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IMPACT OF SALES PROMOTION ON BUYING DECISION (A CASE STUDY OF GLOBACOM NIGERIA LIMITED)

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

After the advent of industrial revolution, machines were introduced into the production system to boost the production of goods and services and this brought about large number of goods available for sales. In this regard, consumers were exposed to variety of products and were required to select the product which will give them the optimum satisfaction they desired according to their needs.

Companies on the other hand were interested in boosting their image, achieving high sales, maximizing profit and at the same time gaining competitive advantage over others. In the light of the foregoing for a company to excel above its competitors, it has to employ certain marketing strategies to attract the attention and triggered the interest of its consumers.

When a consumer goes shopping, he or she implicitly, or explicitly, has to make four key decisions for each product category. Whether to buy in the category and, if so, where (which store), which brand, and what quantity. All four decisions may be influenced by consumer characteristics (e.g., income, family size, purchase frequency) and by the marketing environment (e.g., the prices and promotion activities of the various brands and stores). Marketing mix variables can affect these four decisions to differing degrees.

In recent years, consensus have it that spending on sales promotion by firms in most developed and some developing countries of the world has significantly overwhelmed those on advertising. This is not surprising when its inevitable role in complementing other methods of product promotion in order to achieve short-term gains is considered. Sales promotion involves gaining consumer loyalty, increase repeat purchase and facilitate profit maximization. Promotion campaigns are probably the most important of four marketing mix element: product, price, place and promotion that can help to solve company’s problem and gain competitive advantage if well implemented.

The greatest disadvantage of sales promotion lies on its long-term ineffectiveness, even though it accounts for over 65 percent of a typical marketing budget. This is the result of the research work by Abraham and Lodish in (1990). However, further efforts by Perreault and Mccarthy in (2002) submits that sales promotion can instigate a continuous increase in sales in the long-term if it has successfully resulted in brand loyalty, repeat purchase and customer satisfaction in short term.

Furthermore, the issue of getting the most out of each promotional naira has become an increasingly important one. However, some managers’ studies reveal that 80 percent of promotion users are, in fact, loyal customers who presumably would have bought the brand regardless of the promotion (Levine 1989).

Basically, promotion is an exercise that performs the role of information, persuasion and influence to purchase certain products. Promotion also affects the demand elasticity of a product, making the demand inelastic when the price increases and elastic when the price decreases.

The main purpose of promotion is for effective and efficient communication. Basically, the promotion exercise is usually aimed at achieving the following:

1.                  Achieving high sales volume, which in turns affects the contribution of profit ratio.

2.                  Directing and ensuring that product flow through the appropriate channels till the products get to the final consumers so that wants may be satisfied.

3.                  Identification of markets and buyers motives that enables want to be satisfied.

The objectives of promotion are as follows:

1.                  To inform that is making the market aware of a new product or service. Promotion informs the market of a price charge, the product or service usage and the available services.

2.                  To increase the demand for products and services

3.                  To persuade consumers by building brand name and encouraging consumers to switch to a firm’s brand.

4.                  To reduce customer’s fears and anxiety and also to build good company image.

5.                  It supports personal selling program.

6.                  Reminding customers of where to buy products that are needed immediately and those needed in future, most especially when they are off-season products.

7.                  Announcement of special sale.

8.                  To introduce new business to the community.

This study will be used to highlight or evaluate the effectiveness of sales promotion on the buying decision of consumers. This is very important as it would bring about rapid growth if the promotional strategies are well planned and implemented.

Finally, marketers should constantly evaluate promotional effectiveness in terms of its ability to make clients or consumers to respond more favourably towards the firm’s product than they would respond towards firms’ competitors. This is because it would provide information about the effectiveness of promotional activities on the management, employees, the sales of the company’s product and competitive advantage relevant to most firms or companies producing and marketing consumer products.

1.2       STATEMENT OF THE PROBLEM

Major external factors such as socio-economic, regulatory and technological issues have shaped the structure of communication service and also the nature of competition within it. The Nigerian telecommunication industry cannot be isolated from the list of industries where product promotion and incentives are wholly adopted. The reason for this can be associated with oligopolistic nature of the industry. In other words, the major challenge of the telecommunication companies in Nigeria is how to be the choice of majority of the over 140 million interconnected Nigerians.

However, many promotion and sales incentives adopted by companies these days are so ineffective, dull and dreary that they bore the prospective consumer.

However, considering the level of economic resources committed to these promotional mix and program, a good business manager must weigh the cost of a promotion against the expected increase in sales that will result from the promotion rather than “buying sales” at the cost of reduced profit i.e. carry out a cost benefit of the promotion program. A sales promotion is only effective and appropriate if it can prompt its target and it possess a high degree of creativity and flexibility. Obviously since the aforementioned applies to the Nigerian telecommunication sector, there is therefore a void to fill by carrying out this study.

1.3             RESEARCH QUESTIONS

The following research questions relevant to the study are raised:

1.                  How does sales promotion affect increase in sales and to what extent?

2.                  What are the factors that influence consumer loyalty of a particular package?

3.                  Does sales promotion have a short-term impact rather than long-term impact on buyers’ decision?

4.                  What are the impacts sales promotions have on buyers’ buying decision?                   

1.4       OBJECTIVES OF THE STUDY

The major objective of the study is to examine the effective sales promotion plans in the Nigerian telecommunication industry and evaluate its impact on buying decision using GLOBACOM Nigeria Limited as a case study. The specific objectives of the study include:

1.                  To examine the impact of sales promotion on customer awareness of the company’s product.

2.                  To determine whether sales promotion makes the customers to maintain repeat purchase and have product loyalty.

3.                  To identify the problems associated with sales promotion by the company.

4.                  To examine the impact of sales promotion or buying decision and levels of satisfaction.

1.5       SIGNIFICANCE OF THE STUDY

The significance of the study cannot be over-emphasized as the result; it would serve as an aid to different parties, especially the firm of concern (GLOBACOM NIG. LTD). Drawing from the objectives of the study, it should determine the efficacy of sales promotion by the company in order to foster competitiveness and enhance profit.

Moreover, the study will be useful for students, practitioners, marketers, consultants and academicians who value research and have interest in the business and marketing discipline.

1.6       SCOPE OF THE STUDY

Every research work is only effective and useful at drawing reliable conclusions if it concentrates on its objectives. This study is only limited to the sales promotion activities of GLOBACOM NIG. LTD and the respondents for the study are restricted to the Lagos State University and her immediate environment.

Hence, the researcher has chosen to undertake this research work to cover the period of 2009 and 2010.

1.7       DEFINITION OF TERMS

The following terms are defined as they are used in this study:

PROMOTION: Promotion keeps the products in the minds of the customers and help stimulate demand for the product. Promotion involves on-going advertising, sales promotion and publicity.

MARKETING: This is the wide range of activities involved in making sure that the company is continuing to meet the needs of their customers and getting value in return. Marketing also includes analyzing the competitive positioning of new packages or products or services (finding market niche), pricing products or services and promoting them through continued advertising, promotion, customer service and sales.

SALES: Sales includes various forms of activities. They include marketing prospective buyers (or leads) in a market segment, conveying the features, advantages and benefits of a product or service to the lead and closing the sales (or coming to an agreement on payment and service).

ADVERTISING: This is bringing a product or service to the attention of potential and current customers. It is typically done with signs, brochures, commercials, direct mailing or email messages, personal contacts e.t.c.

SALES PROMOTION: These are other activities other than advertising, personal selling and publicity that stimulate the interest, trial and purchase by final consumers or others in the chain of distribution.

BUYING BEHAVIOUR: This is the decision process and acts of final household consumers associated with evaluating buying, consuming and discarding products for personal consumption.

1.8       BRIEF WRITE-UP ON CASE STUDY: GLOBACOM NIGERIA LIMITED

GLOBACOM Nigeria started operation on August 29, 2003 by Dr. Mike Adenuga, who is the present chairman of the company. GLOBACOM was made known to the people through marketing activities such as sales promotion and advertising.

The company has a reputation of one of the fastest growing mobile service providers in the world and their aim is to be recognized as the best mobile network in Africa.

The company has its headquarters in Lagos, Nigeria. The company consolidated its position by setting up new branches in almost all the states in the country. GLOBACOM also extends outside Nigeria to some West African countries like Benin Republic, Ghana and Ivory Coast.

In the first year of operation, GLO MOBILE boasted of about one million subscribers in over 87 towns. This company provides mobile networks, telecommunication services e.t.c. The Cellular News  reports that GLO MOBILE which was sixth at the start of last year has apparently now overtaken MTN NIGERIA as the market leader occupying the forth place on the lost of the largest mobile network operators in the region. GLO MOBILE now has over 25 million subscribers in the last seven years. This company also has the largest roaming coverage for voice and data in the whole of Africa.

In addition, the company has been a dominant player in the Nigerian Telecommunication Industry and has continued to improve her product and services to attract consumer. The company has also embarked on a lot of promotional strategies to boost the sale of their products. The most recent sales promotional strategies embarked upon by GLOBACOM NIGERIA include GLO talk points, GLO 100 crash rate, GLO free night calls among other.

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