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Sunday, February 2, 2014


In our daily life we all are exposed to various tools of promotion aiming at communicating one thing or the other to us. To illustrate, while at home welcome across advertisements when reading a newspaper, watching TV, listening to radio or even examining the water, electricity or telephone, bills. On our way to the office similar communications face us on bus panels, roadside hoardings, neon sighs, posters and banners etc. And, while at a retail shop these take the shape of traffic builders, product displays, streamers, hangers, bins etc., all sharing information relating to a specific product of a company.

Listed above are just a few types of the various promotion tools available to a marketer. Before proceeding further, let us take a look at the definitions of the four major methods of promotion. These are: advertising, personal selling, sales promotion and publicity. The committee on Definitions of the American Marketing Association defined these components as under:

Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. It includes the use of such media as magazines, newspapers, outdoor posters, direct mail novelties, radio, television, bus posters, catalogues, directories, programmes, circulars and very recently online ads and social media ads.

Personal selling: Oral presentation in a conversation with one or more prospective purchasers for the purpose of making sales.

Sales promotion: Those marketing activities-other than personal selling, advertising, and publicity-that stimulate consumer purchasing and dealer effectiveness such as displays, shows and exhibitions, demonstrations, coupons, contests, and other non-routine selling efforts. These are usually short-term activities.

Publicity: Non-personal stimulation of demand for a product, service or business unit by generating commercially significant news about it in published media or obtaining favourable presentation of it on radio, television or stage. Unlike advertising, this form of promotion is not paid for by the sponsor 

Packaging, public relations and role of other elements of marketing mix in promotion: Although definitions vary about the number of components that constitute promotion, marketing practice brings out that almost all marketing activities influence the promotion function. Notably, packaging performs the promotion function in addition to providing protection to the product. By incorporating creativity in its design, a package can add the `pick-me-up' appeal to the product and also help to communicate its features, uses and benefits more effectively. The promotion aspect of packaging is witnessing a hit of revolution in India now a days with the introduction of innovative, packages in, the field of consumer goods. For example, package design of Pepsi and edible oils etc.

Public relation, likewise, performs an important role in promotion insofar as it helps to create a favourable image of the firm and allows the public to experience better satisfaction in dealing with the firm.

High and consistent product quality, provision of superior customer service, price promotions as a way of increasing short-term sales and compatibility between the character of distribution outlets and the product are the other ways which contribute to the promotion function of this firm.


Marketers rarely rely on only one promotion method. They make use of two or more methods to accomplish promotion and marketing objectives. When a firm makes use of more than one promotion method for one product, the promotion methods used constitute the promotion mix for that product. For example, while TV spots, newspaper and fashion magazine advertisements, and attractive festival displays at the authorised retail shops constitute the promotion mix of Vimal fabrics; specialised industry magazines and participation in national and international exhibition of engineering goods constitute the promotion mix of Hindustan Machine Tools.

Promotion function being linked with the ever changing market environment is a dynamic function. The promotion mix, therefore, acquires the dimension of dynamism and varies from product to product and over a period of time. Quite similar to the problems faced by a marketer in the determination of the optimal marketing mix are the problems faced in the determination of the promotion mix. The task involved is rather more complex due to cross-substitutability of the various promotion methods (i.e. each method is capable of achieving what the other method may achieve) thereby making the measurement of promotional effectiveness more difficult. Notwithstanding these difficulties, factors as mentioned below act as the major determinants of the promotion mix:
1. Type of product
2. Nature of Market
3. Stage of product in its life-cycle
4. Available budget, and
5. Company policy.  
These determinants are briefly discussed.
Type of Product: In terms of the promotion task involved the type of product is the major influence on the promotion-mix. For example, a low priced, frequently purchased consumer convenience item, say a toilet soap, a toothpaste or a cigarette will require that repeat messages influencing and reminding the existing consumers, and persuading the new consumers, be used in a mass manner and at a high frequency. Newspaper and magazine advertisements, TV spots and Cinema Slides, offer of incentives to consumers and organisation of contests will, therefore, constitute the ‘promotion mix' of such consumer goods. Now let us think of an industrial-product., say a special purpose machine tool, which has a high unit value, is technical in nature, is purchased in-frequently and requires demonstration and conviction before it gets sold. Personal selling, quite obviously, becomes indispensable for such a product along with organising product demonstrations and exhibitions, holding seminars, etc. These then constitute the promotion mix in the case of an industrial good with newspaper advertising playing only the limited role of keeping the public informed about the company's activities and accomplishments. Publicity however, to the extent it projects the desired image of the company plays a more important role.

Nature of Market: The locational characteristics of the customers, intensity of competition in the market place and the requirements of wholesalers and retailers influence the promotion mix relating to the product in their own way For example, if the target audience of a consumer product is both large as well as widely dispersed in different parts of the country, advertising and sales promotions emerge to be both more effective and economical promotional methods than the others. This is why advertising and sales promotions are so dominant among consumer goods companies. Personal selling also has a role to play among consumer goods companies but limited mainly to wholesalers and retailers who receive greater focus for activities such as pushing inventories, conducting displays, etc.

Stage in the Product Life Cycle: The promotion mix changes with the movement of the product from one stage to the other in its life-cycle. For example, when the product is in the introduction and early growth stages, and the tasks involved are that of building and motivating trials of the product, the promotion mix comprises of publicity, informative advertising, consumer sales promotions and trade deals. Later, as the product reaches the maturity stage, and goals of maintaining brand loyalty and creating brand preferences become more important, aggressive brand advertising and dealer promotions become the key components of the promotion mix.

The Available Budget: Each method of promotion has certain costs associated with it. The level at which each promotion method is to be used and the selection of the promotion mix is dependent on the promotion budget of the firm. Firms with small promotional budgets have to be content with more localised area activity, using dealer displays, wall writings, personal selling, and other less sophisticated methods. It needs to be emphasised here that for the promotion function to be effective the minimum threshold level must always be exceeded.

Company Policy: In the ultimate analysis an aggregate consideration of the above four determinants along with the company's own marketing and promotion policy determines the mix. Important factors here include the conviction of the top management in the role of promotion and its various components, the product market strategy, and the type of corporate image it wants to project. For example, a company even under the seller's market might still believe in keeping a high profile in public and thus may go for extensive publicity and advertising programmes. Yet another company in the same industry may rely more on personal selling, and continue to grow by maintaining its promotions at low key.


As we noted above, the promotion budget influences the level of promotional activity as well as the promotion mix used by the firm. Budgeting for promotion is yet another area where a lot of subjectivity prevails regarding what is the right amount to be spent on the promotion function. Pending any clear cut relationship between the promotion expenditure and the achievement of promotion objectives, recourse is made to certain rules of the thumb. These are:
  • Incremental promotional expenditure yields, incremental sales to a certain extent;
  • A minimum level of promotion activity must be exceeded for promotion to have a meaningful effect. Often such a minimum level of promotion is set by the competitor or more appropriately by an average of the industry;
  • Promotion activities when well integrated with other elements of the marketing mix produce greater than the planned results.
The above discussion should not, however, lead us to understand that no attempts have been made to shed light on the inherent uncertainty shrouding the cause-effect relationship in this area of promotion budgeting. In fact, quite a few notable attempts, by the economists in terms of application of marginal cost and marginal revenue principle (additional promotional expenditure and additional revenue and profits made), and by marketing researchers through experimentation and model building approaches have been made. The substance of their findings is that results of the promotion function should be constantly monitored in order to establish more reliable parameters of cost-benefit relationships. Further, cost-benefit analysis should form the basis of the trade off before promotion budget is finalised by using any one of the following methods. These methods include per cent-of-sales methods, fixed-sum per unit, affordable funds, competitive parity, and objective and task method.

Percent-of-Sales: This method views promotion budget determination by linking the appropriation to a fixed percentage of sales of the company products. Such sales may relate to the previous year, an average of sales of the previous few years, projected sale of the next year or years or an average of the previous few years sales, as well as the projected sales of the next few years.

This method though simple to use fails to account for the changing promotional costs, and relating the appropriations made to the product-market needs. Particularly difficulties are faced if the sales curve of a company is not smooth, hence resulting in lower outlays for the years that follow the bad sales years. Also the forecasted sales realisations remain uncertain. The ways out attempted have been the adjustment provision of a fixed percentage to the average expenditure of the past (i.e., last year plus 15%), or use of this method in combination with the others that are discussed below.

Fixed-sum per unit: Very much like the per cent-of-sales, under this method the promotion budget is determined by allocating a fixed amount of money per physical unit of product for either past of future sales or a combination of the two. The only differentiating point of this method from the per cent-of-sales method is that the base for budgeting, instead of being rupee sales, is the number of product units sold or targeted to be sold. This method, thus, has almost the same strengths and weaknesses as the ones associated with per cent-of-sales method, namely, simplicity in the determination but arbitrariness in arriving at the percentage or per unit allocation.

Affordable funds: Continuing to think on the plane that promotion expenditure is one of those business costs which are desirable or avoidable as per the convenience of the top management, the funds for promotion are appropriated on discretionary basis under this method. No wonder then, that companies adopting this method find their promotion appropriations fluctuating from year to year depending on the top management's thinking for the year.

Competitive parity: Incorporating a measure of competitiveness in planning, this method guides the budget determination in terms of relativity to what the competitors are likely to allocate. Being a slightly more market-oriented method than the ones' discussed so far, when based on the representative average of the industry promotion expenditure, it becomes a good norm to moderate the promotion expenditure of a company.

Objective and task method: This is one of the most scientific methods of budget determination. It approaches the budget exercise by first setting the specific objectives to be achieved. It then identifies the tasks involved in achieving the said objectives followed by ascertaining the costs involved in the performance of each task required. The result of the exercise is an estimation of the amount required for accomplishing the set promotion goals. Typical objectives might be to increase awareness say by 15% or increase message/theme recall say by 25%.

Indeed, it a good method as far as promotion budgeting for new products is concerned, or when a new thrust to the image of a company and its products is to be provided.

This method presupposes that objectives set are realistic and promotion results can be measured precisely. These assumptions continue to be the subject of unending debate at the one end, and of pursuit of research on the other. It is as a result of the continuing research that some models for promotion budgeting have been developed and are now being refined to be of practical utility to the marketer.

The practice: In practice most companies make use of more than one method for determining the promotion budget. The research into the practices of the companies in India in this regard revealed the above finding. Among the individual methods used "affordable funds" method emerged as the most popular. There were, however, quite a few companies which had started using the approach of ‘objective and task’ in setting their promotion budget either exclusively or in combination with other methods. Most of such companies were dealing in consumer goods.

The practices of the companies using a combination of methods for determining promotion budget pointed to the efforts they were putting in to gather competitive promotion outlays and its apportioning to various promotion components.


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