The Relevance Of Sales Promotion To Business Organizations

Project and Seminar Material for Marketing

The Relevance Of Sales Promotion To Business Organizations


Chapter One


Introduction

1.1 Background information

The business environment has become very competitive in the 21st century due to the growth in technology, infrastructure and access to information around the globe. This has made the environment very complex and consumer preferences keep changing because of the low switching cost in the market. Due to this increasing demand of consumers in the market, management of business organizations have to increase their resources with attention focused more on attracting and retaining its customers (Kotler, 2003).

The ever increasing competition in the global market has prompted organizations to be determined and ensure satisfaction of customer needs and wants more efficiently and effectively than ones competitors (Kotler, 1988).Sales promotion is an initiative undertaken by organizations to promote and increase sales, usage or trial of a product or services (Aderemi, 2003). Sales promotion refers to the provision of incentives to customers or to the distribution channel to stimulate demand for a product. It is an important component of an organizations overall marketing strategy along with advertising, public relations and personal selling. Sales promotion acts as a competitive weapon by providing an extra incentive for the target audience to purchase or support one brand over the other. It is particularly effective in spurring product trials and unplanned purchases (Aderemi, 2003).

Sales promotion is a marketing activity that adds to the basic value proposition behind a product (i.e. getting more for less) for a limited time in order to stimulate consumer purchasing, selling effectiveness or the effort of the sales force (Aderemi, 2003). Thisimplies that, sales promotion may be directed either at end consumer or at selling intermediaries such as retailers or sales crews.

Sales promotion can be an effective tool in a highly competitive market, when the objective is to convince retailers to carry a new product or influence consumers to select it over those of competitors. More so, sales promotion tend to work best when it is applied to items whose features can be judged at the point of purchase, rather than more complex, expensive items that might require hands of demonstration (Kotler and Keller, 2006). Sales promotion includes communication activities that provide extra value or incentives to ultimate customers, wholesalers, retailers or other organizational customers. It also stimulates sales product trial (Kotler and Keller, 2006).

However, according to Keller (2003), consumer buying behavior is the process by which the individual search for, selects, purchase, use and dispose of goods and services, in satisfaction of their needs and wants. The consumers’ behavior has a direct effect on the success of the firm and therefore must ensure that they create a marketing mix that satisfies consumers. The consumer mostly goes through about five steps in taking one purchase decision. These include Problem recognition, Information search, Evaluating of alternatives, Purchase decisions, Purchase and Post Purchase evaluation. Actual purchasing is only one stage of the process and not all decision processes lead to a purchase. Also not all consumer decisions will include all the stages but will depend on the degree of complexity and risk involved.

There are however about four types of buying behaviors that consumers exhibit; these include a routine response which needs very little search and used when purchasing frequently purchased item, limited decisions which is used when purchasing low priced brands in a familiar product category, extensive decision which has a high degree of economic, performance and psychological risk which demands lot of time in seeking information and deciding and impulse buying which is spontaneous and needs no conscious planning.

This study focuses on the effects of sales promotion on consumer buying behavior. 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).

According to Kotler (2003), Sales Promotion is a key ingredient in marketing campaigns and consists of a diverse collection of incentive tools, mostly short term designed to stimulate quicker or greater purchase particular products or services by consumers. Sales promotions programmes are those activities other than stimulate consumer purchase.

Sales promotion is one of the four aspects of promotional mix which is an element of the four marketing mix: product, price, promotion and distribution. It is normally considered as a tool consisting of short term incentives to encourage the purchase or sale of a product or service Examples of sales promotion are found everywhere e.g. In the aisle display in the local supermarket that tempts impulse buyers with a wall of coke cartons, an executive who buys a new Compaq laptop computer gets a free carrying case. Sales promotion includes a wide variety of promotion tools designed to stimulate earlier or stronger market response (Kotler 2003).

The case study is Oriflame Natural Swedish Cosmetics Company which was founded in the year 1967 in Stockholm Sweden, by Robert Jochnik and Jonas Jochnik, the name ‘Oriflamme’ describes a beautiful Swedish woman and thus the two were inspired by the natural beauty of a Swedish woman. Oriflame has branches in over 62 countries and has approximately 3.3 million consultant and over 7,500 employees globally. It launched its operations in Kenya in the year 2003 with its headquarters in Nairobi though it has over 50 branches all over the country.

So far the company is using some sales promotion techniques like the free samples where they give the sales consultants free samples of assorted creams also free trial sales promotion tool where they have most of their products on display in their TSS office where potential customers can sample for free. Currently they lounged the prize off where the prizes of the products have been reduced to 40%.

The free samples are mainly directed to the sales consultants who in most cases, is hard to know if they extend the free samples to their customers or not, Secondly the free trial products are in one point office at the TSS Towers where it is hidden from human traffic so it becomes hard to communicate to the passerby’s or onlookers.
The study seeks to find out the effects of these sales promotion tools, bearing the given demerits above, and also to see if Oriflame can implement better sales promotion techniques especially directly to consumers. The company sells its products through an independent sales force outside the traditional retail environment and it has worked in the 62 countries that it is operating in. Oriflamme has a wide range of over 340 different cosmetic products namely: Skin Care, Color Cosmetics, Fragrances, Personal & Hair Care, Accessories and Wellness. This varied range of cosmetics needs intense sales promotion to ensure that that the products sell and more so to achieve its main goal which is “To become the world’s leading sales cosmetics Company”


1.2 Statement of the problem

Oriflamme natural cosmetic product company needs to provide offerings or services that satisfy consumer needs and expectations to ensure the company’s economic survival. In order to achieve this feat, they need to understand consumer buying behavior to help them evaluate their service offerings.

Consumers go through a cycle of decision making processes before making a purchase decision which define their behavior in the consumption of the products they purchase from these companies. The consumer buying process is a complex matter as many internal and external factors impact on the buying decision of the consumer (Aderemi, 2003).

The consumer makes a purchase decision by examining alternatives before making the purchase. Sometimes, the purchase may differ from the purchase decision reached earlier. There is always a post purchase evaluation by the consumers after purchasing and consumption of the service. Specific factors that may lead to altered consumer buying behavior are size and composition of the evoked set of alternatives, perceived risk, brand loyalty and attribution of dissatisfaction. The consumer determines whether he was satisfied or not with the services rendered. This actually will be an important information reference point to the consumer in determining their behavior in the next purchase (Kotler, 1996).

Oriflame employs the use of some sales promotion tools like; free trial, where they invite prospect customers to try the products without cost. This method is ideal for products like fragrances and make-ups since the results are immediate, but this technique is not very effective for items like; acne fighting products or skin repair products which usually takes longer period for the results to be seen. Another tool is the use of free samples of assorted creams and fragrances, which is a technique only directed to the sales consultants who have accounts to purchase the products and sell at a profit to the customers.

Most of Oriflame Sales promotion is usually directed to the sales consultants, it would be more effective if they implement better sales promotion tools that will be directed towards the consumers, since they are the end users of their products. And even if they use sales promotion tools to the consultants they should strategize them in a way that it will be effective on the general sales.

This study, therefore, sought to determine the effects of sales promotion on consumer buying behavior at Oriflame Natural Cosmetic Products Company Ltd in Mombasa.


1.3 Objectives of the study

General Objective

The general objective of this study was to assess the effect of sales promotion on consumer buying behavior.
Specific objectives

  1. To establish sales promotional tools used by Oriflamme.
  2. To identify sales promotion strategies practiced by Oriflamme.
  3. To find out the factors that promotes or impairs the effectiveness of sales promotion.

1.4 Research Questions

The following are the research questions:

  1. What are the sales promotional tools used by Oriflame?
  2. What are the sales promotions strategies practiced by Oriflame?
  3. What are the factors that promote or impair the effectiveness of sales promotion?

1.5 Justification

The research will have significance to the following different parties;

1.5.1 The researcher

Academically, the study will enlighten the researcher more on the influence of sales promotion on consumer buying behavior, thus being a good marketer.

1.5.2 Jomo Kenyatta University of Agriculture & Technology

The research will be ideal to JKUAT since the students of the institution who are intending to do research on sales promotion will access required information.

1.5.3 Oriflamme Swedish Natural Cosmetics

This intensive research will highlight on promotion tools and techniques and also recommend on the ideal techniques to be employed by the company. The company can also use this research to know the merits and demerits of each promotional technique and unify these in order to achieve their goals.


1.6 Scope of the study.

The study was carried out at Oriflame main office in Coast Region Headquarters which is located along Nkrumah road at TSS building 1st floor to study the effects of sales promotion in relation to consumer buying behavior. For the purpose of this study, the organization’s employees were divided into six different departments.


1.7 Limitations of the study

The following are the limitations that the researcher encountered while carrying out the study;

1.7.1 Time constraint

Time allocated for this study was not adequate and at best stressful. This is because the researcher had seven other units to handle, a full time job, family and social commitments. This limitation was, however, overcome by proper planning. The lecturers were also very supportive and understanding and this made it easier to manage everything.

1.7.2 Confidentiality

There were some respondents who feared sharing out information for fear of being reprimanded by their managers for giving out information that they may have considered confidential. However, the researcher assured the respondents of the confidentiality of the information that they provided. The researcher also obtained permission from the management of Oriflame to undertake the research in the organization.


Chapter Five


Summary, Conclusions And Recommendations

5.1 Introduction

This chapter gleans on the outcome of the analysis from the statistics gathered in chapter four. The researcher made summary, conclusions and recommendations from the findings of the research study.


5.2 Summary

Below are the findings of the research as gleaned from the analyses; Sales promotion practice is a very prominent feature in the every industry and consumers are very much aware of the various sales promotional strategies practiced by these industries. The sales promotion practice in the industry draw these consumers to the product and make them do impulse purchase. This confirms the assertion by Ngolanya, et al, (2006) that sales promotion engenders impulse buying.

Factors such as appearance of sales persons, displays of products, free gifts accompanied with the purchase of products, free samples offered for customer trial and short term reduction of prices on certain occasion could enhance or impair the effectiveness of sales promotion. The findings confirmed that, amidst the factors that could enhance the effectiveness of sales promotion practice, the factor that has the greatest effect was the free samples offered. This supports the study done by Adcock (2001), who asserts that when a purchase decision is made, the actual purchase can be affected by unanticipated situational factors. Some of these situational factors according to them could be directly associated with the purchase, for example the outlet where the purchase is to be made, the quality to be bought, and payment procedure among others. The employers also had similar views that these free samples offered enhance the effectiveness of sales promotion.

There was a significant influence of sales promotion on consumer behaviour. Implying an improvement in the sales promotion strategies will lead to a corresponding improvement in consumer buying behaviour towards purchasing Oriflame products. This supports the study by Sam and Buabeng (2011), which states that, the essence of sales promotion is to provide a direct inducement to act by providing extra worth over and above what is built into the product at its normal price. Sales promotion plays a significant role in influencing the consumer decision process by shortening the decision process during purchase.

The results also indicate that majority of respondents found Oriflame to have good customer relationship due to its sales promotion strategies.

Above fifty-five percent (55%) of the respondents are satisfied with the promotion and distribution decisions as a factor which enhances effective sales promotion. This is followed by evaluation of overall sales programs which greatly influences consumer buying behavior.


5.3 Conclusion

Cosmetic dealers have a lot of services and products that they make available to consumers through their various communication tools. One of the key promotional tools used in marketing these services and products is sales promotion.

In conclusion, Oriflame employees are generally satisfied with the company’s sales promotion strategies which in turn influences consumer buying behavior as this research sought to establish. However this satisfaction seems to have an effect on the number of clients who are willing to repurchase Oriflame products. In effect, the more sales promotion strategies are customer friendly, the more it is capable of influencing those customers buying behavior.
The study revealed that sales promotion has an influence in the purchase decision of consumers. It was realised that the consumer may not go through the entire decision making process anytime they want to purchase a service or product. This may be so because the evoked sets which present the consumer with established alternatives may inform the consumer’s judgements in deciding which service or product to buy. This may eventually prevent the consumer from going through all the stages of decision making because of experience and available information to him. Sales promotion therefore is an inevitable promotional tool for firms if they really want to maintain or increase their market share.


5.4 Recommendations

Recommendations have been made about measures that could be taken to improve the practice of sales promotion at Oriflame and beyond in order to influence the consumer buying behaviour effectively. The following may be noted:

The firm must intensify the use of sales promotion as respondents have shown great interest and are highly influenced by sales promotion activities.

Appearance of sales person should be greatly enhanced. Therefore it may be used in conjunction with other promotional tools such as coupons and free talk time. Greater emphasis may be placed on attachment services to gain maximum advantage.

Sales promotion has short term effect, as a result services providers need to do a continuous follow up to establish long term relationship with new customers acquired during sales promotion period.

Firms should engage in continuous research to correctly approximate consumer expectations and plan to meet them to reduce consumer complaints.

Oriflame should enhance the situational factors such as display of items, appearance of sales persons, location of showrooms as well as payment processes. These factors and other situational factors will enhance the effectiveness of their sales promotions to influence their consumers.

Oriflame should periodically evaluate all its sales promotion programs so as to remain a trend changing consumer expectations. In this contemporary world no strategy is static and to maintain the dynamism, the existing sales programs needs to evaluated over time.


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