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THE ROLE OF SALES PROMOTION ON THE PROFITABILITY OF A FIRM’S PRODUCT IN A DEPRESSED ECONOMY

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THE ROLE OF SALES PROMOTION ON THE PROFITABILITY OF A FIRM’S PRODUCT IN A DEPRESSED ECONOMY

 

ABSTRACT

The aim of this study is to evaluate the impact of sales promotion on the profitability of a firm’s product in a depressed economy. The challenges that propelled this study revolved around the fact that some organizations are not worry of the impact of sales promotion on alcoholic drink industry in Nigeria and a downward economic trend. Failure on the part of the organization to assess consumers attitude towards sales promotion can be seen as catastrophic, since it is difficult to forecast the demand for the products, other organizations have not been able to unearth the sales promotional strategy that can be utilized to increase profitability and sales volume in the organizations during economic recession. There is also a mono-strategy syndrome by organizations who concentrate solely on one type of advertising method while failing to realize the potentiality of sales promotion on turnover relative to other forms of advertising. The study population consisted of all the employees and customer. The Nigeria Brewery Company Plc, Edo State, from which a sample of 150 cutting across all levels and department within the organization were selected for the purpose of investigation. Questionnaire formed the major instrument of collecting the data from the staff, it was structured using 5 – point likert scale, 200 respondents were served with questionnaire representing 100%. The data were than tested using the chi-square test statistics. From the analysis it was revealed that sales promotion have helped to increase the market share, of the organization sales during recession. The product must be right in terms of acceptability, availability and affordability. The publicity of the sales promotion must also be adequate, more so the size of the incentive must be attractive but not two attractive.

CHAPTER ONE

INTRODUCTION

1.1BACKGROUND TO THE STUDY

Promotion is one of the basic elements in marketing strategy whose impact is underscored by the contemporary events within and outside the country. There is no gain saying the fact that the nation is passing through a period of economic crisis whose impact not only cuts across the rank and file of the citizens but her business organizations as well. Business success therefore becomes vital and bring on the ability of organizations to produce its goods and services profitability yet to obtain this success if just a mirage to an organization unless the consumers or users are head to buy its products as a result of effective sales promotional efforts.

According to Ezek (2008), sales promotion is one of the ways companies/cooperatives business owners rewards customers and in turn project the business to attract more customers. But most companies deviate from this, and curiously use sales promotion onto exploit and hurt customer. Moreover, a couple of organizations sometimes rather than reward regular customers, reward those who rushed to the company because of the promotion, those who have it in mind to go back to previous after the promotion. As a result, most companies after promotion, experience reduction in sales patronage.

Basically, promotion consists of those activities, aimed at bringing a company’s goods and services to the favourable attention of customers.

Divergent view as held by different writers on what constitute the elements of promotional mix.

Promotional mix in this regards refers to the basic combination of promotional method used by an organization for a particular product is consists of those marketing activities other than personal selling, advertising and public relation than stimulate purchasing and dealer effective. Example is displays, contests, demonstration, shows and expositions and various non-current selling efforts that are not in ordinary routine.

1.2STATEMENT OF THE PROBLEM

Sales promotion is one of the backbones of any successful organization effort in the contest of marketing. Therefore, companies spend a lot of money on sales promotion. Some companies with little budget for sales promotion have recorded drastic fall in profit which has resulted in retrenchment of workers.

Some organizations are not aware of the impact of sales promotion on alcoholic industry in Nigeria and the economy at large organizations to assist consumers attitude towards sales promotion can be seen as a catastrophic, since the organization cannot forecast the demand for product.

Other organization has not been able to discover the sales promotion strategy that can be utilized to increase profitability and sales volume growth in organizations during economic recessions.

There is also a minor strategy syndrome by organization who concentrates solely on type of advertising method while failing to realize the potentiality of sales promotion on turnover relative to other forms of advertisement.

There is also the problem of decoding which choice of sales promotion activity is cost effective for a specific situation.

1.3RESEARCH QUESTIONS

Data analysis is used to answer the following for appraising how sales promotion effectively increases profitability in a depressed economy.

1.          Does sales promotion affect organizations sales during a depressed economy?

2.          Does sales promotion affect an organizational profitability during economy recession?

3.          What is the effect of sales promotion on the economy at large during hold-rums?

4.          What are the challenges militating against the effective use of sales promotion during economy recession?

1.4STATEMENT OF HYPOTHESES

Ho:  Sales promotion does not affect organizational profitability during economy depression.

Hi:   Sales promotion affects organizational profitability during economy depression.

Ho:  Sales promotion does not increase organizational sales during economy recession.

Hi:   Sales promotion increases organizational sales during economy recession.

1.5PURPOSE OF THE STUDY 

The fundamental of the objective of this study is to examine the extent to which sales promotion can affect company profitability, particularly during a depressed economy.

However, the specific objectives are to:

1.          Bring about a change in the demand pattern of products and services.

2.          To increase consumer demand, stimulate market demand and improve product availability.

3.          Serve as link between advertisement and personal selling, thereby to provide extra value that encourages purchase, when it is targeted at consumers.

1.6SCOPE OF STUDY

This research project is concerned with the validity that exist between sales promotion and profitability.

Its also intended to look at the sales promotion as a strategic tool for expanding sales volume by marketing organization in Nigeria with Nigeria Brewery Plc as a case study. The research examines how companies use sales promotion tools not only as a strategy for competition but also influencing growth, consumer buying habits and to increase turnover.

1.7SIGNIFICANCE OF THE STUDY

This study have shown that marketing techniques have great influence on the profitability of any company, thus this study seek to examine the function of sales promotion programmes and to consider the effectiveness of sales promotion in the market. The finding and recommendation of this study produces greater awareness on the part of the organization particularly in the area of sales promotion. Management, students and academics can utilize the conclusions and recommendations based on this research work as a vendible tool in varying specialized field of study of some of information a reference point and a guide from further researcher in this field of study.

1.8LIMITATION OF THE STUDY

This research work will be limited to the effects of Edo State Brewery Plc, Benin City on the role of sales promotion and profitability in a depressed economy.

The research work does not go beyond into the sales promotion of other Brewery companies like alcoholic industry because they are included in any research work.

1.9OPERATIONAL DEFINITION OF TERMS

For better understanding of this research work some of the terminologies used in this work are explained below.

        MARKETING

 American Marketing Association (AMA) 2011), defined marketing as the activity, set of institutions, and processes for creating, communication, delivering and exchanging offerings that have value for customers, clients, partners, and society at large. 

Kotler (2011), defines marketing as the science and art of exploring, creating and delivering value to satisfying the needs of a target market at a profit.

Marketing is the process by which a firm profitably translates customers need into revenue (Burgess, 2011).

        COUPON

 Olajide (2002), states that a coupon is a voucher attached to goods for sales indicating that payment is to be made.

It as a reduce of a product is precise and are used to promote customers to try new and established products (Idogho and Agbaiza, 2010).

Kotler (1984) sees it as a reward presents product users, win back former users, and encourage purchases in large quantities.

        MARKETING MIX

Kotler (2013) opines that marketing mix are terms used to describe the contribution of the four elements, strategies that are constant for they are of a company’s marketing system.

Kotler (2006), define marketing mix as the set of marketing tools the firm uses to pursue its element of the marketing mix must blend and fit together in harmony with the other elements.

Marketing mix according to Stanton is the term used to describe the combination of the four inputs which constitute the core of a company’s marketing system. The product, the price structure and the promotional activities, and the distribution system.

        SWEEPSTAKES

 Howard (2006) defined sweepstakes as prices awarded according to decision of event.

It is an inclusion in a drawing for prices. It is often used to stimulate sales and are sometimes teamed with other sales promotion methods (Amodu, 2006).

 

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