”
Source: Financial Express
Promotions: Horlicks Jug
Posted on: September 24, 2011
During the early 90′s, the brand Horlicks faced a problem in West bengal. Though the brand is well known and the consumers are buying it, the consumers are not buying the 1Kg pack and are repeatedly buying the 450gm size pack. Though the 450 gm size pack helped gain new users (trials), the repeat purchase is still happening at 450gm pack size only. Consumers are not buying the 1Kg pack.
Objective:
To make the existing consumers to uptrade to 1Kg size, and capture the heavy users of the competitive brands like Complan and Viva.
Promotion Vehicle Chosen: Container Premium
The 1Kg Horlicks was packed in an attractive premium glass jug. The jug decorated with a floral pattern, and had a plastic handle. The lid was embossed with a big logo.
Results:
Sales of the 1Kg bottle in West Bengal increased by 28% and an increase of 10.4% in the controlled market Bihar.
This is an example of an excellent promotion targeted at housewives. This is a very ambitious promotion as this Horlicks jug involves changing all the existing ground rules. There are a lot of changes required like the factories are requried to fill a glass jug rather than the usual bottle requiring change in production processes. The whole logistics are to be changed as the jugs require larger cases for transit. The jugs occupy more space in the shelf, and has to be negotiated with the retailer.
Promotions Management
Posted on: September 24, 2011
Every promotion has an objective to increase sales, brand-building, building added values to the brand, increase purchase frequency, introducing a new sample product, etc. Based on the objective to be achieved, category/brand managers and key account managers develop and implement a promotional programme that gives the maximum return on investment and maintains the trade off between profits and share, and among different stakeholders like suppliers, finance, merchandising, distributors, retailers and other trade partners.
For example, some of the simple reasons for a price promotion are:
1. Offensive Sales Gain: To offset competitive threats where the manufacturer is ready to forego short term profits for long term base and traction.
2. Recover Market Share: The player has lost some market share to competitors and want to recover the share.
3. Stimulate Sales and increase profitability: The company will increase the sales revenue which wouldn’t have come without the promotion, as a result it increases the total profit from the promotion.
4. Switches and Trials: Certain promotions are made to attract the consumers using competitive products and let them switch to our product
5. Increase purchases and push stocks/volumes: Certain promotions are made to let the consumer buy more than required. So the consumer buys three t-shirts instead of one t-shirt.
6. Trade promotions are given to trade partners like distributors and sellers to maintain the product on the shelf, and push the product. These include more margins, etc.
Promotions Management is one of the key challenges faced by the marketing and brand managers. It is one of the most interesting areas in marketing involving a lot of creativity and understanding of the customers. Various decisions are taken about:
- What to promote?
- When to promote?
- How long to promote?
- Which bundle of products to select?
- What is the effect on the brand equity?
- What do the trade partners, production process, etc. require to do?
- How do I communicate the promotions?
- What sort of impact will the promotions make on my baseline consumer sales?
Some of the different promotions are:
- Price promotions
- Volume Promotions
- Saver packs
- Different banded packs, pack free promotions
- Coupons
- Cash refunds
- Competitions
- Container premiums
- Promotional Games
Let us see how one of the Toothpaste brands used promotions to increase its share.
Promise Toothpaste Promotion
Test marketing a new brand in a single area before extending distribution nationally can produce invaluable data. This is about how Promise discovered in test market that a sales promotion was needed to achieve a market share target.
Background
Promise toothpaste was test marketed by Balsaras in Delhi in early 80′s. The product was similar to Colgate toothpaste in taste and packaging, but media advertising stressed the clove oil content of Promise.
Three months after the Delhi launch, a tracking study was conducted and the study indicated that Promise had achieved a 17% trial rate and repeat purchase rate of 22%. This meant that if the marketing support for the brand is unchanged in a national launch, it would achieve a market share of 17% X 22% = 3.74%. As the target market share was at least 8%, this predicted result was unacceptable.
The agency indicated that a repeat purchase rate of 22% is good in a product category like Toothpaste. So, the problem is the media advertising had not induced enough people to try the brand. If the trial rate could be increased to 40% and the repeat purchase rate is maintained at 22% then Promise would achieve 40% X 22% = 8.8% market share.
Promotion Vehicle Chosen: Sampling
Free samples of Promise were distributed to approximately 1 lakh homes in Delhi. Care was taken that the free samples were not placed in those households which had already tried the brand.
Within three months of the promo Promise’s market share climbed to 10% in Delhi.
It is interesting to see how promos are used to achieve various objectives. In the further blogs, I will analyze a set of earlier promotions and a set of recent promotions to understand how marketers are using promotions to achieve different targets.
Based on a set of factors mentioned below (not comprehensive) the managers decide to go for a PUSH or a PULL strategy. In practice, generally both PUSH and PULL strategies are used in combination to achieve the objective.
1. Product category
2. Consumer Behaviour in the category and the interaction
3. Competition Promotions and Marketing Spends
4. Marketing spend
5. Effectiveness of the different options in that category
6. and more
Pull:
1. Value Promotions
2. Volume Promotions
3. Banded Packs giving some other category free
4. Banded Packs giving a LUP of the same category free
5. BTL promos
6. ATL promos
7. Coupons/Samples
8. and more
Push:
1. Increasing trade promotions and incentives
2. Increasing distribution
3. Increasing margins and pushing it to the retailers
4. Helping the retailer increase his sales and yours by different consumer activations,etc.
5. Provide more credit extensions, etc.
6. Building different incentives like if you sell this much you will get washing machine free, or this much worth stock of this brand free, etc.
7. and more
If a firm decides to use push strategy, its efforts are directed at resellers and the manufacturer becomes very dependent on their personal selling abilities and efforts. The promotional efforts are focused at pushing the product through the distribution channels; the resellers may be required to display, demonstrate and offer discounts, to sell the product. The communication to resellers is generally through trade circulars or the sales force.
Push strategies are generally appropriate for:
- Product categories where there is low brand loyalty
- Where many acceptable substitutes are available in the market
- Relatively new products are to be launched
- When the brand choice is often made in response to displays in the stores
- The product purchase is unplanned or on impulse
- The consumer is familiar and has reasonably adequate knowledge about the product
- Manufacturers, who cannot afford to engage in sustained mass advertising, often use push strategy and offer effective incentives to dealers
Example for Retailer promotion: Buy Cadbury’s products worth Rs.3000/- and get any 30 chocolates worth Rs.5 each free.
Through this offer the company is pushing its product to the retailers and now that the retailer has enough incentive the retailer stocks more and thus it becomes essential for the retailer to push the product to the consumers.
Disadvantages of Sales Promotion:
1. Increased price sensitivity
Consumers wait for the promotion deals to be announced and then purchase the product. This is true even for brands where brand loyalty exists. Customers wait and time their purchases to coincide with promotional offers on their preferred brands. Thus, the routine sales at the market price are lost and the profit margin is reduced because of the discounts to be offered during sale-season.
‘The Diwali Bonanza Offers’ on electronic goods.
2. Quality image may become tarnished:
If the promotions in a product category have been rare, the promotions could have a negative effect about its quality image. Consumers may start suspecting that perhaps the product has not been selling well, the quality of the product is true compared to the price or the product is likely to be discontinued because it has become outdated.
The Smyle Powder offer of “Buy 1 and get 2 free” went on and on. Ultimately people stopped asking for the product as the on-going sales promotion strategy made the customers perceive it to be a cheap and an inferior product.
3. Merchandising support from dealers is doubtful:
In many cases, the dealers do not cooperate in providing the merchandising support nor do they pass on any benefit to consumers. The retailer might not be willing to give support because he does not have the place, or the product does not sell much in his shop, or may be he thinks the effort required is more than the commission/benefit derived.
4. Short-term orientation:
Sales promotions are generally for a short duration. This gives a boost to sales for a short period. This short-term orientation may sometimes have negative effects on long-term future of the organization.
Promotions mostly build short-term sales volume, which is difficult to maintain. Heavy use of sales promotion, in certain product categories, may be responsible for causing brand quality image dilution. While sales promotion is a powerful and effective method to produce immediate short term positive results, it is not a cure for a bad product or bad advertising. In fact, a promotion is speed up the killing of a bad product.
How promotions may take your market share down?
Let us suppose a Pepsodent toothpaste gave a volume promotion that ‘Buy 1 and Get1 free‘ on a toothpaste. So, as toothpaste is a category where people don’t mind to buy for future purchase (buying more than what is required today), many people may want to take advantage of this offer and they buy two packs of it, which means you’re having four toothpastes for the next few months. A lot of people bought this, and the volumes shoot up increasing your volume share.
A very important thing is the consumption is constant in this category. A consumer who bought four toothpastes will not suddenly start brushing his teeth four times in a day. This means though he bought four packs, his rate of consumption hasn’t changed. So, this essentially means the consumer will not buy the toothpastes in the coming months. However, based on your penetration, marketers would like to see if we could bring in new consumers to use Pepsodent and are they being retained after the promotion goes off. If people buy Pepsodent only on offers and they don’t buy normally, it becomes extremely difficult for the marketer to handle it, and may eventually have to reduce the price of Pepsodent.
So, the promotion might result in the following which causes a decline in the market share in the forthcoming period.
- Existing consumers did a lot of pre-buying during the promotion and will not purchase in the coming months
- New consumers to the brand switched back to their earlier brand
- Couldn’t pull new consumers into the category
The whole strategy of having the right promotions programme to gain maximum share and profits is not so easy as it is on paper or written in a blog. It depends on hundreds of factors which change across cultures, and regions.
Surely, there are advantages with promotions which will help you achieve your marketing objectives. But, one has to be very careful while handling brand promotions because it can easily put the brand in a worse situation than it was before the promotion.
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