Brandalyzer

Posts Tagged ‘impact of promotion strategy on brand equity

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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