Advertising And Sales Promotion And Impact On Consumer Marketing Essay

Chapter 2

Part 1

Advertising and sales Promotion and its Impact on Consumer

Buying Behaviour

2.1.1. Introduction:

The main purpose of this part of research work is to carry out a detail literature review of advertising and sales promotions and its impact on consumer buying behaviour. Both these tools are used to by the companies to increase short and long term profitability for the Company.

The chapter commences with the important definitions and goes in to in depth critical analysis, research gaps, decision variables and other relevant topics to advertising and sales promotions that are needed for our research purposes. Summary of the chapter is also given in the end.

2.1.2. Advertisement:

The word Advertising is defined by many scholar, business and marketing analysts as follow.

“Advertisement is paid-for, non-personal communication from an identified organization, body or individual designed to communicate information and influence consumer behaviour” Tony Yeshin (2005, p.1)

According to Jim Blythe (2005-p.479) advertising is the main activity use by marketing professionals to gain long term prospects. It has become the obvious activity used by the companies to create awareness about the product and service. Our daily life observation of advertising all around us show how much it is important to the companies. Advertising create awareness so that the consumer may be attracted to buy. Bullimore (1995) states that without advertising No brand, value for money, consumer behaviour and Innovation is possible. So it is the more significant for growth.

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2.1.3. Sales Promotion:

The sales promotions activities been an important and significant activity used by traders for long time and has been considered as best marketing tool for short term increase in sale. Sales promotion gives incentive to people to buy and loyal to the brand.

Kotler (1997, p. 624) defined as “Diverse collection of incentive tools, mostly short term, designed to stimulate quicker and or a /greater purchase, of a particular product or services by the consumer or the trade”.

According to Brassington, et al. (1997. p, 653) ” a range of tactical marketing techniques designed with in a strategic marketing framework to add value to a product or service in order to achieve specific sales and marketing objectives”.

Many marketing analysts consider sales promotion is a short term tool to change customer decision regarding the product as it is used to achieve strategic objectives but this traditional concept that sales promotion is short term activity is becoming obsolete and now in many stores like ASDA, Somerfield, Morrison, Tesco, club card, loyalty card other membership and offers card used are aimed to make long term loyal customers. Brassington (1997) defined it as follow.

“A range of marketing techniques designed with in a strategic marketing frame work to add extra value to a product or a service over and above the normal offering in order to achieve specific sales and marketing objectives. This extra value may be a short term tactical nature or it may be part of long-term franchise building programs.”(Brassington et al 1997, p.654).

Copley , P(2004) explained the short and long term nature of sales promotion and stated that it is no longer short term activity but an important long term marketing activity that increases sales, firm equity and brand loyalty. According to him the main goal of the company is not a short term sale but a long term relationship with customers.

2.1.4. Rationale for the Detailed Literature:

The detail analysis and review here will prove more fruitful in finding out the impact of these marketing tools and its effect on company growth and consumer buying behaviour. This part of research studies will come out with various scholars and analyst approaches towards consumer buying decision that later will help researcher in finding out the correlation between primary analyses and this detailed literature.

The detail literature study explains in detail all the decision variables that will lead researcher to the results and conclusion for this particular research. Efforts are made to come up with more relevant literature so that it helps us in our research work.

2.1.5. Advertisement and Sales Promotions Critical Analysis:

Advertising and sales promotions are used as effective marketing tools to enhance firm growth by increasing revenue, brand image, customer attraction and loyalty.

The detail analyses reveal that effect of both these tools varies with cultures, geographic locations, income, personality and other factors. Different nature and impact of advertisement and sales promotion both on company and consumer buying decision have made these tools important for our research to critically discuss. For both these tools the brands manager and executives has to take such decisions so that it work in tight allocated budget (because of expensive nature of these tools) and use techniques that build more loyal customers.

People are different in religion, perceptions, attitude, education; social life, geographic location and financial position so thus have different demands and activation towards buying decision. (Egan, j. 2007)

So different natures of people have different response and thus have different marketing spend at different situations and thus influenced differently by ads and promotion offers.

All around here we see advertising and promotion offers and according to Jacobs et al (2002-page 1270) companies spend huge money on such promotion tools and such activities are aimed to attract customers and to change their behaviours. (Anderson et al 1998)

The researcher will endeavour to discuss all these factors that lead and on other hand resist to buying decision and will carry out detail by detail research analysis.

Sales promotion doesn’t play positively and according to Lattin et al (1989) some time sales promotion tools in which the products are offered on sales play a negative role on firm because the consumer expects the same price even after promotion period and that in result leads to brand switching and decreased turnover and profit.

Sales promotion has become focus for companies as compare to advertising and increase tangible values of the company but on other hand according to some scholars like Egan, J (2007) it is immeasurable and bit costly tool.

Kotler (1997, page662) states that the companies allocate huge money for sales promotions as compare to advertising. According to him a decade ago its ratio was 60:40 that has reached 65:75 of the budget allocated for advertising and sale promotions. So it mean that budget allocation for sales promotions increasing.

According to Duncan (2002) the customers tends to change brand choice with the time and the only way to retain them are sale promotions offers. There are many examples, like Tesco gives loyalty cards and bonuses to its customers. Air lines give free tickets to its regular customers. Some companies give free vouchers and extra quantity for same price etc. According to Duncan (2002) it is the only way to please consumers and make them stick to brand. Brassington, et al. (1997, p.662) define sales promotion and according to him it means direct invitation to people “buy me and buy me now” so it is a way for quick sale.

Nevertheless this research is to conduct comparative analysis on both these marketing tools. Efforts will be made in onwards sessions to explain these tools in broader terms and analyze it in more depth.

Advertising and sales promotions are the marketing tools that according to Egan, j (2007) are used from centuries ago by marketing and business professionals to incline people towards their product.

Everywhere in the world we go one see ads and offers and regarding different products and according to Gelb et al (1985) advertising impacts and motivates consumers to buy the products that are advertised and change their attitude towards buying decision, similarly according to Duncan (2002) the only way to attract new customers and retain existed customers are the sales promotions offers

Businesses today are struggling to lead market and build new customers. Under extreme pressure from its competitors and all around companies are compelled to allocate huge fund to advertising and sales promotions of marketing mix and according to Anderson et al (1998-page 410) in 1992 total promotion and that is growing a rate of 8% (Promo 1994) quoted by Anderson et al ( 1998). At such scenario the marketing analysts are compelled to rethink and redesign their promotional and advertising strategies. If on side the executives are compelled to spend huge money on promotions and advertising so on other hand the expenditures are closely examined by top management to increase short and long term profit. This scrutiny puts huge pressure on executives to spend both on advertisement and sales promotions within the allocated and fixed scale of budget.

Risk of high spending:

The advertising and sales promotions both are the tools the companies spending huge budget.

The research show that short long and term objectives of the company are of more consideration for the company.

According to Mohr et al (2000) states that risk of sales promotion seems to be appear as the companies tends try to cut off their promotions budgets as Mohr et al (2000) states that Proctor and Gamble reducing promotion budget and emphasis on reduced prices.

Copley (2004) states, that sales promotions budget allocation is necessary for the companies if they want to lead competitor and build loyal customers. Tenser (1996) quoted by Mohr et al (2000) states that manufacturers nowadays allocate 75% of its budget to these short term marketing strategies.

Advertising on other hand is used to attract customers even by high prices and are shown by advertising techniques and campaigns that later will be discussed in detail. The aim of these campaign to provide consumer all alternatives regarding the product so they can inclined towards the product.

Alvarez et al (2005) states that sales promotion various techniques are used and almost it is allocated huge budget as compare to advertising and the most widely is traditional way of immediate reduced price technique.

So this gives a rough conclusion that establishment wish to influence buyer behaviour and thus introduce different reduced price campaigns.

Budget an Important Issue:

Mohr et al (2000) states that budget is very important issues for the companies and further he states that the it depends on company short and long term strategy. Factors like market share, competition, popularity, creating brand image and relative prices are related to advertising while short term strategies are related to sales promotion tools done by free gifts, reduced prices and other promotional offers.

Mohr et al (2000) states the budget for advertising and sales promotions is very critical for top executives and brand managers and they go through scarce marketing approaches to identify specific budget for both these marketing activities. For example US reduced 10% of advertising budget as compare to 1998 on media advertising as explained by Mohr et al (2000).

In this paper our main aim will be to find out the impact of these promotional tools and its impact on consumer buying decision. First I will carry out all important definitions and its relevant topic and then will carry out detail quantitative analysis.

2.1.6. Importance of Advertising and sales Promotions:

Advertising impacts and motivates consumers to buy products that are advertised and thus change their attitude and decision (Gelb et al. 1985). Our daily experience on consumer behaviour shows a greater tendency to buy when the products are offered on sales or when it is advertised in such a way that it create need and impulse of brand change in consumer mind. Advertising and sales promotions are the tools the marketers use to increase short term sales.

Sales Promotions give added value to the products in the shape of samples, loyalty cards and prizes and thus creating awareness to products and services. (Fill 2005)

Both sales promotions and advertising techniques are used to attract new customers, retain existed customers and to build strong relationship between consumers and brand.

It is considered as urgent tool to attract customers. According to Eagan. J(2007) sales promotion come in to four types given as follow.

Consumer

Trade

Retail

Sales Force

Sale promotions come in many form like gifts, buy one get one free, extra quantity and free stuff etc. It is of much importance for companies and these offers some time are seasonal special events and some time instant to reduce inventory.

According to Needle (2004) marketing mix is the concept of four “Ps” simply as follows.

Product

Price

Promotions

Placing

This is further added with other two elements marketing research and consumer buying behaviour. All these above elements play key role in market strategy and firm growth.

For Our research purpose the researcher will focus promotion techniques advertising and sales promotions. A detail literature review by marketing scholars will be brought forward to make this research more fruitful.

The application of sales promotion has a huge importance in firm growth, stability and prosperity. Sales promotion offers give benefits to all members in supply chain that range from manufacturer to distributer and than from seller to end user. According to Koltler(1997) sales promotion is more cost effective way to reach end users.

Some of the benefits sales promotions taken from Brassington (1997), 4th edition, p 659 are given as follows.

It attracts new customers and retains existed customers

It gives a competitive position to the firm in market place.

It loads up existed users and disseminates information

Sale promotion encourages trials, increase manufacturer production and reduce seller inventory by increasing short term sale.

2.1.7 Advertising and Consumer buying behaviour:

According to Yeshin (2005) Advertising is used as primary tool to inform, persuade people and to sell product. All around us are the company adverts. Consumer behaviour change as new brand in similar use product are coming in to the market which the Porter (1980) of Harvard University has said the threat entry and termed as the power of buyer in other hand.

Advertising create image of the product and increase brand loyalty, goodwill according to Blythe (2006). By studying product life cycle the initial phase where the product is introduced in market is of huge significance for the companies.

According to Kotler et al (2005-page256) there are numbers of factors that control the consumer buying behaviour. These are given as follow

Cultural

Social

Personal

Psychological

Culture is basically the set of norms and values, tradition and behaviours that is the primary factor behind human wants and desires. Each culture group of people can be divided in to group and sub groups according Kotler et al(2005) and thus make subcultures of different religion, perceptions, races and life styles. One of the subgroup is social culture which varies based on income, educational qualification, economic condition and wealth.

The second factor is social grouping. In these one person of family group or depend on other elder of the family and thus affecting all in family that makes appear as a obstacle in purchasing desire.

The third factor is personal factor. All people are different in habits, personality, attitudes and thus have different perceptions. It depends on personal occupation and earning power. People of different economic condition and personal status will have different tendency to purchase. According to Blackwell et al (2001) each person has his own autonomy, wills, personality that impact purchasing decision.

The fourth factor is the psychological factors that mean people have different attitude toward buying. New things attract people, their motivation change in purchasing decision. Shultz and Barnes (1995) statement taken from book on Advertising by Yeshin (2005) looks customer in this way, they use various resources with time and change mind about brand. Their mind clicks to the new brand if they reckon same properties in different brand. He also emphasize that consumer will be more bended if the product is advertised very effectively and is economical. Advertised is used to turn the customer mind to new product launched in the market to make loyal customers.

Usually there are four types of consumer buying behaviour noted.

Routine Response: the consumers buy many products on daily routine basis like soft drinks, alcohol, vegetables and fruits so they show normally a fix response to product. In this scenario the advertisement for new products will now show a major response and the consumer will buy normally the routine product.

Limited Decision making: this type of behaviour is seen normally when one has no intension to buy anything. According to Blyth (2006) the advertisement should be strong and targeted to switch consumer mind. Different people are have different minds set so to prepare them to buy will need effective advertisement.

The marketers use added values to adverts like adding celebrities, beautiful girls in print and media make customer more focused.

Extensive Decision making:

This behaviour states that consumer has no decision to buy. This might be of more cost, complexity and unfamiliarity. Advertising will have little or no effect in such circumstances.

Impulse buying: When one has no decision to buy products or in other words don’t need that product.

2.1.8. Sales Promotion and Consumer Buying Behaviour:

The theme of sales promotion is to provide such incentives and added-values to customers so that they are stimulated to buy and purchase. Sales promotion in any form like free gifts, premiums, contests, samples, bonuses, loyalty cards stimulate customer in purchase decision and that in turn raise short term sales increase. (Fill 2005)

According to Kotler (2005) people are different socially, culturally, personally and psychologically that in other words by Eagon, J(2007) has been termed Individual Nature that play a significant role on consumer behaviour decision. According to Lee, W.H(2002) people at the matured phase of product life cycle tends to change brand and the tool to stick them to the brand are sales promotions offers like discounts, prizes, coupons. Although sales promotion is used to be a significant marketing tool for immediate increase in sales but according to many critics sales promotions are in effective as they make consumer promotion prone that result market share loss in long run (Ehrenberg et al., 1994) quoted by Kwok. Simon(2005), but according to Hoch et al(1994) sales promotion offers are for long term sale increase and brand image. Both these statement lead to a controversy and thus we can simply conclude that there are some factors that influence firm revenue.

Based on Smith and Taylor (2002) quoted by Egan.J (2007) factors affecting consumer buying behaviour are given in following diagram.

Fig: 2.6 Factors affecting sales decision making

External Influences

Personal situation

Fashion

Income

Disposable Income

Law

Media

Weather

Stock Position

Market communication

Race, Religion, Culture

Attitude Age

Perception Sex

Learning Income

Memory Personality

Motivation Family

Situation

Secondary Group like School Friends

S

Gathering/ Friends

Income

Source: diagram sketched by Researcher taken from Egan. J (2007) page 58

Demographic and all the factors income, family, gathering, social status etc has huge impact on consumer buying behaviour.

The concept of consumer behaviour is explained by many scholars and there are theories that explain what motivate people to buy. Maslow (1954) quoted by Egan, J(2007-p70) proposed a model that explains the type of need that drive us and when one need is fulfilled the desire for second one arise.

http://www.union.umd.edu/GH/basic_needs/images/maslows_hierarchy2.jpg

Fig 2.7 Maslow Hierarchy of needs and demands

Source: Picture taken from Google (04th/02/210-21:40)

Maslow explains that man first looking to fulfil his basic needs like hunger and thrust and security and then desires for other social and esteem needs. The proposed model above gives us a rough idea of how much one can take decision and the power to buy.

According to Millward Brown (2008) research taken about key knowledge points he states that people of different countries have different demand and activation to buy product. Further in his research work he has categorized the demand of some categories of products to its activation and has concluded that different regions because of their different nature, culture and traditions have different demand. They are motivated by different mediums and promotion offers in different way. He states that many people prefer in store activities like discounts, free gifts, extra quantity etc. People get motivated when they visit store and see products on reduced prices. Some have very nice packaging and two in price of one etc as he summarise it in following diagram.

http://www.warc.com/fulltext/MBKnowledge/images/89704f05.gif

Fig 2.8: Sales promotions techniques and its impact on buyer behaviour

Source: picture taken warc.com research of Millward Brown (Accessed at 02 Feb 2010)

The research work show how effective is the technique of sale promotion influencing consumer buying behaviour. Brassington(1997) 4th edition states that sales promotions give incentive to new customers when they enter in new store. Most people like product to touch and feel and buy it when it is on offer. They are easily attracted because of the reduced prices and increased quantity.

Sales promotions offers by most of the companies in UK Boxing day and general promotions offers on daily and seasonal basis are the examples by which many people tends to shop and thus increase the firm revenue.

2.1.9 A Comparative analysis of Sales Promotions and advertising

Following diagram plotted by researcher and taken from John Egan book best describe the effectiveness of both advertising and sales promotions.

Ad

SP High

Ad

Ad

Ad Effectiveness

SP

Ad

SP

SP

SP

Low

Awareness Interest Desire Purchase Post Purchase

Fig 2.9: Advertising and sales promotions comparative analysis

Source: Marketing Communication by John Egan, page 224

SP

Ad Stands for Sales Promotions

Stands for Advertising

2.1.10. Research Gaps:

Although much of the work has been done many scholars and business analysts on advertising and sales promotions but there are other action variables according to Ailawadi et al (1994) quoted by Mohr et al(2000-page 289) are very important to find out.

The literature review shows that gap exist in many points in this analysis. First is that high

level brand manager and their perception and understanding the multiethnic area for this area where the research is being conducted. So I am going for a detail analysis through research questions.

Other gap seems to exist between products and time in market and respective buying behaviour of consumers. Response to different products are different and some time the price of one product is different from one store to another that so efforts will be made to suggest a criteria for both advertising and promotion activities.

Next I come out with all questions that are the main objective of the research. These are shown as our decision variable on the basis of which the questionnaire will be designed and results will be find out.

2.1.11. Important Decision Variables/Gaps in Literature:

Advertising Vs Sales Promotion budget allocation (Product life Cycle/need)

Advertisement and sales promotion dependability on brand (Single/Multiple family brand, luxury stuff, commodities and other fast moving consumer goods etc.

A brand relative price and the allocation of proper fund for advertising and sales promotions

What makes the people more activated to shop?

Advertisement and sales promotion seasonal affects.

Advertising and Sales Promotion and Retailer Influence

Allocation of Advertising and Sales Promotions budget and Individuals perceptions/Race/Family

Demographic and multi ethnic factors.

2.1.12. Summary:

The detail literature review come to conclusion that both advertisement and sales promotion offers play significant role in firm growth, brand image and loyalty. It attracts people of different nature, cultures and income. The study reveals that sales promotion traditional approach that states promotion is a short term tool is obsolete and according to Copley (2004) sales promotion can be used for both short and long term objectives. Duncan (2002) it is the only way to attract new customers and to retain existed customers. Sales promotion influence consumers very easily and activate people to buy.

Advertising according to Blythe (2005) is used as main tool for long term prospective. It inform the people about new products its features and it comparative position with other products and according to Bullimore(1995) no brand, value of the money, innovation and consumer influence is possible without advertising. Advertising is very important tools and needs huge marketing budgets as compare to sales promotions but no doubts it impacts are long term as compare to sales promotion that according many scholars is useful for short term objectives.

The research shows the people are get influenced by promotions offers like discounts reduced prices; coupons and even change brand and their mind if they get economical prices.

So we can conclude that sales promotion play important role as compare to advertising as it provide opportunity for all brands to maintain good sale and market share.

Chapter 2

Part B

2.2.1. Advertising Background:

“Advertising can be traced back to the very beginnings of recorded history. Archaeologists working in the countries around the Mediterranean Sea dug up signs announcing various events and offers. The Romans painted walls to announce gladiator fights during the Golden Age in Greece, town criers announced the sale of cattle, crafted items and even cosmetics ” (Kotler et al. 2002, p. 661).

The concept of advertising is quite old and has been used in different form in the past. According to Yeshin (2005) the use of advertisement goes back to 300 years. Newspaper and magazine in early centuries were used to advertise and attract many more possible. It changed its shape from personal business to organizational business so was considered more significant tool with passage time momentum.

People in the past lived the life of simplicity and in other words more ignorant from the material world according to Tony Yeshin (2005) products and almost giving less consideration to materials but with the passage of time the inventions and modernization of life style people started influencing people to go for new products. This was the stage where the advertisement burst out and was thus seen an effective tool to attract people. The earliest advertising was made through newspaper, magazines , walls paper and prints that in 1950s and when the Tele Vision took births was seen the most significant tool of all time. Although these type of electronic devices Radio and TV were used to convey and convince and even now the application of these two big tools are unaccountable.

In late 1950 major work was done to introduce advertisement and marketing concept specially the young community gave a significant push, as they had tendency to buy new stuff. Leveit(1960) and Kotler and Levy (1969) gave a new approach to marketing and consumer behaviour.

The advertisement nowadays is fast, effective and more coherent. Latest technology has made revolutionary change in marketing field and thus the companies gain huge turnover.

2.2.2. Classification of Advertising:

Advertising is not a single entity according to Yeshin.T (2005) and can be classified in to the following ways.

Advertising by audience

By Purpose

By Medium

Geographic region

The author Yeshin (2005, page7) has further classified advertising in to the following.

Pioneering Advertising: is made for the advertising of existing products categories.

Competitive Advertising: Persuade on benefits from other brands

Comparative Advertising: compare one product attributes with other competitors

Subliminal Advertising: embedding materials in video, print and audio etc.

The writer of the books has explained the above ways in much detail. In advertising the audience is one of the important aspects whom are targeted by marketers. For example cream and lotion and other make stuff would be advertised for women and mainly young girls not men.

The media are selected by the firm some prefer TV, Radio some some prefer point of sales purchase banners etc. This might be the collection of many media in same time.

There are number of generic advertising like to wear seat belt while driving, east eggs, eat less fats etc are the adverts for special purpose.

In advertisement geographic region is given major consideration mainly in international marketing. In some Muslim countries like Saudi Arabia discourage press and banner advertising if it has female pictures or contradict the religious principles. In some cultures cinemas and videos are discouraged so advertising should be designed according to region to make it more attractive.

2.2.3. Advertising working/Mechanism:

Although it is seems to be quite simple that how the advertising works but it in marketing concept this topic is quite debatable. There are different theories according to Blyth (2006) about the advertisement.

Strong Theory

Week Theory

Awareness Interest Desire Action

No Knowledge of brand Point of sales purchase

Awareness Trial Reinforcement Nudging

Fig 2.1 Strong and weak theories of Advertising

Source: Blythe, J (2005), “Principle & Practice of Marketing” page 481

Strong theory states that advertising is powerful tool that can change customer attitude and can deliver significant knowledge and understanding.

While the week theory states that adver