Sales Promotion Abuse

The increasing use of sales promotion in marketing programs is more than a passing fad. It is a fundamental change in strategic decisions about how companies market their products and services. The value of this increased emphasis on sales promotion has been questioned by several writers, particularly with regard to the lack of adequate planning and management of sales promotion programs. Are marketers becoming too dependent on this element of the marketing program? Consumer and trade promotions can be a very effective tool for generating short-term increases in sales, and many brand managers would rather use a promotion to produce immediate sales than invest in advertising and build the brand’s image over an extended time. As the director of sales promotion services at one large ad agency noted: “There’s a great temptation for quick sales fixes through promotions. It’s a lot easier to offer the consumer an immediate price savings than to differentiate your product from a competitor’s.”

Overuse of sales promotion can be detrimental to a brand in several ways. A brand that is constantly promoted may lose perceived value. Consumers often end up purchasing a brand because it is on sale, they get a premium, or they have a coupon, rather than basing their decision on a favorable attitude they have developed. When the extra promotional incentive is not available, they switch to another brand. A study by Priya Raghubir and Kim Corfman examined whether price promotions affect pretrial evaluations of a brand.69 They found that offering a price promotion is more likely to lower a brand’s evaluation when the brand has not been promoted previously compared to when it has been frequently promoted; that price promotions are used as a source of information about a brand to a greater extent when the evaluator is not an expert but does have some product or industry knowledge; and that promotions are more likely to result in negative evaluations when they are uncommon in the industry. The findings from this study suggest that marketers must be careful in the use of price promotions as they may inhibit trial of a brand in certain situations.

Alan Sawyer and Peter Dickson have used the concept of attribution theory to examine how sales promotion may affect consumer attitude formation. According to this theory, people acquire attitudes by observing their own behavior and considering why they acted in a certain manner. Consumers who consistently purchase a brand because of a coupon or price-off deal may attribute their behavior to the external promotional incentive rather than to a favorable attitude toward the brand. By contrast, when no external incentive is available, consumers are more likely to attribute their purchase behavior to favorable underlying feelings about the brand.

Another potential problem with consumer-oriented promotions is that a sales promotion trap or spiral can result when several competitors use promotions extensively. Often a firm begins using sales promotions to differentiate its product or service from the competition. If the promotion is successful and leads to a differential advantage (or even appears to do so), competitors may quickly copy it. When all the competitors are using sales promotions, this not only lowers profit margins for each firm but also makes it difficult for any one firm to hop off the promotional bandwagon.

A number of industries have fallen into this promotional trap. In the cosmetics industry, gift-with-purchase and purchase-with-purchase promotional offers were developed as a tactic for getting buyers to sample new products. But they have become a common, and costly, way of doing business. In many areas of the country, supermarkets have gotten into the trap of doubling or even tripling manufacturers’ coupons, which cuts into their already small profit margins. Fast-food chains have also fallen into the trap with promotions featuring popular menu items, such as Burger King’s Whopper for 99 cents. The sales promotion war spread to yet another industry recently when Dell Computer began using sales promotion offers to help sell its personal computers.

Dell’s Trip-a-Day Giveaway offered consumers a chance to win a vacation worth up to $50,000. Competitors quickly matched Dell’s promotion: Compaq and Hewlett Packard developed their own sweepstakes and also began using rebates. Gateway gave away free printers and scanners with certain PCs, and Apple offered no-payment financing. Industry analysts have expressed concern over the impact the promotional war will have on these companies as profit margins in the PC industry are already very low.

Marketers must consider both the short-term impact of a promotion and its longterm effect on the brand. The ease with which competitors can develop a retaliatory promotion and the likelihood of their doing so should also be considered. Marketers must be careful not to damage the brand franchise with sales promotions or to get the firm involved in a promotional war that erodes the brand’s profit margins and threatens its long-term existence. Marketers are often tempted to resort to sales promotions to deal with declining sales and other problems when they should examine such other aspects of the marketing program as channel relations, price, packaging, product quality, or advertising.

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