Promotion as a Strategic Instrument in Sales

Promotion as a Strategic Instrument in Sales

 The advent of petroleum in Nigeria which was first discovered in Oloibin in 1956 has made the country’s economy now predominantly that of industrialization.   The increase in propensity from petroleum, in addition to industrialization has increased the national income of Nigeria.   The standard of living has improved and purchasing power has risen likewise.   Consumers therefore want more goods and services because the marginal propensity to consume (MPC) has increased too.   As is natural, this has led to the scarcity problem.   in the light of this, post consumption and production patterns has altered in response to these shortages.  

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This has led to tremendous changes in the business climate in Nigeria where we formally had industries trying to dispose of surpluses. We now have shortages and skyrocketed promotion in virtually all consumable and industrial goods in the country like foods, clothing, household materials and cans, to mention but a few.   Most of these goods have been promoted out to the reach of the majority of the consumers.   This is because despite increase in National Income and per capital income inflation and economic recession had caused rises in general price level making purchasing power lower.   This has de-emphasized spending on goods considered to be luxuries.   One unfortunate tuaussy affected by this restructuring of spending by consumers is the brewing industry.

In manufacturing industries, promotion is a matter of fundamental interest to bit buyers and sellers in the market.   The buyers and sellers of a product must watch promotion at all levels of production. As earlier mentioned, through the restructuring of spending by the consumers, brewing firms are now figuring a war of “survival of the fittest”.   This is because beer and malt drinks are now livery products in the country.   Since there is scarcity of means of satisfying every wants of consumers and he has choice, the successful trials and subsequent repeat purchase depend upon the manufacturing’s ability to satisfy the consumers so that the choice is exercised in his favour.   Also, as a necessary prerequisite for survival and expansion, they tend to charge the promotions capable of encouraging purchase at a reasonable return on capital invested.

Generally, in manufacturing industries, when promotion are low due to increase supply, profit tend to decline.   Therefore, it is pertinent to note that promotion have to be reasonable in manufacturing industries in Nigeria, especially in the breweries bearing in mind the prevailing competitive and economic conditions.   Economically, a firm seeks to change promotion and produce output which will enable it to achieve as near as possible an equality between its marginal cost and marginal revenue.

The manufacturing company ie. Assumed to be controlled by demand and cost conditions which are outside the firms output are determined by these two sets of factors plus the firm’s policies.   Pricing policies and objectives stem from corporate (or overall company) objective relating to sales and profits.   The promotion decision affects the entire enterprise.   It is not simply a marketing or financial decision Guinness Nigeria Plc is in an oligopolistic market which sells differential varieties of a particular product.   In this market, because of differentiated products, some consumers are loyal to particular products which permits an individual seller to raise promotion relative to competitors promotion without hosing all of his customers because of the bias for this product and to have promotion relative to competitors promotion without attracting all or most of their customers.

Promotion is used as a strategic tool for achieving the sales and corporate objectives of the firms in the competitive environment. Though promotion, management attempts to recover the cost of the product itself, associated administrative and marketing expenses, as well as generated residual profit for the firm.   Hence it will have to be woven vice-visa the corporate objective.   If this is not done, the short-term decision on promotion may not fit the company’s heavy term objectives, thereby threatening the existence of the firm.

THE PROMOTOOLS

          The promotools consist of specific blend of advertising, sales promotion, public relation, personal selling and direct marketing.   These tools are the tools the company uses to pursue its advertising and marketing objectives.

Advertising: Any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor.

Sales Promotion:  Is a short-term incentive to encourage the purchase or sale of a product or service.

Public relation:     Is building good relation with the company’s various publics by obtaining favourable publicity, building up a good corporate image, and handling or heading off unfavourable rumours, stories and events.

Personal Selling:   Is a personal or face-to-face presentation by the firm’s sales force for the purpose of making sales and building customer relationships.

Direct Marketing: Is direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivating long lasting customer relationship with the use of telephones, mail, fax, e-mail, the internet and other tools to communicate directly with specific consumers.

PROMOTION OBJECTIVES AND IT’S ECONOMIC IMPORTANCE

          PROMOTION OBJECTIVES:

Every business firm has an objective to pursue and in realization of these objectives, promotion objective must therefore be logically determined in relation to the overall company objectives, that is (the corporate objective).   Though very few firms consciously establish promotion objectives or better put, they do not state clearly their specific promotion objectives and this goes a long way in attaining the targeted sales revenue.   This fact was established in study conducted among twenty brooking institution in United State of America, according to one of the principal investigators Lanzilotti, (1998, P.22)” the main goals in promotion are classified as follows:

• To achieve target return on investment or on target sales.
• To maintain or improve market share.
• To meet or prevent competition.
• To maximize and optimize profits.

According to Schewe, (1991, P.322) in his text share the same view on the report of American Economic Review when he pointed out promotion objectives can be classified into your categories namely:

1. Profit objectives
2. Competitive objectives

• Sales objectives.

1. Serial responsibility objectives.

A firm may promote to achieve a certain percentage return on investment or net sales, this goals is the one frequently mentioned in the Brocking institution study.   But the situation is quite different in the marketing institutions (wholesalers, retailers, among others) operating in the country, they focus on short run period return on capital, in other words, they set a percentage make-up on sales that large enough to cover anticipated profit for the year.   Having established this fact, let us now take one close look at some of the objectives mentioned above:

• Price stabilization: This can often be linked

with social responsibility objective; firms with promotion leadership status often pursue this goal.   In industries where demand fluctuates frequently, large companies will try to maintain stability in their promotion.   However as possible to avert promotion wars regardless of other demand is increasing or declining.

• Maintaining or improving the market share:

Most companies both large and small has one factor that makes this goal workable, one is that company can usually determine what share of market it engages especially when the total market is growing. Where in some situation firm’s objectives might simply be to meet or present competition.

• Maximization and Optimization of profit: This

objective is followed by a large number of companies though this policy is likely to be more beneficial to a company as well as the public, if practiced over a long term.   This means that over the long run, profit optimization and maximization should result in a socially desirable allocation of resources.   In effect firms may have to accept short run losses because a firm entering a new area of introducing a new product will no doubt introduce or set promotion to build a large number of customers.

PROMOTION – ECONOMIC IMPORTANCE

The individual firms promotion structure is influenced by both the government, legislation and the consumer capabilities.   The promotion is the major determinant of the market demand for an item; it thus affects the firm’s competitive position and its share of the market. Hence, promotion has a considerable bearing on the firm’s revenue.

PROMOTION POLICY/STRATEGIES

PROMOTION POLICY

A systematic approach to promotion requires that decisions on individual promotion situation be generalized and codified into a policy coverage of all the principla promotion problems, infact the management should make sure that the policy to be formulated is failure to suit various competitive situations.   In almost all policy, the need arises clearly to state in writing what and what are supposed to be done to achieve a targeted goals.   Almost every company such as Guinness Nigeria Plc, they have a stated promotion policy.   However the following are the basis to which most promotion policy are drawn, which was stated by DEAN (1991, P. 401).

 

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