The effect of sales promotion on consumer behavior
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 4908 words||✅ Published: 1st Jan 2015|
Part of: Consumer Behaviour
Sales promotion is one of the most important strategies that marketers are focusing nowadays and also it is one of the most important techniques in the marketing mix. Sales promotions are increasing day by day thanks to the rough competition and other developments that are taken place in the world as globalization and technological developments. Moreover, sales promotion is one the most amazing tools that supports other marketing effort as advertising to attract consumers (Shimp 2003: 469-471).
The aim of this research is to identify what is meant by sales promotion and consumer buying behavior. Moreover, this study will examine how sales promotion is influencing on consumers while they are purchasing certain product or service.
Although sales promotion is one of the tools in the marketing mix, it has different objective from others. For example, advertising is aiming to create brand awareness, influence and change consumers’ attitudes. Personal selling is aiming to have direct contact with buyers. The main aim of this connection is to persuade, inform and educate them. Point of purchase communication is to attract consumer to purchase certain product or service while he/she do a shopping. Sponsorship marketing is aiming to promote the brand when it helping to do certain event. However, sales promotion has another objective, which is stimulate consumers to purchase certain product or service in a lower price. They are incentives that are offered by manufacturers. (Shimp 2003: 4-5)
1.4 organization of the paper
The paper structure is divided into literature review, which contains definition of sales promotion and definition of each type of it. Also in the literature review include the definition of consumer buying behavior and the definition of each part of it. Then studying how sales promotion is influencing on consumer buying behavior and research gap will be included in the literature review. Then another chapter will handle the research design or the methodology to answer the research gap’s questions. Finally the conclusion of the research.
2.1 Sales Promotion
Sales promotion is the techniques mainly are used by marketer in order to influence and encourage consumers and end users to purchase certain product in a certain time period. Sales promotion has a short term influence on sales; hence it is mainly offered for a short term. In case that certain brand launched a new product mainly consumers do not have information or experience regarding this new product, therefore sales promotion is recommended to encourage this consumer to try and purchase this product. As it is clear that sales promotions’ objective is influencing on consumer buying behavior (Solomon, Marshall and Stuart 2008: 422-423). Kotler and Armstrong (2004: 467) agreed with the pervious definition. Moreover, they classified sales promotion as one of the five backbones of marketing communication mix. Marketing communication mix is mainly tools that are used to persuade consumers to purchase certain product or service, sales promotions are one of these tools that are short term motivations that affect on consumer buying behavior.
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Real world facts show that sales promotions are crucial for the marketing of the companies: taking the instance of the United States where the amounts of funds dedicated to the sales promotions account for about 30% of what spent on advertising. Nevertheless, it is common in Europe to find a company where the investments in sales promotion exceed the advertising budget (Astons and Jacob 2002: 1270). Also, it was found that the price based sales promotions are the main factor to induce customers to buy more and enhance product trial. These facts make it important to exhibit in the next few paragraphs the tools and the different kinds of sales promotion used by marketers (Parsons 2003: 76).
2.1.2 Types of Sales promotion
According to Clow and Baack (2007:309) there are four types of sales promotions which are as following:
Coupons are one of many tools used by marketers as sales promotion technique. Coupons are paper or certificate that save money for the customer when he/she purchases a product. This could be a 25% discount of the value of the product or a fixed amount like $5 on every piece (Harmon and Hill 2003: 167). Marketers try to send coupons to customers by so many methods: Free standing inserts in newspapers could be an effective method. Moreover, a customized mail could be sent to the important customers or give the coupon to the customer when he/she purchases another product. However, there are some magazines which include only coupons and sold most probably as a fundraiser in charity events. Electronic in store coupon machines constitute the state of the art in that field as they are at the point of checkout counter where the history of the customer is checked and coupons are offered based on the past purchases and the buying behavior with that company (Kotler and Armstrong 2006: 472).
Statistics could be used to show the popularity of coupons: nearly 79% of the US population use coupons and redeem their amount. In 2004, nearly the value of 3.8 billion coupons was redeemed by the American consumers and the shoppers saved about 3 billion dollars due to the use of coupons. These dazzling numbers do not make mandatory to accept that the use of coupons will increase the welfare of the company as this matter is still a very controversial matter (Barat and Paswan 2005: 379).
Coupons have a lot of advantages like increasing sales in the very short period and encourage the customers to switch to another brand. Also, Coupons stimulates the trial of a new product. For instance of a customer who wants to purchase a new flavored kind of tea but fears that the new flavor will not match his taste, a coupon will encourage this customer to purchase the product as it will reduce the cost of obtaining such a product (Nudubisi and Tung 2005: 33-34). On the other hand, many views point up the ineffectiveness of using the coupons as a sales promotion technique. Those are arguments are based on the fact that huge coupon discounts on the product may decrease the value of that product in the minds of different customers. Moreover, the majority of these coupons are redeemed by loyal customers who by any mean would have purchased the product with or without the introduction of Coupons causing the waste of the financial and monetary resources of the company (Silva-Risso and Bucklin 2004: 442).
Rebates are also a form of sales promotion that could be likened to coupons. Nonetheless, there exists a major distinction between both of them: the coupons amounts are redeemed during purchase but rebates are redeemed after purchase. This ambiguity could be resolved by explaining the process of the rebates: when a customer purchases a product – subject to rebate discount – he/she sends the proof of purchase like the receipt and the company sends him the money afterwards by mail (Kotler and Armstrong 2006: 472,). This was always conceived as the main disadvantage of rebates as the uncertainty of redeeming the money persists after purchasing the product which constitutes the major dissimilarity between coupon and rebates (Lu and Moorthy 2007: 67).
Free Samples and Premiums are also among the most important tools of sales promotion. Free samples are trial amount of a certain product distributed to customers through so many different ways like handing them in front of office buildings, send them by mail or attach the sample to another different product. Free samples stimulate the trial of a new product during the introduction stage of the product (Clow and Baack 2007: 313-314). However, the problem of samples is that it is the most expensive sales promotion tool. Premiums are goods offered for free or with a very low price to induce customers to buy the product. Many examples explain premiums like the inclusion of a toothbrush with a tooth paste or the inclusion of a kid toy with kids products in order to attract the segment of children who will ask their parents to purchase that product for them in order to enjoy the accompanied product. Premiums could in the package, out of the package or even sent by mail (Pride and Ferrel 2008: 565).
22.214.171.124 Bonus packs
Marketers also refer sometime to bonus pack as a mean to promote sales to their customers. Bonus pack could be exemplified by the Kraft Company which could offer the normal 500 gm cheddar jar with an increase to 700 gm with the same price i.e. customers will benefit from an increase of 200 gm from free. A soft drink company may offer a 14 cans pack for the price of 12 cans making the customer benefit from 2 cans for free. The biggest deal in that field is the BOGO (Buy One, Get Other for free). Bonus packs could have several advantages as boosting sales in the short run without the need to reduce price; this point is very critical as decreasing prices could devaluate the image of the product. Moreover, the bonus pack is a temporary offer which will not last for ever; this point could help the company as ending the offer will be a lot better than decreasing the price and increasing it afterwards (Nudubisi and Tung 2005: 34). On the other hand, bonus pack could have some pitfalls: one of the major problems associated with bonus pack is that it makes harder for supermarket shelves to include the higher amounts of the products. Some customers may realize that this increase in quantity is permanent and could act in an irritated manner when they realize that the offer was ended. Also, bonus pack will not be appealing to customers who do not purchase the product and will not induce product trial e.g. a person who does not eat jam will not be encouraged to purchase a jam jar if he/she noticed a free increase in quantity (Ong et al. 1997: 102-103).
Consumer Buying Behavior
The buying behavior of consumers will be elaborated before studying the effects of the sales promotion on the buying behavior of consumers. The buying purchase process consists of several stages which are as following:
2.2.1 Need recognition
. The need recognition occurs when a person feels a gap between his actual sate and a desired state. This need recognition arises due internal and external stimuli: internal stimulus like hunger will push a certain person to search for a meal while a new ad of a new luxurious car represents an external stimulus that will make an individual to feel that there is a discrepancy between the new, state of the art car and his/her old car. However, though there could be a gap between the actual and the desired state, a person could not be eager to overcome that discrepancy. This mainly depends on the magnitude of the gap between the actual state and the desired state and relative importance of the recognized problem (Hawkins et al 2004:504-507).
Pervious claim is well supported by Kotler and Keller (2006: 191). Moreover, they added that the main objective of marketers is to identify consumers’ needs and wants and figure out how to meet their expectations.
2.2.2 Information search
If the customer recognizes a need and decides to execute a purchase, he/she will move to the next step which is information search. The customer at this stage will seek searching for information about the different brands and the different alternatives available in the market. Information could be acquired from so many sources like the personal experience with using such products, the surrounding environment like family, friend and colleagues and most importantly from commercial sources like printed and TV ads. However, the amount of search carried out depends mainly on the importance of the product and its price (Kotler 2003: 204-205).
This claim is also supported by Kotler and Keller (2006: 192). Also they stated that mainly consumers pay attentions to the commercial sources, which is advertisements, packaging displays and dealers, to gather information about certain product
2.2.3 Evaluation of alternatives
After gathering the information, the customer will move to the third stage which is evaluating several available alternatives. This necessitates the use of a certain evaluative criteria. Let’s take the example of a customer facing the decision of the purchase of a new car; he might be interested in three features: price, warranty and fuel economy. This customer will value the options available for him and select the one that best fits his desires. The example mentioned before represents an attribute-based alternatives evaluation process which differs from the attitude-based alternatives evaluation process. A customer who is examining the attributes of alternatives to pick the one that best fits him/her is carrying out an attribute-based alternatives evaluation process. If a customer loves a certain brand and goes for it directly, then he/she has made an attitude based choice (Kotler 2003: 205-206).
2.2.4 Purchase decision
According to Kotler and Keller (2003:197), after the consumer compared the different alternatives, he/she will shift to the fourth stage which is the purchase decision. The customer has to specify the place of the purchase whether from a shopping center, specific dealer or even through the internet. Nonetheless, choosing a brand could not result in a purchase decision due to there are other factors are influencing on consumer buying behavior. Mainly there are 2 factors which are as following
Attitudes of others: it is the other consumer’s opinion and preference regarding certain brand. Mainly other consumers’ opinion, who could be member in a family or friend, plays a role in consumer buying behavior, which may influence on other consumers’ decision making and change their preference brand.
Unanticipated factors: the unexpected factors that lead the consumer to change the purchase. For instances
Functional risk: the product may not perform as it was expected
Physical risk: the product may have a negative influence on consumer’s health
Financial risk: the price of product is higher than the product’s value.
Psychological risk: the product may influence on consumer’s psychology.
2.2.5 Post purchase evaluation
Even though the product is acquired during the previous stage, there is still one step to go which is the post-purchase stage. At this stage the customer starts to test the product and formulate an opinion about this product which will end up by being satisfied or dissatisfied by that experience. One of the major factors influencing the degree of satisfaction or dissatisfaction is the degree of discrepancy between what expected from the product and its current state. If the expectations were very high and the product performs low, there would be a great dissatisfaction. However, if the expectations about the performance of the product were low and the actual performance was high, this will result in a satisfaction of the customer (Kotler 2003: 208-209).
2.3 Effect of sales promotion on consumer buying behavior
In this section, the effect of sales promotion on consumer buying behavior will be elaborated.
Mainly, sales promotion has a temporary effect on consumer buying behavior. Many researchers are arguing that sales promotion does not have a long term effect on consumer buying behavior and also it reduces the revenue, as in coupon, refunds and rebates. These tools are increasing costs (Clow and Baack 2007: 311 & 319).
In this particular point there is an argument; hence other researchers are stating that sales promotion does not reduce revenues because sales promotion can attract and encourage consumer to purchase the product in a higher quantity in lower prices. Moreover, it is stated that the value of product can be increased during sales promotion period as a result consumer reacts immediately, since for consumers, who did not purchase such product before, will satisfy their needs and wants while the products’ price is low (Pauwels ,Hanssens and Siddarth 2002, 421, 424).
According to Clow and Baack (2007: 509-510) stated that it is observed the sales volumes of products are increasing during the sales promotion periods in many countries like United Stated of America, United Kingdom and Germany. Sales are increasing for three reasons which are as following:
For certain current brand users will purchase their product in higher quantities for their future needs and wants; therefore the consumption of the product is going to increase. Also it will help support product to its current consumers and become loyal to this brand.
Consumers of competing brands may switch and purchase other branded products during its sales promotion because of the reduction in the product price. However, it is unknown that if these consumer will repeat their purchases again from their original brand or not.
Consumers, who did not purchase such product before, may be attracted to purchase this product since its value is very high; hence the consumer is buying this product his/her needs and wants will be satisfied with minimum cost and risk.
Also sales promotions are playing an important role in consumer perception. According to self-perception theory stated that consumers mainly prefer to purchase products based on external attributes, which is taking advantage of price reduction, instead of internal attributes, which is brand preferences. However, the main weakness point of sales promotion in influencing consumer buying behavior is that according to price perception theory stated that consumers mainly build a reference based on the previous prices of the product. Then this reference is used to compare between the current price of this product and pervious prices as well. Using sales promotion is mainly increasing the degree of hesitation to buy a certain brand in its nonpromotion period. As a result it may increase sales for short term, but it influence negatively on brand equity in long term. (Pauwels ,Hanssens and Siddarth 2002, 424)
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As it is stated before that sales promotion in long term does not support brands equity. Consumers start to devalue the brands’ product and purchase them during its sales promotion only. As a result when a brand leader does frequent sales promotions, there is risk that this brand’s sales will be decreased in the long run. However, the advantages of sales promotion should be taken into consideration as well. Sales promotions help to increase sales in short term more than advertisements do. The main reason behind this is advertisements’ objective is building a brand loyalty. Therefore, in real life it is hard to find a certain brand leader depends on sales promotion to market its products; hence sales promotion does not help market leader to maintain or protect its market share. Moreover, sales promotion does not help to switch brand loyal buyers to other brands(Kotler 2003: 610).
On the other hand, it is found that sales promotion is more efficient than advertising in general in influencing consumer buying behavior. These researchers provided a real life example which is AKAI in India used heavily sales promotion when they offered good trade in value on black and white TV sets at buying a new color TV. In matter of fact, AKAI become a market leader when they did such strategy (Alvarez and Casielles 2005: 66-67).
Another weakness point in using sales promotions, especially coupons, is the fear of losing the face. This feature should be taken into consideration before launching the sales promotion campaigns. The most obvious tool which raises such issue is coupons. Fear of losing face is an embarrassment of purchasing certain product in low prices; hence coupons may indicate that certain individual’s income is low and this issue is obvious among Africans Americans. For Japanese, using coupon is embracement for the consumer among his/her friends or relatives; hence coupons may give a falsely assumption about this consumers’ financial conditions among his/her friends are relatives. Therefore, it seems that coupons are a tool to embrace consumers and losing them as well (Ndubisi and Yung 2005:45-46).
However, there is an argument which is that coupons are helping products to be known to the consumers and in matter of fact it helps consumers to take the risk and purchase certain branded product for first time in a lower price. Also it is believed that the main reason of declining in coupon usage is that bad distribution of coupons among different segments. So there are arguments of the reasons why consumers do not use coupons nowadays. (Clow and Baack 2007: 310-311)
2.4 Research Gap
From pervious literature review, it is found that there is a big gap in the research. Mainly, the researchers did not highlight the influence of sales promotion on consumer buying behavior in E-marketing especially in Egypt. According to Kamel and Hassan (2002: 148) stated that E-commerce in Egypt is providing an amazing chances from promotions and transactions perspectives. It helps in increasing transactions and trades, facilitating the business process between consumer and the firm and providing uncounted opportunities to increase number of marketing tools. It is also well developed and number of users is increasing dramatically. In 1993, there were about 2000 users only who were using the internet, but in 2001 there were 600 000 users of the internet (source of this info?). Therefore investigating the role of sales promotion on consumer buying behavior is necessary; hence number of internet users and e-shoppers are increasing day by day in Egypt. So the main research questions are as following:
In E-marketing, does sale promotions plays a role in consumer buying behavior in Egypt?
Which stages that consumer buying behavior is influenced by sales promotion in Egypt?
Definitely there are some hypothesis regarding this issue and they are as following:
For E-shoppers, yes sales promotion is playing an important role in consumer buying behavior.
In the offline environment, sales promotion is influencing mainly on pre-purchase evaluation and purchase stages. However, in online environment sales promotion is going to influence on information search stage as well
3. Research design
In this section will elaborate how the research is going to be conducted in order to accept or deny the hypotheses. A quantitative research will be done through using surveys and questionnaires that are going to be distributed among the research’s sample size. The main aim of using quantitative research is to have sufficient evidence, which is using statistical methods in analyzing the responds’ answers, that gives us the opportunity to either confirm or deny the hypotheses and answer the research questions.
The target group will answer the questionnaire are the Egyptian e-shoppers, who are have the capability and ability to purchase their product via the internet. It does not mean anyone could be an E-shopper. There are some characteristics that differentiate an e-shopper from other shoppers. Mainly E-shoppers are well educated, his/her age is ranging from 19-49 years old; hence it is very difficult to find an internet user and his/her age is 50 (where did you get that? Senior managers in organizations can be older than 60 years and they use the internet quite well). He or she is in A and B classes; hence it is very difficult to find someone has credit card and he/she in C and D classes.
The main reason of choosing these restricted characteristics among the sample size is that it is rare to find that all internet users are e-shoppers since many of internet users are using some e-services for free. For instance, most of the Egyptian internet user has an E-mail, but the question is how many e-mail owners are actually purchasing products and services via the internet. On the other hand, every e-shopper is an internet user because the e-shopper is purchasing his/her product via the internet, so he/she accesses the internet frequently. The best places to distribute the questionnaire are GUC and AUC; since the students and staffs are using the internet frequently the probability to find e-shoppers is high. Go into more detail about the sample: who will you give the questionnaire to
The number of sample size is 600. The main sampling technique is going to be used is non-probability sampling technique, snow ball technique; hence the probability to find an e-shopper is high this respond will not find difficulty to recommend others to actually purchase products and services via internet.
The main software will be used to analyze the answers of responds is SPSS. The time frame will be one year maximum to include spring, winter and summer students. At each semester 100 responds should be collected for generalization purposes.
There are many foreigners students and staff in both universities, therefore the opportunity to collect 600 responds is going to be low which will have a negative influence on the generalization’s accuracy. Moreover, the error to distribute the questionnaire among foreigners is going to be high, therefore training the field workers, who will help the researcher to distribute the questionnaire, is recommended to increase the accuracy of this research.
Another limitation should be taken into consideration, which is it is very difficult to reach households whose age range from 40-49 years old due to lack of resources. So, most of questionnaire will be answered by youth whose age are ranging from 18-39 years old, which also will affect on the accuracy of this research.
In this paper, it is examined the role of sales promotion on consumer buying behavior. Generally, consumer buying behavior is influenced on its pre purchase evaluation and purchase stages by sales promotions. Moreover, sales promotion has only short term effect on consumer buying behavior. It is rare to find that sales promotion build loyal customers. It is just tool that encourages consumers to try a new product. According to Shimp (2003: 483) stated that there are two extremes a loyal consumers, who are purchasing certain product from certain brand regardless sales promotions that are offered in other brands. On the hand, consumers are not loyal at all. Mainly, consumers are falling between those two extremes.
The researcher is convinced that a sales promotion has a short term effect on consumer buying behavior. The main aim of using such marketing tool is increasing sales in short run. However, it is believed that sales promotions play an important role in building loyal customers. It is stated before that sales promotion is used when certain company launch a new product. If this new product exceeds customers expectations, it will lead to customer satisfaction and may be lead to customer loyalty.
Shimp T. A., Advertising, Promotion, & Supplemental Aspects of Integrated Marketing Communications, Sixth Edition. pp.(4-5), (469-471),(483)
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