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THE EFFECT OF SALES PROMOTION ON PRODUCT PERFORMANCE AND MARKET SHARE OF THE ORGANISATION

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THE EFFECT OF SALES PROMOTION ON PRODUCT PERFORMANCE AND MARKET SHARE OF THE ORGANISATION

 

CHAPTER ONE

1.1INTRODUCTION

In the 1970’s as well as early 1980’s the Nigeria market was favourable to the producers of various products.  At that time, we had what was called “sellers’ market”.

However, with the current economic trend in Nigeria markets, especially at the inception of Structural Adjustment Programme (SAP), the reversal is the case. Manufacturers have shifted considerable attention to the consumer particularly in the consumable goods sector, they now regard the consumer as the king. We now have what is popularly termed the “Buyers market”.

Producers have now resorted to numerous means of sales promotion to increase the sales volume and profitability.  According to the American Marketing Association (1990 p 25) sales promotion is defined as those marketing activities, other than personal selling, advertising and publicity, that stimulate consumer purchasing and dealer effectiveness, such as displays, shows, expositions, demonstrations and various concurrent selling efforts not in the ordinary routine.  Thus, sales promotion is any promotional effort that falls outside the other four statements of the promotional mix. 

Marcarthy (1998 p 386) defined sales promotions as “all activities/variables involved in communicating information between seller and buyer with a view to changing attitude and behaviour towards a product or service.  And the variables are advertising, personal selling, publicity, public relations and sales promotions”.

Stanton (1998 p 75) defined sales promotion, as the component of marketing that is used to inform and persuade the market regarding a company’s product.  It includes those efforts a company embarked upon to effectively communicate the services and to persuade target customers to patronize them.  In order to achieve its aims, the company employs the services of the various promotional mix, notably among which are: Advertising, Publicity, Personal selling and Sales promotion.

However, Wentz and Leyrich (2000 p 262) describe promotion as “the most nebulous of the six basic marketing instruments”.  According to them, it is not surprising that it lends itself more readily to contradiction, conversely, conformity, imagination, subjective judgement and bizarre management decisions than other marketing variables.

Sales promotion embraces all activities and devices that are designed to sell more products and to create goodwill, directly or indirectly.  A wise commonly accepted view, however is that sales promotion concerns only those activities and devices whose primary function is that of inviting, persuading and otherwise encouraging and stimulating trade.

The relative importance and effectiveness of the different types of promotional effort naturally vary considerably from industry and from time to time. Success with these sales building tools depends upon ability to organize and coordinate them into a unified programme, tailored to the specific needs of a particular industry and its products.

Promotions including selling and advertising has received the greatest attention in marketing practice and research according to Sheth and Garrett (1986 p 86).  There are several emerging issues in promotional management.  First, there is a growing belief that companies need integrated communications across all channels, such as selling, advertising, packaging, sales promotional and public relations.  This integration has been lacking in the past, with inconsistencies in the brand product or corporate positioning.  Also there is a growing interest in electronic shopping and selling and their impact in the promotional function.  For the first time it seems possible to bring the producer and the customer closer to each other on a direct and “real-time” basis through the current innovative sales promotion strategies.

A sales promotion strategy prescribes the role to be played by every means of disseminating information to customers about a particular product.  This aspect of formulating this strategy includes such factors as determining information to be communicated to consumers, the objectives of the promotions strategy, the budget for the sales promotions and the means or tools for disseminating information.  The aim of every promotional strategy being the purchase and use of a product or service.

1.2STATEMENT OF THE PROBLEM

The major focus of this study is to solve the problem that arises from a company’s sales promotion method on its product performance and the market share of the organization.  Basically, the main issue is to know the extent which promotional effort has led to increase in sales volume and profitability.

1.3OBJECTIVES OF STUDY

The main objectives of the study at hand – The effect of sales promotion on product performance and market share of the organization: A case study of Nestle Foods Nigeria Plc are:

i.             To examine the effect of sales promotion on a people’s buying behaviour – with special reference to the food and beverage industry.

ii.            To review the effect of Nestle Foods Nigeria plc sales promotion strategies on its product performance in the market and hence determine the areas of weaknesses.

iii.          To proffer suggestions on better ways to influence buyers in the choice of goods they have not been attached to.

1.4RELEVANCE OF STUDY

In any organization, it is important to examine the cost.  It is important to do a “cost-benefit” analysis before a decision is taken and after the outcome of the decision taken.  Nowadays, sales promotion constitutes a major financial investment and an essential part overhead cost.

Therefore, it is justified and relevant to review the benefit being derived from huge amount of money spent on sales promotions by many producing companies.  There is the need to see how much is gained in terms of increased sales volume and profits from sales promotional efforts of a company.

1.5SCOPE OF STUDY

The scope (which is the same as delimitation of study), will be limited to the company being used for Nestle Foods Nigeria Plc.  Therefore, relevant data will be collected from Nestle Foods Nigeria Plc.  Moreso, there are many sales promotions strategies that can be used by an organization.  These strategies can be combined or directed at a particular functional area.

However, this study is restricted to sales promotion strategy.  Also, since Nestle Foods Nigeria Plc produces many products, there may be specific sales promotion strategies in use.  This research study is concerned with the broad strategies and objectives of sales promotions in Nestle Foods Nigeria Plc and not for specific products.

1.6LIMITATION OF STUDY

As a result of short period before the researcher as well as constraint of resources, the researcher is not able to cover all the aspects of sales promotion in this study hence, he would limited himself only to the effect of sales promotion on the performance of company product and market share of the organization in Nigeria market.

1.7RESEARCH QUESTIONS

In this research study, the following research questions were provided with appropriate answers.

i.             How has sale promotions increased sales volume and hence profit levels in the company?

ii.            How does a sales promotional strategy influence consumer permanent acceptance of a product?

iii.          How does company business operations improve through strategic sales promotion?

1.8RESEARCH HYPOTHESES

The hypotheses used for this study is generated from the research questions above and comprise the Null hypothesis (Ho) and Alternative hypothesis (Hi). A hypothesis is a conjecture or a quess about the relationship between two or more variables.  They include:-

1.     Ho:   There is no direct relationship between sales

promotion and the sales volume of Nestle Foods Nigeria Plc.

Hi:    There is a direct relationship between sales promotion and the sales volume of Nestle Foods Nigeria Plc.

2.     Ho:   Sales promotion does not create permanent

consumer acceptance of a product.

Hi:    Sales promotion creates permanent consumer acceptance of a product.

3.     Ho:   Business operations does not improve through

strategic sales promotion.

Hi:    Business operations improves through strategic sales promotion.

1.9RESEARCH METHODOLOGY

The sales promotion efforts of Nestle Foods Nigeria plc is the basis on which the research hypothesis is tested.  Being the case study for this research work, acceptance of hypothesis, interpretation and conclusions is based on the extent of information gathered from the company.

1.10MODE OF DATA COLLECTION

Data is collected through the use of questionnaire; other data may be obtained from the records of the company.  These may include costs of sales promotion efforts, sales volume and profit levels for corresponding number of years.

1.11DATA ANALYSIS

The mode of analysis of data will be used on the quantity of information collected.  However, statistical methods such as simple percentage and chi-square were used to analyse the questionnaire and to test the hypotheses in this research work.

1.12DEFINITION OF TERMS

i.             SALES PROMOTION:  Asika (2000 p 1) defined sales promotion management as “a task of planning, organizing, coordinating and controlling all activities aimed at passing current and relevant information to customers and potential customers so as to facilitate increased and continuous patronage”.

ii.            PUBLICITY:        Is non-personal stimulation of demand for a product, service, or business unit by planting commercially significant news about it in published medium, or obtaining favourable presentation of it upon radio, TV, or stage that is not paid for by the sponsor. (Alexander et al 1990 p 350).

iii.          PERSONAL SELLING:  Is the process of making oral commercial presentation during buyer/seller interview situation.  It is colloquially referred to as face-to-face selling, and sometimes known as buyer/seller interface. (Wilmshirtst 1998 p 143).

iv.          PUBLIC RELATIONS:  Is a management function which helps to establish and maintain mutual lines of communication, understanding, acceptance and cooperation between an organization and its publics involving the management to keep informed on and responsive to public opinion, defining and emphasizing the responsibility of management to serve the public interest, helping management to keep abreast of and effectively utilize change, serving as a memory system to help anticipate trend, and using research and sound ethical communication techniques as its principal tools. (Harlow 1996 p 263).

v.           ADVERTISING:  Is one of the four major tools that companies use to direct persuasive communications to target buyers and publics.  It consists of non-personal or one-way forms of communication conducted through paid media under sponsorship. (Kotler 1998 p 35).

vi.          PROMOTIONAL MIX:  Is the strategic combination of advertising, personal selling, sales promotion and public relations that can be devised to reach the foods of the sales programme.  (Asika 2000 p 79).

REFERENCES

1.           Alexander, R.S. et al (1990) “Marketing definitions”. American Marketing Association ; Chicago, pp. 25

2.           Marcathy, E.J. (1998) Basic marketing: A managerial approach. Irwin Inc.;  Homewood, pp.386.

3.           Stanton, W.Y. (1998) Fundamentals of marketing.    McGraw-Hill ; New York, pp. 75

4.           Wentz, B.W. and Leyrich, G. (2000) Marketing theory and application. Brace and World Inc. ; Harcourt, pp.262.

5.           Asika, Lekan (2000) Promotions management1: Principle and practice.  Bimsmart; Lagos, pp. 1, 79.

6.           Wilmshirtst, W.B. (1998) Marketing theory and application. McGraw Hill; London, pp. 143.

7.           Harlow, T. (1996) Basic of public relation. Brace and World Inc.; New York, pp. 263.

8.           Kotler, P. (1998) Introduction to marketing, advertising and public relation.  Macmillan; London, pp. 35.

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