Chapter 1-5 Effect of Sales Promotion on Consumer Buying Habits

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EFFECT OF SALES PROMOTION ON CONSUMER BUYING HABITS

(A CASE STUDY OF NIGERIA BOTTLING COMPANY)

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The major tasks of marketers are to produce the right goods, charge the correct price, gives the product exposure through distribution networks, and to induce the consumers to purchase the product. All these marketing skills will be a waste of effort if consumers fail to become aware of the existence of a product or service.

However, sales promotion is the array of method or techniques that marketers use to stimulate or improve immediate purchase. In most cases, sales promotion is used in conjunction with other promotional tools especially advertising and personal selling to achieve desire result. But unlike advertising and personal selling, sales promotion comprises a wide variety of technical promotional tools of short term incentives designed to stimulate a target market response. (Daniel, 2001).

In other words, sales promotion is one of the methods or ways by which information about a product or service is passed to potential consumers. Generally, sales promotion has two main objectives which could be categorize into broad objective and specific objective. The broad objective of any sales promotion will include product exposure, attention acquisition and comprehension of sales promotion, attitude change and habits while in a specific objective the target consumers are specified as well as the intended effect of the promotion upon the target market (Micheal, 1994).

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 amount 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 the companies in the same trade. In the light of the foregoing for a company to excel above its competitors, it has to improve certain marketing strategies to attract the attention and interest of its consumers. (Daniel, 2001).

In recent years, according to 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 in 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.

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.

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 rather than instigate them. Hence, the question that readily comes to the minds are:

-Are sales promotion activities a waste?

-Do promotion incentive schemes really work?

-If they do, what is the extent of their efficacy and how do they affect purchase habits?

-However, considering the level of economic resources committed to these promotional mix and programme, 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 programme. A sales promotion is only effective and appropriate if it can instigate its target and it is possess a high degree of creativity and flexibility. Obviously since the afore-stated applies to the Nigerian telecommunication sector, there is therefore a void to fill by carrying out this study.

1.3 AIMS AND 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 effect on consumer habits using Nigeria Bottling Company Plc Lagos as a case study. The specific objectives of the study include:

-To examine the effect of sales promotion on customer awareness about the company’s product or packages.

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

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

-To examine the effect of sales promotion or buying habits and levels of satisfaction.

1.4 RESEARCH QUESTIONS

The following research questions relevant to the study are raised:

-Does a sales promotion activity result in customers’ awareness of the company’s product?

-Does a sales promotion activity result in repeat purchase of product?

-Does sales promotion have a short term effect rather than long term effect on buyers’ habits?

-Does sales promotion activity effects on buyers’ behavior?

1.5 RELEVANT RESEARCH HYPOTHESES

H₀: sales promotion activity does not result in repeat purchase of product

H_i: sales promotion activity result in repeat purchase of product.

H₀: Sales Promotion does not have positive effect on the consumer buying decision.

H_i: Sales Promotion has positive effect on the consumer buying decision.

1.6 SCOPE OF THE STUDY.

These researches covers the area of sales promotion, paying attention to effective sales promotion and other factors that can affect consumers buying habits with special emphasis on Nigeria Bottling Company Plc.

The scope of this study will be limited to Nigeria Bottling Company Plc Lagos Branch.

1.7 SIGNIFICANCE OF THE STUDY

The significance of the study cannot be over-emphasized as the result would serve as an aid to different parties, especially the firm of concern (Nigeria Bottling Company Plc). 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 was found useful for students, practitioners, marketers, consultants and academicians who value research and have interest in the business and marketing discipline.

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

Project Overview

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