DISSERTATION PROJECT REPORT ON

“ROLE OF SALES PROMOTION ON FMCG”

A Research Project Report submitted to
Dr. Namita Dixit
Session 2022-24

IILM University Gurgaon

Submitted By : Pawan Soni

Roll No: 2252204

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CERTIFICATE

This is to certify that Mr. Pawan Soni. PGDM (Batch 2022-24) a student of IILM Gurgaon, has
undertaken the project on “ROLE OF SALES PROMOTION ON FMCG”

. “To the best of my knowledge, the survey, data collection, & analysis work for preparing the
project has been carried out by the student in partial fulfilment of the requirements for the award
of PGDM, under my guidance and supervision. I am satisfied with the work of Mr. /Ms.

…………………………..

Date:

Faculty Mentor’s Name: Dr. Namita Dixit

Signature:

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TABLE OF CONTENT

Chapter – 1 : Introduction 6-45

1- Background

2- Research Problem

3- Research Objective

Chapter - 2 : Literature Review 46-54

Chapter – 3 : Research Methodology 55-58

1- Types Of Data

2- Choice Of Method For Data Collection

3- Sample Size

Chapter – 4 : Data Analysis & Interpretation 59-85

Chapter – 5 : Finding 86-87

Chapter – 6 : Conclusion 88

Chapter – 7 : Suggestions For Future 89-91

Bibliography 92

Annexure : Questionnaire 93-98

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Chapter – 1

INTRODUCTION

1.1 BACKGROUND

FMCG Concept and Definition:

The term FMCG (fast moving consumer goods), although popular and frequently used
does not have a standard definition and is generally used in India to refer to products of everyday
use. Conceptually, however, the term refers to relatively fast moving items that are used directly
by the consumer. Thus, a significant gap exists between the general use and the conceptual
meaning of the term FMCG.

Further, difficulties crop up when attempts to devise a definition for FMCG. The problem
arises because the concept has a retail orientation and distinguishes between consumer products
on the basis of how quickly they move at the retailer’s shelves. The moot question therefore, is
what industry turnaround threshold should be for the item to qualify as an FMCG. Should the
turnaround happen daily, weekly, or monthly?

One of the factors on which the turnaround depends is the purchase cycle. However, the
purchase cycle for the same product tend to vary across population segments. Many low-income
households are forced to buy certain products more frequently because of lack of liquidity and
storage space while relatively high-income households buy the same products more infrequently.
Similarly, the purchase cycle also tends to vary because of cultural factors. Most Indians,
typically, prefer fresh food articles and therefore to buy relatively small quantities more
frequently. This is in sharp contrast with what happens in most western countries, where the
practice of buying and socking foods for relatively longer period is more prevalent. Thus, should
the inventory turnaround threshold be universal, or should it allow for income, cultural and
behavioral nuances?
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Characteristics of FMCG Products:
● Individual items are of small value. But all FMCG products put together account for a
significant part of the consumer's budget.
● The consumer keeps limited inventory of these products and prefers to purchase them
frequently, as and when required. Many of these products are perishable.
● The consumer spends little time on the purchase decision. Rarely does he/she look for
technical specifications (in contrast to industrial goods). Brand loyalties or
recommendations of reliable retailer/dealer drive purchase decisions.
● Trial of a new product i.e. brand switching is often induced by heavy advertisement,
recommendation of the retailer or neighbors/friends.
● These products cater to necessities, comforts as well as luxuries. They meet the demands
of the entire cross section of population. Price and income elasticity of demand varies
across products and consumers.

FAST MOVING CONSUMER GOODS

The Indian FMCG sector is the fourth largest sector in the economy with a total market size in
excess of US$ 13.1billion.It has a strong MNC presence and is characterised by a well-
established distribution network, intense competition between the organised and unorganised
segments and low operational cost.
Availability of key raw materials, cheaper labour costs and presence across the entire value chain
gives India a competitive advantage .The FMCG market is set to treble from US$ 11.6 billion in
2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita Consumption in most
product categories like jams, toothpaste, skin Care, hair wash etc. in India is low indicating the
untapped market Potential. Burgeoning Indian population, particularly the middle class
and the rural segments, presents an opportunity to makers of branded products to convert
consumers to branded products. Growth is also likely to come from

consumer 'upgrading' in the matured product categories. With 200 million people expected to
shift to processed and packaged food by 2010, India needs around
US$ 28 billion of investment in the food- processing industry.
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WHY INDIA

Large domestic market

India is one of the largest emerging markets, with a population of over one billion. India is one of
the largest economies in the world in terms of purchasing power and has a strong middle class
base of 300 million.
Rural and urban potential

Rural-urban profile
Urban Rural
Population 2001-02 (mn household) 53 135
Population 2009-10 (mn household) 69 153
% Distribution (2001-02) 28 72
Market (Towns/Villages) 3,768 627,000
Universe of Outlets (mn) 1 3.3

Source: Statistical Outline of India (2001-02), NCAER

Around 70 per cent of the total households in India (188 million)

resides in the rural areas. The total number of rural households are
expected to rise from 135 million in 2001-02 to 153 million in
2009-10. This presents the largest potential market in the world.
The annual size of the rural FMCG market was estimated at around
US$ 10.5 billion in 2001-02. With growing incomes at both the
rural and the urban level, the market potential is expected to
expand further.

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 India - a large consumer goods spender

An average Indian spends around 40 per cent of his income on

grocery and 8 per cent on personal care products. The large share
of fast moving consumer goods (FMCG) in total individual
spendingalong with the large population base is another factor
that makes India one of the largest FMCG markets.

Consumption pie

Source: KSA Technopak Consumer Outlook 2004.

Even on an international scale, total consumer expenditure on food in India at US$ 120 billion is amongst
the largest in the emerging markets, next only to China.
Consumer expenditure on food (US$ billion)

Source: Euro monitor.

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FAST MOVING CONSUMER GOODS

Rapid urbanisation, increased literacy and rising per capita income, have all caused rapid growth
and change in demand patterns, leading to an explosion of new opportunities. Around 45 per cent
of the population in India is below 20 years of age and the young population is set to rise further.
Aspiration levels in this age group have been fuelled by greater media exposure, unleashing a
latent demand with more money and a new mindset.

Demand-supply gap

Currently, only a small percentage of the raw materials in India are processed into value added
products even as the demand for processed and convenience food is on the rise. This demand
supply gap indicates an untapped opportunity in areas such as packaged form, convenience food
and drinks, milk products etc.
In the personal care segment, the low penetration rate in both the rural and urban areas indicates
a market potential. Change in the Indian consumer profile.

Consumer Profile

1999 2001 2006

Population (millions) 846 1,012 1,087
Population < 25 years of age 480 546 565
Urbanisation (%) 26 28 31
Source: Statistical Outline of India (2002-03).
FMCG Category and products

Category Products
Household Care Fabric wash (laundry soaps and synthetic detergents); household cleaners
(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito
repellents, metal polish and furniture polish). Food and Health beverages; soft drinks;
staples/cereals; Beverages bakery products (biscuits, bread, cakes); snack food; chocolates; ice
cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water;
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Category Products:

Household Care Fabric wash (laundry soaps and synthetic detergents); household cleaners
(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito
repellents, metal polish and furniture polish). Food and Health beverages; soft drinks;
staples/cereals; Beverages bakery products (biscuits, bread, cakes); snack food; chocolates; ice
cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water:
branded flour; branded rice; branded sugar; juices etc. Personal Care Oral care, hair care, skin
care, personal wash (soaps); cosmetics and toiletries; deodorants;
Perfumes; feminine hygiene; paper products.

INDIA COMPETITIVENESS AND COMPARISON WITH THE WORLD MARKETS.

Materials availability

India has a diverse agro-climatic condition due to which there exists a wide-ranging and large
raw material base suitable for food processing industries. India is the largest producer of
livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice,
wheat and fruits & vegetables.
India also has an ample supply of caustic soda and soda ash, the raw materials in the production
of soaps and detergents – India produced 1.6 million tonnes of caustic soda in 2003-04. Tata
Chemicals, one of the largest producers of synthetic soda ash in the world is located in India. The
availability of these raw materials gives India the locational advantage.

Cost competitiveness

Labour cost comparison

Apart from the advantage in terms of ample raw material availability, existence of low-cost
labour force also works in favour of India. Labour cost in India is amongst the lowest in Asian
countries. Easy raw material availability and low labour costs have resulted in a lower cost of
production. Many multi-nationals have set up large low cost production bases in India to
outsource for domestic as well as export markets.

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Leveraging the cost advantage

Global major, Unilever, sources a major portion of its product requirements from its Indian
subsidiary, HUL. In 2003-04, Unilever outsourced around US$ 218 million of home and
personal care along with food products to leverage on the cost arbitrage opportunities with the
West.

To take another case, Procter & Gamble (P&G) outsourced the manufacture of Vicks Vaporub to
contract manufacturers in Hyderabad, India. This enables P&G to continue exporting Vicks
Vaporub to Australia, Japan and other Asian countries, but at more competitive rates, whilst
maintaining its high quality and cost efficiency.

Presence across value chain

Indian firms also have a presence across the entire value chain of the FMCG industry from supply of
raw material to final processed and packaged goods, both in the personal care products and in the food
processing sector. For instance, Indian firm Amul's product portfolio includes supply of milk as
well as the supply of processed dairy products like cheese and butter. This makes the firms located in
India more cost competitive.

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POLICY

India has enacted policies aimed at attaining international competitiveness through lifting of the
quantitative restrictions, reduced excise duties, automatic foreign investment and food laws
resulting in an environment that fosters growth. 100 per cent export oriented units can be set up
by government approval and use of foreign brand names is now freely permitted.

FDI Policy

Automatic investment approval (including foreign technology agreements within specified

norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies
(OCBs) investment, is allowed for most of the food processing sector except malted food,
alcoholic beverages and those reserved for small scale industries (SSI). 24 per cent foreign
equity is permitted in the small-scale sector. Temporary approvals for imports for test marketing
can also be obtained from the Director General of Foreign Trade. The evolution of a more liberal
FDI policy environment in India is clearly supported by the successful operation of some of the
global majors like PepsiCo in India. PepsiCo's India experience After a not so successful attempt
to enter the Indian market in 1985, Pepsi re-entered in 1988 with a joint venture of PepsiCo,
Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India
Limited. By 1994, Pepsi took advantage of the liberalised policies and took control of Pepsi
Foods by making an offer to both Voltas and PAIC to buy their equity. The Indian government
gave concessions to the company, Pepsi was allowed to increase its turnover of beverages
component to beyond 25 per cent and was no longer restricted by its commitment to export 50
per cent of its turnover. The government approved more than US$ 400 million worth of
investment of which over US$ 330 million has already been invested. The government also
allowed PepsiCo to set up a new company in India called PepsiCo India Holdings Pvt Ltd, a
wholly owned subsidiary of PepsiCo International, which is engaged in beverage manufacturing,
bottling and exports activities as Pepsi Foods Ltd.

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Since then, the company has bought over bottlers in different parts of India along with Dukes, a
popular soft-drink brand in western India to consolidate its market share. This was followed by
an introduction of Tropicana juice in the New Delhi and Bangalore markets in 1999.

Currently, soft drink concentrate, snack foods and vegetable and food processing are the key
products of the company. Pepsi considers India, along with China, as one of the two largest and
fastest growing businesses outside North America. Pepsi has 19 company owned factories while
their Indian bottling partners own 21. The company has set up 8 greenfield sites in backward
regions of different states. PepsiCo intends to expand its operations and is planning an
investment of approximately US$ 150 million in the next two-three years. Removal of
Quantitative Restrictions and Reservation Policy The Indian government has abolished licensing
for almost all food and agro-processing industries except for some items like alcohol, cane sugar,
hydrogenated animal fats and oils etc., and items reserved for the exclusive manufacture in the
small scale industry (SSI) sector. Quantitative restrictions were removed in 2001 and Union
Budget 2004-05 further identified 85 items that would be taken out of the reserved list. This has
resulted in a boom in the FMCG market through market expansion and greater product
opportunities.

Central and state initiatives

Various states governments like Himachal Pradesh, Uttaranchal and Jammu & Kashmir have
encouraged companies to set up manufacturing facilities in their regions through a package of
fiscal incentives. Jammu and Kashmir offers incentives such as allotment of land at concessional
rates, 100 per cent subsidy on project reports and 30 per cent capital investment subsidy on fixed
capital Investment up to US$ 63,000. The Himachal Pradesh government offers sales tax and
power concessions, capital subsidies and other incentives for setting up a plant in its tax free
zones. Five-year tax holiday for new food processing units in fruits and vegetable processing
have also been extended in the Union Budget 2004-05. Wide-ranging fiscal policy changes have
been introduced progressively. Excise and import duty rates have been reduced substantially.
Many processed food items are totally exempt from excise duty. Customs duties have been
substantially reduced on plant and equipment, as well as on raw materials and intermediates,
especially for export production. Capital goods are also freely importable, including second hand
ones in the food-processing sector.

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Food laws Consumer protection against adulterated food has been brought to the fore by "The
Prevention of Food Adulteration Act (PFA), 1954", which applies to domestic and imported food
commodities, encompassing food colour and preservatives, pesticide residues, packaging,
labelling and regulation of sales.

Trends and players

The Indian FMCG sector is the fourth largest sector in the economy and creates employment for
three million people in downstream activities. Within the FMCG sector, the Indian food
processing industry represented 6.3 per cent of GDP and accounted for 13 per cent of the
country's exports in 2003-04. A distinct feature of the FMCG industry is the presence of most
global players through their subsidiaries (HLL, P&G, Nestle), which ensures new product
launches in the Indian market from the parent's portfolio. Critical operating rules in Indian
FMCG sector

• Heavy launch costs on new products on launch advertisements, free samples and product
promotions.
• Majority of the product classes require very low investment in fixed assets

• Existence of contract manufacturing

• Marketing assumes a significant place in the brand building process

• Extensive distribution networks and logistics are key to achieving a high level of penetration in
both the urban and rural markets
• Factors like low entry barriers in terms of low capital investment, fiscal incentives from
government and low brand awareness in rural areas have led to the mushrooming of the
unorganised sector.
• Providing good price points is the key to success Penetration and per capita consumption.

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 Rural - urban penetration (2002)

Category Market Size Urban Rural Total

(US$ million) Penetration Penetration Penetration
(%) (%) (%)
High Penetration categories >50%: Drive upgradation and
consumption
Fabric Wash 1210 89.6 82.9 84.9
Personal Wash 938 97.9 90.7 92.8
Packet Tea 635 91.2 82.2 84.9

Low penetration categories: Drive penetration

Toothpaste 409 69.8 32.3 43.5

Skin 312 36.6 19.8 24.7
Hair Wash 230 40.1 16.3 23.3
Talcum Powder 148 66.0 36.8 45.1
Branded Atta 107 44.0 30.2 34.3
Dish Wash 102 54.6 11.5 24.4
Instant Coffee 55 - - -
R&G Coffee 30 - - -
Ketchups 25 12.5 0.7 4.2
Deodorants 19 - - -

Source: HUL, Indian

Readership Survey.

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Penetration level in most product categories like jams, toothpaste, skin care, hair wash etc in
India is low. The contrast is particularly striking between the rural and urban segments - the
average consumption by rural households is much lower than their urban counterparts. Low
penetration indicates the existence of unsaturated markets, which are likely to expand as the
income levels rise. This provides an excellent opportunity for the industry players in the form of
a vastly untapped market. Moreover, per capita consumption in most of the FMCG categories
(including the high penetration categories) in India is low as compared to both the developed
markets and other emerging economies. A rise in per capita consumption, with improvement in
incomes and affordability and change in tastes and preferences, is further expected to boost
FMCG demand. Growth is also likely to come from consumer "upgrading", especially in the
matured product Categories.

Detergent per capita consumption (in kg) (2018)

Tea per capita consumption (in kg) (2018)
Personal wash per capita consumption (in kg) (2018)
Toothpaste per capita consumption (in kg) (2018)
Skin care products per capita consumption (in Rs) (2018)
US$ 1=Rs 47.2
Ice cream per capita consumption (in litre) (2018)
Shampoo per capita consumption (in kg) (2018)
Fabric wash per capita consumption (in kg) (2018)

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Most Indian FMCG companies focus on urban markets for value and rural markets for volumes.
The total market has expanded from US$ 17.6 billion in 1992-93 to US$ 22 billion in 1998-99 at
current prices. Rural demand constituted around 52.5 per cent of the total demand in 1998-99.
Hence, rural marketing has become a critical factor in boosting bottom lines. As a result, most
companies' have offered low price products in convenient packaging. These contribute the
majority of the sales volume. In comparison, the urban elite consumes a proportionately higher
value of FMCGs, but not volume.

Rural markets: small is beautiful

By the early nineties FMCG marketers had figured out two things

• Rural markets are vital for survival since the urban markets were getting saturated
• Rural markets are extremely price-sensitive. Thus, a number of companies followed the
strategy of launching a wide range of package sizes and prices to suit the purchasing preferences
of India's varied consumer segments.
Hindustan Lever, a subsidiary of Unilever, coined the term Nano-marketing in the early nineties,
when it introduced its products in small sachets. Small sachets were introduced in almost all the
FMCG segments from oil, shampoo, and detergents to beverages. Cola major, Coke, brought
down the average price of its products from around twenty cents to ten cents, thereby bridging
the gap between soft drinks and other local options like tea, butter milk or lemon juice. It also
doubled the number of outlets in rural areas from 80,000 during 2001 to 160,000 the next year,
thereby almost doubling its market penetration from 13 per cent to 25 per cent. This along with
greater marketing, led to the rural market accounting for 80 per cent of new Coke drinkers and
30 per cent of its total volumes. The rural market for colas grew at 37 per cent in 2002, against a
24 per cent growth in urban areas. The per capita consumption in rural areas also doubled during
2000- 02.

FAST MOVING CONSUMER

GOODSSource: HUL, NCAER.
Household income distribution - 2003
Household income distribution - 2015
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Consumer-class boom

Demand for FMCG products is set to boom by almost 60 per cent by 2007 and more than 100
per cent by 2015. This will be driven by the rise in share of middle class (defined as the climbers
and consuming class) from 67 per cent in 2003 to 88 per cent in 2015. The boom in various
consumer categories, further, indicates a latent demand for various product segments. For
example, the upper end of very rich and a part of the consuming class indicate a small but rapidly
growing segment for branded products. The middle segment, on the other hand, indicates a large
market for the mass end products.

The BRICs report indicates that India's per capita disposable income, currently at US$ 556 per
annum, will rise to US$ 1150 by 2015 - another FMCG demand driver. Spurt in the industrial
and services sector growth is also likely to boost the urban consumption demand.
Source: Euro monitor, BRICs Report (Goldman Sachs).

A brief description of the Indian FMCG industry is given in the below.

Segment Unit Size Key Players Share of

Market leader (%)
Household care 62
Fabric wash market Mn tonnes 50 HLL, P&G, Nirma, SPIC 38
Laundry soaps/bars US$ mn 1102
Detergent cakes Mn tonnes 15
Washing powder Mn tonnes 26
Dish wash US$ mn 93 HLL 59
Personal care 58
Soap & Toiletries Mn tonnes 60 HLL, Nirma, Godrej
Personal wash market US$ mn 989 HLL, Nirma, Godrej
Oral care US$ mn 537 Colgate Palmolive, HLL 40
Skin care & cosmetics US$ mn 274 HLL, Dabur, P&G 58
Hair care US$ mn 831 Marico, HLL, Cavin Kare, 54
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Procter & Gamble, Dabur, Godrej
Feminine hygiene US$ mn 44 Procter & Gamble, Johnson and Johnson
Food and Beverages
Bakery products Mn tonnes 30 Britannia, Parle, ITC
Tea 000 tonnes 870 HLL, Tata Tea 31
Coffee 000 tonnes 20 Nestle, HLL, Tata Tea 49*
Mineral water Mn crates 65 Parle, Bisleri, Parle Agro, Coca Cola, Pepsi
Soft Drink Mn crates 284 Coca Cola, Pepsi
Branded atta 000 tonnes 750 Pillsbury, HLL, Agro Tech, Nature Fresh, ITC 15
Health beverages 000 tonnes 120 SmithKline Beecham, Cadbury, Nestle, Amul
Milk and Dairy products US$ mn 653 Amul, Britannia, Nestle
Chocolates US$ mn 174 Cadbury's, Nestle
Culinary products US$ mn 326 HLL, Nestle 78
Edible oil Mn tonnes 13 Ruchi Soya, Marico, ITC Agrotech 28
Note: *R&G Source: ORG Marg, AC Nielson, FICCI, India Stat
and HLL.

Household care

The size of the fabric wash market is estimated to be US$ 1 billion, household cleaners to be
US$ 239 million and the production of synthetic detergents at 2.6 million tonnes. The demand
for detergents has been growing at an annual growth rate of 10 to 11 per cent during the past five
years. The urban market prefers washing powder and detergents to bars on account of
convenience of usage, increased purchasing power, aggressive advertising and increased
penetration of washing machines. The regional and small unorganised players account for a
major share of the total detergent market in volumes.

Personal care

The size of the personal wash products is estimated at US$ 989 million; hair care products at
US$ 831 million and oral care products at US$ 537 million. While the overall personal wash
market is growing at one per cent, the premium and middle-end soaps are growing at a rate of 10
per cent. The leading players in this market are HUL, Nirma, Godrej Soaps and Reckitt &
Colman. The oral care market, especially toothpastes, remains under penetrated in India (with
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penetration level below 45 per cent) due to lack of hygiene awareness among rural markets. The
industry is very competitive both for organised and smaller regional players. The Indian skin
care and cosmetics market is valued at US$ 274 million and dominated by HLL, Colgate
Palmolive, Gillette India and Godrej Soaps. This segment has witnessed the entry of a number of
international brands, like Oriflame, Avon and Aviance leading to increased competition. The
coconut oil market accounts for 72 percent share in the hair oil market. In the branded coconut
hair oil market, Marico (with Parachute) and Dabur are the leading players. The market for
branded coconut oil is valued at approximately US$ 174 million.

Food

According to the Ministry of Food Processing, the size of the Indian food processing industry is
around US$ 65.6 billion including US$ 20.6 billion of value added products. Of this, the health
beverage industry is valued at US$ 230 billion; bread and biscuits at US$ 1.7 billion; chocolates
at US$ 73 million and ice creams at US$ 188 million.
The size of the semi-processed/ready to eat food segment is over US$ 1.1 billion. Large biscuits
& confectionery units, soya processing units and starch/glucose/sorbitol producing units have
also come up, catering to domestic and international markets. The three largest consumed
categories of packaged foods are packed tea, biscuits and soft drinks.

Beverages

The Indian beverage industry faces over supply in segments like coffee and tea. However, more
than half of this is available in unpacked or loose form. Indian hot beverage market is a tea
dominant market. Consumers in different parts of the country have heterogeneous tastes. Dust
tea is popular in southern India, while loose tea in preferred in western India. The urban-rural
split of the tea market was 51:49 in 2000. Coffee is consumed largely in the southern states. The
size of the total packaged coffee market is 19,600 tonnes or US$ 87 million. The urban rural split
in the coffee market was 61:39 in 2000 as against 59:41 in 1995.
The total soft drink (carbonated beverages and juices) market is estimated at 284 million crates a
year or US$ 1 billion. The market is highly seasonal in nature with consumption varying from 25
million crates per month during peak season to 15 million during offseason. The market is
predominantly urban with 25 percent Contribution from rural areas.

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Exports

India is one of the world's largest producers for a number of FMCG products but its exports are a
very small proportion of the overall production. Total exports of food processing industry was
US$ 2.9 billion in 2001-02 and marine products accounted for 40 per cent of the total exports.
Though the Indian companies are going global, they are focusing more on the overseas markets
like Bangladesh, Pakistan, Nepal, Middle East and the CIS countries because of the similar
lifestyle and consumption habits between these countries and India. HUL, Godrej Consumer,
Marico, Dabur and Vicco laboratories are amongst the top exporting companies.

Investment in the FMCG sector

The FMCG sector accounts for around 3 per cent of the total FDI inflow and roughly 7.3 per cent
of the total sectoral investment. The food-processing sector attracts the highest FDI, while the
vegetable oils and Vanaspati sector accounts for the highest domestic investment in the FMCG
sector.

Source: SIA Newsletter, DIPP.

Investments in the FMCG sector (August 1991-April 2004)
Domestic players

Britannia India Ltd (BIL)

Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Co. Ltd. and currently the
Groupe Danone (GD) of France (a global major in the food processing business) and the Nusli
Wadia Group hold a 45.3 per cent equity stake in BIL through AIBH Ltd (a 50:50 joint venture).
BIL is a dominant player in the Indian biscuit industry, with major brands such as Tiger glucose,
Marie gold, Fifty-Fifty, Good Day, Pure Magic, Bourbon etc.

The company holds a 40 per cent market share in the overall organised biscuit market and has a
capacity of 300,000 tonne per annum. Currently, the bakery product business accounts for 99.1
per cent of BIL's turnover. The company reported net sales of US$ 280 million in 2002-03.
Britannia Industries Ltd (BIL) plans to increase its manufacturing capacity through outsourced
contract Manufacturing and a Greenfield plant in Uttaranchal to expand its share in the domestic
biscuitand confectionery market.

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Dabur India Ltd

Established in 1884, Dabur India Ltd is the largest Indian FMCG and ayurvedic products
company. The group comprises Dabur Finance, Dabur Nepal Pvt Ltd, Dabur Egypt Ltd, Dabur
Overseas Ltd and Dabur International Ltd. The product portfolio of the company includes health
care, food products, natural gums & allied chemicals, pharma, and veterinary products. Some of
its leading brands are Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola, Lal Dant Manjan,
Pudin Hara and the Real range of fruit juices. The company reported net sales of US$ 218
million in 2017-18. Dabur has firmed up plans to restructure its sales and distribution structure
and focus on its core businesses of fast-moving consumer good products and over-the-counter
drugs. Under the restructured set-up, the company plans to increase direct coverage to gap outlets
and gap towns where Dabur is not present. A roadmap is also being prepared to rationalise the
Stockist’s network in different regions between various products and divisions.

Indian Tobacco Corporation Ltd (ITCL)

Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a 37 per cent
stake. In 1910 the company's operations were restricted to trading in imported cigarettes. The
company changed its name to ITC Limited in the mid-seventies when it diversified into other
businesses. ITC is one of India's foremost private sector companies with a turnover of US$ 2.6
billion. While ITC is an outstanding market leader in its traditional businesses of cigarettes,
hotels, paperboards, packaging and agriexports, it is rapidly gaining market share even in its
nascent businesses of branded apparel, greeting cards and packaged foods and confectionary.
After the merger of ITC Hotels with ITC Ltd, the company will ramp up its growth plans by
strengthening its alliance with Sheraton and through focus on international projects in Dubai and
the Far East. ITC's subsidiary, International Travel House (ITH) also aims to launch new
products and services by way of boutiques that will provide complete travel services.

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Marico

Marico is a leading Indian Group incorporated in 1990 and operating in consumer products,
aesthetics services and global Ayurvedic businesses. The company also markets food products

and distributes third party products. Marico owns well-known brands such as Parachute, Saffola,
Sweekar, Shanti Amla, Hair & Care, Revive, Medicare, Oil of Malabar and the Sil range of
processed foods. It has six factories, and sub-contract facilities for production. In 2003-04, the
company reported a turnover of US$ 200 million. The overseas sales franchise of Marico's
branded FMCG products is one of the largest amongst Indian companies. It is also the largest
Indian FMCG company in Bangladesh. The company plans to capture growth through constant
realignment of portfolio along higher margin lines and focus on volume growth, consolidation of
market shares, strengthening flagship brands and new product offerings (2-3 new product
launches are expected in 2004-05). It also plans to expand its international business to Pakistan.

Nirma Limited

Nirma Ltd, promoted by Karsanbhai Patel, is a homegrown FMCG major with a presence in the
detergent and soap markets. It was incorporated in 1980 as a private company and was listed in
fiscal 1994. Associate companies' Nirma Detergents, Shiva Soaps and Detergents, Nirma Soaps
and Detergents and Nilnita Chemicals were merged with Nirma in 1996-1997. The company has
also set up a wholly owned subsidiary Nirma Consumer Care Ltd, which is the sole marketing
licensee of the Nirma brand in India. Nirma also makes alfa olefin, fatty acid and glycerine.
Nirma is one of the most successful brands in the rural markets with extremely low priced
offerings. Nirma has plants located in Gujarat, Madhya Pradesh and Uttar Pradesh. Its new LAB
plant is located in Baroda and the soda ash complex is located in Gujarat. Nirma has strong
distributor strength of 400 and a retail reach of over 1 million outlets. The company reported
gross sales of US$ 561 million in 2017-18. It plans to continue to target the mid and mass
segments for future growth.

23
Foreign Players

Cadbury India Ltd (CIL)

Cadbury Indian Ltd is a 93.5 per cent subsidiary of Cadbury Schweppes Plc, UK, a global major
in the chocolate and sugar confectionery industry. CIL was set up as a trading concern in 1947
and subsequently began its operations with the small scale processing of imported chocolates and
food drinks. CIL is currently the largest player in the chocolate industry in India with a 70 per
cent market share. The company is also a key player in the malted foods, cocoa powder, drinking
chocolate, malt extract food and sugar confectionery segment. The company had also entered the
soft drinks market with brands like 'Canada Dry' and 'Crush', which were subsequently sold to

Coca Cola in 1999. Established brands include Dairy Milk, Perk, Crackle, 5 Star, Éclairs, Gems,
Fructus, Bournvita etc. The company reported net sales of US$ 160 million in 2003. The
company plans to increase the number of retail outlets for future growth and market expansion.

24
Cargill

Cargill Inc is one of the world's leading agri-business companies with a strong presence in
processing and merchandising, industrial production and financial services. Its products and
geographic diversity (over 40 product lines with a direct presence in over 65 countries and
business activities in about 130 countries) as well as its vast communication and transportation
network help optimise commodity movements and provide competitive advantage. Cargill
India was incorporated in April 1996 as a 100 per cent subsidiary of Cargill Inc of the US. It is
engaged in trading in soya bean meals, wheat, edible oils, fertilisers and other agricultural
commodities besides marketing branded packaged foods. It has also set up its own anchorage
facilities at Rosy near Jamnagar in Gujarat for efficient handling of its import and export
consignments.

Coca Cola

Coca-Cola started its India operations in 1993. The Coca-Cola system in India comprises 27
wholly company-owned bottling operations and another 17 franchisee-owned bottling
operations. A network of 29 contract-packers also manufacture a range of products for the
company. Leading Indian brands Thums Up, Limca, Maaza, Citra and Gold Spot exist in the
Company's international
Family of brands along with Coca-Cola, Diet Coke, Kinley, Sprite and Fanta, plus the
Schweppes product range. During the past decade, the Coca-Cola system has invested more than
US$ 1 billion in India. In 2018, Coca-Cola India pledged to invest a further US$ 100 million in
its operations.

Colgate-Palmolive India

Colgate Palmolive India is a 51 per cent subsidiary of Colgate Palmolive Company, USA. It is
the market leader in the Indian oral care market, with a 51 per cent market share in the toothpaste
segment, 48 per cent market share in the toothpowder market and a 30 per cent share in the
toothbrush market. The company also has a presence in the premium toilet soap segment and in
shaving

25
Products, which are sold under the Palmolive brand. Other well-known consumer brands include
Charmis skin cream and Axion dish wash. The company reported sales of US$ 226 million in
2003-04. The company's strategy is to focus on growing volumes by improving penetration
through aggressive campaigning and Consumer promotions. The company plans to launch new
products in oral and personal care segments and is prepared to continue spending on advertising
and marketing to gain market share. Margin gains are being targeted through efficient supply
chain management and bringing down cost of operations.

H J Heinz Co

A US$ 8.4 billion American foods major, H J Heinz Co comprises 4,000 strong brand buffet in
infant food, sauces and condiments. The company was the first to commence manufacturing and
bottling of tomato ketchup in 1876. In India, Heinz has a presence through its 100 per cent
subsidiary Heinz India Pvt Ltd. Heinz acquired the consumer products division of
pharmaceutical major Glaxo in 1994.
Heinz's product range in India consists of Complan milk beverage, health drink Glucon-D, infant
food Farex and Nycil prickly heat powder, besides the Heinz ketchup range.

Hindustan Unilever Ltd (HUL)

Hindustan Unilever Ltd is a 51 per cent owned subsidiary of the Anglo-Dutch giant Unilever,
which has been expanding the scope of its operations in India since 1888. It is the country's
biggest consumer goods company with net sales of US$ 2.4 billion in 2003. HUL is amongst the
top five exporters of the country and also the biggest exporter of tea and castor oil. The product
portfolio of the Company includes household and personal care products like soaps, detergents,
shampoos, skin care products, colour cosmetics, deodorants and fragrances. It is also the market
leader in tea, processed coffee, branded wheat flour, tomato products, ice cream, jams and
squashes. HUL enjoys a formidable distribution network covering over 3,400 distributors and 16
million outlets. In the future, the company plans to concentrate on its herbal health care portfolio
(Ayush) and confectionary business (Max). Its strategy to grow includes focussing on the power
brands' growth through consumer relevant information, cross category extensions, leveraging
channel opportunities and increased focus on rural growth.

26
 Nestle India Ltd (NIL)

Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA, Switzerland, is a leading manufacturer
of food products in India. Its products include soluble coffee, coffee blends and teas, condensed
milk, noodles (81 per cent market share), infant milk powders (75 per cent market share) and
cereals (80 per cent market share). Nestle has also established its presence in chocolates,
confectioneries and other processed foods. Soluble beverages and milk products are the major
contributors to Nestlé’s total sales. Some of Nestlé’s popular brands are Nescafe, Milkmaid,
Maggi and Cerelac. The company has entered the chilled dairy segment with the launch of
Nestle Dahi and Nestle Butter. Nestle has also made a foray in non-carbonated cold beverages
segment through placement of Nestea iced tea and Nescafe Frappe vending machines. Exports
contribute to 23 per cent of its turnover and the company reported net sales of US$ 440 million
in 2003.

PepsiCo

PepsiCo is a world leader in convenient foods and beverages, with revenues of about US$ 27
billion. PepsiCo brands are available in nearly 200 markets across the world. The company has an
extremely positive outlook for India. "Outside North America two of our largest and fastest growing
businesses are in India and China, which include more than a third of the world's population"
(Pepsico's annual report). PepsiCo entered India in 1989 and is concentrating on three focus areas -
soft drink concentrate, snack foods and vegetable and food processing. PepsiCo's success is the
result of superior products, high standards of performance and distinctive competitive strategies.
Procter & Gamble Hygiene and Health Care Limited Richardson Hindustan Limited (RHL),
manufacturer of the Vicks range of products, was rechristened 'Procter & Gamble India' in October
1985, following its affiliation to the 'Procter & Gamble Company', USA. Procter & Gamble
Hygiene and Health Care Limited (PGHHCL) acquired its current name in 1998, reflecting the two
key segments of its business. P&G, USA has a 65 per cent stake in PGHHCL. The parent also has a
100 per cent subsidiary, Procter& Gamble Home Products (PGHP). The overall portfolio of the
company includes healthcare; feminine-care; hair care and fabric care businesses. PGHH operates in
just two business segments – Vicks range of cough & cold remedies and Whisper range of feminine
hygiene. The detergent and shampoo business has been relocated globally to Vietnam. The
company imports and markets most of the products from South East Asian countries
27
and China, while manufacturing, marketing and export of Vicks and sanitary napkins has been
retained in India. The company reported sales of US$ 91 million in 2002-03. The parent
company has announced its plan to explore further external collaborations in India to meet its
global innovation and knowledge needs.

MARKET OPPORTUNITIES FOR INVESTMENT

Measuring the opportunity: Domestic FMCG market to treble

Source: HH Panel data

According to estimates based on China's current per capita consumption, the Indian FMCG
market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The dominance
of Indian markets by unbranded products, change in eating habits and the increased affordability
of the growing Indian population presents an opportunity to makers of branded products, who
can convert Consumers to branded products.

The investment potential in rural markets

The Indian rural market with its vast size and demand base offers a huge opportunity for
investment. Rural India has a large consuming class with 41 per cent of India's middle-class and
58 per cent of the total disposable income. With population in the rural areas set to rise to 153
million households by 2009-10 and with higher saturation in the urban markets, future growth in
the FMCG sector will come FMCG Market Size (US$ billion) from increased rural and small
town penetration. Technological advances such as the internet and e-commerce will aid in better
logistics and distribution in these areas. Already Indian corporates such as HUL and ITC have
identified the opportunity and have initiated projects such as 'Project Shakti' and 'e-Chou pal' to
first, expand rural income, and then, to penetrate this market. Boosting rural income - novel
experiments by Indian corporates

28
1.2 Research Problem:

1. Consumer preferences with respect to sales promotion in FMCG sector.

2. Tradeoffs, relative importance of different attributes while responding to a sales

promotion offer.

3. The effect of sales promotions in FMCG sector esp. in soaps and detergent industry.

4. Consumer behavior in purchase of soaps and detergent

29
OBJECTIVE

1. To study consumer preferences with respect to sales promotion in FMCG sector.

2. To study the effect of sales promotion in FMCG sector especially in soap and detergent.

3. To examine tradeoff, relative importance of different attributes while responding to sales

promotion offer.

4. To study consumer behavior in purchase of soaps and detergent.

30
1.3 Research Objective

The importance of consumer sales promotion in the marketing mix of the fast moving consumer
goods (FMCG) category throughout the world has increased. Companies spend considerable
time in planning such activities. However, in order to enhance the effectiveness of these
activities, manufacturers should understand consumer and retailer interpretations of their
promotional activities. The study here pertains to consumer’s perceptions regarding sales
promotion. Some past researches have suggested that promotion itself has an effect on the
perceived value of the brand. This is because promotions provide utilitarian benefits such as
monetary savings, added value, increased quality and convenience as well as hedonic benefits
such as entertainment, exploration and self-expression.

Broadly speaking most of the companies using Marketing Mix which includes…

Price

Place (Channel of Distribution)

Product

Promotion

These are the four basic pillar of marketing mix. Most of the marketing strategies are built on
the basis of these criteria.

Promotion is one of the important elements of marketing mix. There are so many elements of
promotion such as …

31
 Advertising

Direct Marketing

Public Relations

Sales Promotion

Traditionally, sales Promotions have been used by marketer to increase sales in the short term.
However, in the last few decades this communication tool has evolved and now is considered from
a strategic point of view. For this reason, it is necessary to realize new studies in this area and study
how consumers evaluate sales promotions.

Sales promotions have grown in both importance and frequency over the past few decades.
Although an accurate estimate for total sales promotions expenditures does not exist, we can be
sure that the trend is up.

Sales promotion serves three essential roles: It informs, persuades and reminds prospective
customers about a company and its products. Even the most useful product or brand will be a failure
if no one knows that it is available. As we know, channels of distribution take more time in creating
awareness because a product has to pass through many hands between a producer and consumers.

Therefore, a producer has to inform channel members as well as ultimate consumers about the
attributes and availability of his products. The second purpose of promotion is persuasion. The cut
throat competition among different products puts tremendous pressure on their manufacturers and
they are compelled to undertake sales promotion activities. The third purpose of promotion is
reminding consumers about products availability and its potential to satisfy their needs. From these
elements Sales Promotion is the element which is in the focus of this project.

Further Sales Promotion is quite broad term it includes

32
 Consumer Oriented Sales Promotion

Trade Oriented Sales Promotion

Consumer Oriented Sales Promotion

Consumer Oriented Sales Promotion is the main topic of this project. Here emphasize is
given to motivate consumer to increase sales. Consumer Oriented Sales Promotion includes
Sampling, Couponing, Premiums, Contest, Refunds, Rebates, Bonus Pack’s, Price-off, Event
marketing etc.

Definition:

For the purpose of this study, following definitions of sales promotion were kept in mind.

Kotler defines sales promotion as: “Sales promotion consists of a diverse collection of incentive
tools, mostly short-term designed to stimulate quicker and/or greater purchase of particular
products/services by consumers or the trade.”

Roger Strang has given a more simplistic definition i.e. “sales promotions are short-term
incentives to encourage purchase or sales of a product or service.”

Hence, any forms of incentives (price cut or value added nature) offered for short period either to
trade or consumers are considered as sales promotion activities.

Marketer’s uses consumer oriented sales promotion tools for the following reasons:

• To increase short term sales

• To induce trial

• To reduce inventory

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• To establish a brand name

• To make cross selling

• To cope up with competition

• To avoid advertising clutter

Tools of Consumer Oriented Sales Promotion:

There are so many tools or technique available to the marketers for achieving objective of sales
promotion. These tools should be used considering all other factors affecting such as cost, time,
competitors, availability of goods etc. These tools are as under…

1. Coupons

2. Price-Off

3. Freebies

4. Scratch Cards

5. Lucky Draws

6. Bundling Offer

7. Extra Quantity

Let’s have look at each tool…

1. Coupons:

Coupon is the oldest and most widely used way of sales promotion. Coupons have been
used since 1895. It is mostly used by packaged goods. It is worthwhile to use coupon as a
promotion tool because data shows that market for packaged goods increased from 16 billion in
34
1968 to 310 billion in 1994. To boost up the sales not only manufacturer but retailers personally
can also used. A coupon leads to price reductions so as to encourage price sensitive customers.
Non users can try a product which may leads to regular sales.

2. Price-off:

A price-off is simply a reduction in the price of the product to increase sales and is very
often used when introduction a new product. A reduction in price always increases sales but the
use of this technique should be carefully considered in the current market situation.

Price-off is the most preferred sales promotion technique because consumers response
very positively to this scheme. Not only that but it also cause large increase in sales volume.
Price-off reductions are typically offered tight on the package through specially marked price
packs. E.g. Krack Jack offers 30% Price-off.

3. Freebies

Freebies are a popular form of modern marketing and are some of the best things about the
internet. The definition of freebies is products or services given away for free at no cost to the
consumer. Well that’s the definition we came up with. I am a bargain freebie shopper, pretty
much going for any free product and informing everyone about it.

At different times, big and small companies often give away prizes and money which is too
good to be true. Often it’s in the pursuit of more customers or a larger fan base and it often
works.

4. Scratch Cards

A scratch card (also called a scratch off, scratch ticket, scratcher, scratchie, scratch-it, scratch
game, scratch-and-win or instant game) is a small token, usually made of cardboard, where one

35
or more areas contain concealed information: they are covered by a substance that cannot be seen
through, but can be scratched off.

5. Bundling Offers

Product bundling is a marketing strategy that involves offering several products for sale as one
combined product. This strategy is very common in the software business (for example: bundle a
word processor, a spreadsheet, and a database into a single office suite), in the cable television
industry (for example, basic cable in the United States generally offers many channels at one
price), and in the fast food industry in which multiple items are combined into a complete meal.
A bundle of products is sometimes referred to as a package deal or a compilation or an
anthology.

Factors Influencing Consumer Oriented sales promotion:

Mainly four factors should be taken into account while determining the sales promotion
program.

> Target market

> Nature of product

> Stage of product life cycle

> Budget available for promotion

36
Target Market:

While doing sales promotion, marketer must know who their target market is; otherwisethere is no
use of all effort because it leads to no where. A target market can be in any of the stages of
buying hierarchy i.e. awareness, knowledge, liking, preferences, conviction andpurchase. Each
stage defines a possible goal of promotion.

Nature of the product:

There are various product attributes which influence sales promotional strategy. When the unit
price is low the manufacturer as well as the customer has low risk but he can get the benefit of mass
marketing. Therefore, mass marketing requires mass sales promotion schemes. Sales promotion
scheme differ for products like its durability, perishable goods etc.

Stage of product Life Cycle:

Sales promotion strategies are influenced by the life cycle of a product. When a new product
introduced, prospective buyers must be informed about its existence and its benefits and middlemen
must be convinced to stock it. Later, if a product becomes successful, competition intensifies and
more emphasis is placed on sales promotion to increase its sales.

Budget Available for Promotion:

The funds available for promotion are the ultimate determinant of the promotional programme. A
business with ample funds can make more effective use of sales promotion programme than a firm
with limited financial resources. The budget for sales promotion can be prepared by the following
methods…

Percentage of Sales

Fixed funds available for sales promotion

Following the competition, and

Budgeting by objective
37
Sales Promotion from the Consumers point of view

Willingness to buy on sales promotion offer

Sixty per cent of the sample did not show willingness to buy a brand due to promotion while
30% showed willingness and 10% were not sure. This indicates that when 30% showed
willingness and 10% consumers who were not sure, these groups might be lured through
innovative and lucrative sales promotion offer.

Ability to induce trial

Forty per cent of the respondents had said that sales promotion had the ability to induce trial
which reinforces the above inference.

Long-term impact

In order to understand ability of the promotions to increase long-term sales, respondents were
asked about continuity of purchase of a brand after the withdrawal of promotion. Eighty per cent
of the respondents indicated that they would not continue. But 20% said they would. Thus, it
could be inferred that promotions in this category (low involvement products) might encourage
trial and brand switching but not long term loyalty.

Preference of Schemes:

Price off was the most preferred type of scheme. Maximum customers’ ranked price-offs as
number one or two.

Perceived Quality:

Majority of respondents had a perception that the quality of the promoted brands remained the
same during promotion, while some of them felt that it was inferior than before. It can be
inferred that promotions were not leading to negative brand quality perceptions. It is found that

38
some customer strongly preferred to buy their regular brand and said that sales promotion would
not weaken their loyalty towards the brand.

Perceptions regarding underlying company motivations

On tapping perceptions’ regarding underlying company motivations for sales promotion, “to
increase sales” was ranked highest followed by “to attract switchers” and “to sell excess stocks”.
While providing value to customers” and “To reinforce company image” were ranked lowest.
This indicates that consumers believed that companies were undertaking such activities only for
their own benefit and not for the benefit of consumers.

Findings from retailer and consumer perception studies, it is evident that there was a matching of
perceptions regarding nature of scheme (price offs as most preferred type of scheme mentioned
by consumers and retailers’ perceptions about consumer preferences). Since retailers observe
consumers in store behavior were frequently and directly, their perceptions regarding providing
consumer behavior are likely to be accurate. Such inputs from the retailers would be useful to
companies.

The retailers had the perception that those schemes which were announced through mass media
had better response. This was reinforced by the consumer survey which showed that recall in
case of heavily promoted schemes on TV was found to be very high.

Retailers’ prediction of companies’ motivation for offering sales promotion were matching with
the consumer perception regarding the same. Thus both viewed that companies were using sales
promotion activities mainly to increase short term sales or encourage switching or selling excess
stock and not really to give value benefit or enhance/reinforce brand/company image.

Trade Oriented Sales Promotion

Trade Oriented Sales Promotion aimed to motivate channel member of the company and to
encourage them to push company’s product. Trade Oriented Sales Promotion includes dealer
contest and incentives, trade allowances. Point-of-purchase displays, sales training programs,
trade shows, cooperative advertising, and other programs designed to motivate distributors and
retailers to carry a product and make an extra effort to push it to their customers.
39
Sales promotion from the retailer’s point of view:

Perceptions on Scheme Preference

It was found that retailer perceived price offs as a better form of sales promotion activity. Price
offs in their opinion had relatively a greater impact compared to any other form of sales
promotion activity like Bonus packs, Premium, Contests etc. Retailers preferred price offs the
most, then bonus pack, premium, contests, in order of importance.

Perceptions about Buying Roles

Retailers viewed that the person who came to the shop (who may be a maid, son, daughter,
daughter-in-law and child) was the decider of a toilet soap brand and not the Income provider
(e.g. head of the family). It could be inferred that visibility of information about the sales
promotion activity at the point of purchase could result into the purchase of a promoted brand.

Perceptions about their role in decision-making

Retailer had relatively very low influence in affecting choice. It could be inferred that visibility
and awareness about the scheme were the critical success factors so that pull could be created.

Perceptions about Response to Sales Promotion Offers

They believed that younger age-groups were more experimental in nature, amenable to trying
new brands, and sought/looked for or asked whether there were any) sales promotion schemes
running on any toilet soap at the time of purchase.

Perceptions about Communications of Sales Promotion Schemes

Retailers perceived that role of word of mouth and television advertising played an important
part in providing information inputs to consumers regarding sales promotion activities.

40
Variations in Information Flow

Smaller (non-supermarket, small format store) retailers received relatively less support compared
to supermarkets in terms of servicing, margins, information about sales promotion activities from
the dealers. Many a times small retailers were only informed verbally about sales promotion
schemes by the dealer salesmen during the scheduled weekly visits.

Dealer-Retailer Dynamics

At the time of sales promotion activities, dealers had tendency to push unwanted stocks onto the
smaller retailers. In fact these retailers preferred to stock variety of brands and wanted payment
for shelf and window display to increase traffic into their store. However, supermarkets and big
retailers were pampered and given special services and given better margins and better
allowances.

Margins

It was found that in sales promotion schemes margins varied from 6 to15% depending of the size
of the retail outlet, bargaining power of a retailer, quantity ordered by him etc. Mostly margins
were linked to size of the volumes that were ordered.

Perceptions about terms and conditions

Retailers were not found to be happy with sales promotion schemes where their margins were cut
on the pretext of just fast movement of inventory of the brand being promoted. Also if additional
incentive was offered it was subject to minimum performance requirement.

Nature of POP

Retailers indicated that most of the POP (Point of Purchase) materials were meant for brand
advertisement and not for giving information regarding the schemes. Thus it could be inferred
that company’s follow up was not adequate.

41
Servicing during duration of Scheme

In stock-out situation during the running of the sales promotion schemes, smaller retailers had to
wait for replenishment of stocks till the next scheduled weekly visit by the dealer salesman but
big retailers were serviced on telephonic request for replenishment of stocks. This clearly
indicated the disparity in treatment.

Problem of left-over

A leftover stock at the end of any scheme was required to be sold by the retailers before they
ordered fresh stocks. In case of bonus packs scheme, leftover stock was often dismantled (cut
open buy one get one free) and sold them individually as a regular soap.

This approach of the company leads to misappropriation which in turn could result in adverse
brand image.

Gifts for Retailer motivation

Companies at times were rewarding retailers by giving free gifts like thermos flasks or clocks if
they sold more than certain quantity in a given period. Companies were making a half-hearted
effort to motivate retailers.

Perceptions about mass media announcements

Retailers viewed that whenever sales promotion scheme was announced on TV, it created pull
and they were more than willing to stock such brands. For example Medimix and Dettol contest
was not advertised on TV, hence there was very little awareness leading to unsold stock till 6
months. While Lux Gold Star which was heavily promoted on T.V. is recalled even today.

Post Promotion Behavior

42
Retailers observed that in most cases sales promotion scheme on a brand might encourage a
buyer to switch a brand temporarily but he would revert back to original brand after promotion.

Handling Problems

Many a time’s retailers had to handle various sales promotion offers simultaneously in a category
and also across categories and there was no formal communication planning either from the
dealer or the company. Remembering each offer and handling was a problem especially for a
small retailer which was often an as one-man show.

Why do Sales promotion schemes affect sales?

There are three mechanisms behind these facts. It is Purchase quantity, Brand switching and
Category expansion.

First, consumer can increase the quantity they buy just because the product is on sale.

Second, consumers are inducing to purchase another brand different from the one they would
have purchased when there is no promotional incentive.

Finally, consumer’s total consumption of the product category is increased by the promotion.
However, in the long term this positive effect may be diluted because a promotional campaign
has no permanent effect in the sales of the firm

Sales Promotion Strategy

Sales are the lifeblood of a business, without sales there would be no business in the first place;
therefore it is very important that if a business wants to succeed, it should have a sales promotion
strategy in mind. The primary objective of a sales promotion is to improve a company’s sales by
predicting and modifying your target customer’s purchasing behavior and patterns.

Sales promotion is very important as it not only helps to boost sales but it also helps a business
to draw new customers while at the same time retaining older ones. There are a variety of sales
promotional strategies that a business can use to increase their sales, however it is

43
important that we first understand what a sales promotion strategy actually is and why it is so
important.

A sales promotion strategy is an activity that is designed to help boost the sales of a product or
service. This can be done through an advertising campaign, public relation activities, a free
sampling campaign, a free gift campaign, a trading stamps campaign, through demonstrations
and exhibitions, through prize giving competitions, through temporary price cuts, and through
door-to-door sales, telemarketing, personal sales letters, and emails.

The importance of a sales promotion strategy cannot be underestimated. This is because asales
promotion strategy is important to a business boosting its sales

When developing a sales promotion strategy for your business, it is important that
you keep the following points in mind.

• Consumer attitudes and buying patterns

• Your brand strategy

• Your competitive strategy

• Your advertising strategy

• Other external factors that can influence products availability and pricing.

There are three types of sales promotion strategies:

• A push strategy

• A pull strategy or

• A combination of the two

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Push Strategy:

A ‘push’ sales promotion strategy involves ‘pushing’ distributors and retailers to sell your products
and services to the consumer by offering various kinds of promotions and personal selling efforts.
What happens here is that a company promotes their product/services to a reseller who in turn
promotes it to another reseller or to the consumer. The basic objective of this strategy is to persuade
retailers, wholesalers and distributors to carry your brand, give it shelf space, promote it by
advertising, and ultimately ‘push’ it forward to the consumer. Typical push sales promotion
strategies include; buy-back guarantees, free trials, contests, discounts, and specialty advertising
items.

Pull Strategy:

A ‘pull’ sales promotion strategy focuses more on the consumer instead of the reseller or
distributor. This strategy involves getting the consumer to ‘pull’ or purchase the product/services
directly from the company itself. This strategy targets its marketing efforts directly on the
consumers with the hope that it will stimulate interest and demand for the product. This pull
strategy is often used when distributors are reluctant to carry or distribute a product. Typical pull
sales promotion strategies include; samples, coupons, cash refunds or rebates, loyalty programs and
rewards, contests, sweepstakes, games, and point-of-purchase displays.

A Combination of Two Strategies:

A ‘combination’ sales promotion strategy is just that; it is a combination of a push and a pull
strategy. It focuses both on the distributor as well as the consumers, targeting both parties
directly. It offers consumer incentives side by side with dealer discounts.

45
The Short term Impact of Promotions:

Let’s have look at the impact of promotions on purchase behavior during the promotional period
i.e. the week or the month when the promotion was being run. The majority of the empirical
studies have focused on the impact of promotions in the short term. The key findings across the
studies are discussed below.

Temporary price reductions (price off) substantially increase sales:

There is ample evidence to show that promotions lead to dramatic increases in sales of promoted
brand in the short term. Studies have consistently reported high sales effects and high price
elasticity of brands which are on promotion. The economic rationale for the promotional
response is clear – temporary price cuts increase the value of the product to the consumer and it
leads to immediate action. Sales boost can be quantified on the basis of brand switching, primary
demand expansion and consumer stockpiling during a promotion.

Sales Promotion leads to brand substitution with the product category:

The sales ‘bump’ during the promotional period into sales due to brand switching, purchase time
acceleration and stockpiling. Studies on brand switching have shown that brand switching effects
within a category are asymmetric such that promotions on higher quality brands impacts weaker
brands disproportionately. During a promotion, higher quality brands induce a large number of
consumers to switch to them as compared to lower quality brands. One explanation advanced for
this finding by researchers is that large share brands have higher brand equity and attract
switchers more than low share brands.

Sales Promotion leads to purchase acceleration/stockpiling effects:

In response to a promotion, consumers may buy more quantity of the product category or buy at
an earlier time than usual (purchase acceleration effect). If consumers buy extra quantity during a
promotion or earlier than normal, then they are not in the market to buy products once the
promotion is over. Thus purchase acceleration is demonstrated through

A lengthening of inter purchase times after a promotion. Purchase acceleration was more likely
to be exhibited in increased purchase quantity than in shortened inter purchase times. Results
showed that consumers mostly made up for the large quantity purchased by waiting longer until
purchasing again. Results indicated that heavy users tended to accelerate purchases more than
46
light users. There was negligible difference in the acceleration propensities of high versus low-
income groups.

Sales Promotion leads to primary demand expansion for a category:

While it was traditionally assumed that consumption rates remain fixed during and after a
promotion, but from this project I came to know that promotions also have a primary demand

expansion effect. When a primary demand expansion occurs, promotion induced increase in
purchase quantities does not significantly extend the time till the next purchase in the category
occurs, thus indicating that there has been an increase in consumption promotions induced
consumers to buy more and consume faster. It is found that promotion induced inventory
temporarily increased consumption rates within the category e.g. in categories such as bacon,
salted snacks, soft drinks and yogurt exhibited primary demand expansions as a result of
promotion while bathroom tissue, coffee, detergent and paper towels exhibited stockpiling only.

Sales Promotions affect sales in complementary and competitive categories:

From this project it is found that promotion not only increases sales of main product but it also
lead to increase in sales of complementary categories. Found strong cross relationships between
products of the promoted product category indicating brand substitution behavior. They stated
that retail price promotions work as a form of implicit price bundling whereby the consumer
surplus is transferred from the promoted item to non promoted items. Also found that retail price
promotions create significant complementary and substitution effects within the store.

The Long term Impact of Promotions:

Strategies are builds to reap the benefits for longer period of time; same is true in sales
promotion strategies. Let us see impact of promotions effort and study the impact over a longer
time period e.g. 4-6 months or even a few years after a sales promotion campaign.

The result showed that consumer promotions for leading brands of established packaged
products had no after-effects on the brand’s sales or repeat buying loyalty. The extra sales of a
47
brand while promoted came virtually all from the brand’s existing long-term customer base for
which the experience of buying the promoted brand was nothing new.

It is found that although the short term effects of promotions are strong; these promotions rarely
exhibit long term effects. It is observed that each sales component generally lacked a permanent
effect and the effect of promotion was short lived and increase in promotions affected
consumers’ stockpiling decisions in the long run. They found that the combined short and long-
term elasticity of promotions was zero. The stockpiling induced by a promotion was essentially
offset by reduced demand in the long term. Thus increased sales were more a result of sales
borrowed from the future than increased consumption.

SWOT Analysis of FMCG Sector

Strengths:

● Well-established distribution network extending to rural areas.

● Strong brands in the FMCG sector.

● Low cost operations.

Weaknesses:

● Low export levels.

● Small-scale sector reservations limit ability to invest in technology and achieve economies
of scale.

● Several "me-too’’ products.

48
Opportunities:

● Large domestic market.

● Export potential.

● Increasing income levels will result in faster revenue growth..

Threats:

● Imports.

● Tax and regulatory structure.

● Slowdown in rural demand.

49
CHAPTER-2

LITERATURE REVIEW

Does consumption respond to promotion? Many studies have focused on the effects of
promotion on brand switching, purchase quantity, and stockpiling and have ocumented that
promotion makes consumers switch brands and purchase earlier or ore. The consumers‘
consumption decision has long been ignored, and it remains unclear how promotion affects
consumption (Blattberg et al. 1995). Conventional choice models cannot be used to address this
issue because many of these models assume constant consumption rates over time (usually
defined as the total purchases over the entire sample periods divided by the number of time
periods). While this assumption can be appropriate for some product categories such as
detergent and diapers, it might not hold for many other product categories, such as packaged
tuna,
candy, orange juice, or yogurt. For these categories, promotion can actually stimulate
consumption in addition to causing brand switching and stockpiling. Thus, for product categories
with a varying consumption rate, it is critical to recognize the responsiveness of consumption to
promotion in order to measure the effectiveness of promotion on sales more precisely emerging
literature in behavioural and economic theory has provided supporting evidence that
consumption for some product categories responds to promotion. Using an experimental
approach, Wansink (1996) establishes that significant holding costs pressure consumers to
consume more of the product. Wansink and Deshpande (1994) show that when the product is
perceived as widely substitutable, consumers will consume more of it in place of its close
substitutes. They also show that higher perishability increases consumption rates. Adopting
scarcity theory, Folkes et al. (1993) show that consumers curb consumption of products when
supply is limited because they perceive smaller quantities as more valuable. Chandon and
Wansink (2002) show that stockpiling increases consumption of high convenience products
more than that of low-convenience products. In an analytical study, Assuncao and Meyer (1993)
show that consumption is an endogenous decision variable driven bypromotion and promotion-
induced stockpiling resulting from forward-looking behaviour. There are some recent empirical
papers addressing the promotion effect on consumer
50
stockpiling behaviour under price or promotion uncertainty. Erdem and Keane (1996) and Gonul
and Srinivasan (1996) establish that consumers are forward looking. Erdem et al. (2003)
explicitly model consumers‘ expectations about future prices with an exogenous consumption
rate. In their model, consumers form future price expectations and decide when, what, and how
much to buy. Sun et al. (2003) demonstrate that ignoring forward looking behaviour leads to an
over estimation of promotion elasticity.
Consumer promotions are now more pervasive than ever. Witness 215 billion manufacturer
coupons distributed in 1986, up 500% in the last decade (Manufacturers Coupon Control Center
1988), and manufacturer expenditures on trade incentives to feature or display brands totalling
more than $20 billion in the same year, up 800% in the last decade (Alsop 1986; Kessler 1986).
So far, not much work has been done to identify the purchasing strategies that consumers adopt
in response to particular promotions, or to study how pervasive these strategies are in a
population of interest. Blattberg, Peacock and Sen (1976) define a purchase strategy as a general
buying pattern which "incorporates several dimensions of buying behaviour such as brand
loyalty, private brand proneness and deal proneness." A greater understanding of the different
types of consumer responses to promotions can help managers to develop effective promotional
programs as well as provide new insights for consumer behaviour theorists who seek to
understand the influence of different types of environmental cues on consumer
behaviour.Blattberg, Eppen, and Liebermann (1981), Gupta (1988), Neslin, Henderson, and
Quelch (1985), Shoemaker (1979), Ward and Davis (1978), and Wilson, Newman,and Hastak
(1979) find evidence that promotions are associated with purchase acceleration in terms of an
increase in quantity purchased and, to a lesser extent, decreased inter purchase timing.
Researchers studying the brand choice decision-for example, Guadagni and Little (1983) and
Gupta (1988)-have found promotions to be associated with brand switching. Montgomery
(1971), Schneider and Currim (1990), and Webster (1965) found that promotion-prone
households were associated with lower levels of brand loyalty.Blattberg, Peacock, and Sen
(1976, 1978) describe 16 purchasing strategy segments based on three purchase dimensions:
brand loyalty (single brand, single brand shifting, many brands), type of brand preferred
(national, both national and private label), and price sensitivity (purchase at regular price,
purchase at deal price). There are other variables that may be used to describe purchase
strategies, examples are whether the household purchases a major or minor (share) national
brand, store brand, or generic, or whether it is store-loyal or not. McAlister (1983) and Neslin
and Shoemaker (1983) use certain segments derived from those of Blattberg, Peacock, and Sen

51
but add a purchase acceleration variable to study the profitability of product
promotions.Throughout the world, consumer sales promotions are an integral part of the
marketing mix for many consumer products. Marketing managers use price-oriented promotions
such as coupons, rebates, and price discounts to increase sales and market share, entice trial, and
encourage brand switching. Non-price promotions such as sweepstakes, frequent user clubs, and
premiums add excitement and value to brands and may encourage brand loyalty (e.g., Aaker
1991; Shea, 1996). In addition, consumers like promotions. They provide utilitarian benefits such
as monetary
savings, added value, increased quality, and convenience, as well as hedonic benefits such as
entertainment, exploration, and self expression (Chandon, Laurent, and Wansink, 1997).A large
body of literature has examined consumer response to sales promotions, most notably coupons
(e.g.. Sawyer and Dickson, 1984; Bawa and Shoemaker, 1987 and 1989; Gupta, 1988; Blattberg
and Neslin, 1990; Kirshnan and Rao, 1995; Leone and Srinivasan, 1996). Despite this, important
gaps remain to be studied. It is generally agreed that sales promotions are difficult to standardize
because of legal, economic, and cultural differences (e.g., Foxman, Tansuhaj, and Wong, 1988;
Kashani and Quelch, 1990; Huff and Alden, 1998). Multinational firms should therefore
understand how consumer response to sales promotions differs between countries or states or
province.

According to Rust, Ambler, Carpenter, Kumar, & Srivastava (2004), it is important to measure
marketing asset of a firm which they define as customer focused measures of the value of the
firm (and its offerings) that may enhance the firm‘s long-term value. To measure this, they focus
on two approaches: brand equity and customer equity. Measuring brand equity deals with the
measurement of intangible marketing concepts, such as product image reputation and brand
loyalty. Rajagopal (2008) supports the view of measuring the marketing asset of a firm and
highlights that the major advantage of a brand measurement system is that it links brand
management and business performance of the firm and is a strategic management tool for
continuous improvement rather than a static snapshot in time of the brand‘s performance. An
effective brand measurement system therefore helps businesses to understand how the brand is
performing with the framework of customer values and against competing brands.According to
Ambler, 2003 many companies measure brand equity to ensure that marketing activities are
aligned with the company‘s strategy and to ensure that investment is used for the right brands.
Ambler (2003) further defines marketing metrics as quantified performance measures regularly

52
reviewed by top management which can be classified into six categories such as: 1. Consumer
intermediate: such as consumer awareness and attitudes. The measure lies in inputs (advertising)
and behaviour (sales).
2. Consumer behaviour: such as quarterly penetration.93 | P a g e
3. Direct trade customer: distribution availability.
4. Competitive market measures: market share (measure relative to a
competitor or the whole market).
5. Innovation: such as share of turnover due to new products.
6. Financial measures: advertising expenditure or brand valuation.
Multinationals such as Coca Cola, PepsiCo, McDonald‘s, IBM and many others have marketing
metrics in place that are used globally to measure and track brand equity. According to Kish,
Riskey & Kerin (2001), PepsiCo measures and tracks brand equity using a propriety model
called Equitrak which is based on two factors: (1): Recognition – how broad and deep is a
brand‘s awareness and (2): Regards: which measures how people feel about the brand and
includes brand reputation, affiliation, momentum and differentiation. The Equitrak model used
by PepsiCo not only tracks the company brands but competitor brands as well and is used by all
subsidiaries in different countries. McDonald‘s UK has key areas for metrics to track their
marketing quarterly: 1. Sales transaction (which also includes customer satisfaction, value for
money and cleanliness), 2. Market share and brand equity measures (awareness, and advertising
recall) and 3. Mystery diners who visit the stores to evaluate the service level (Ambler, 2003).
Shell also uses a global tracker which provides metrics and diagnostics for their brand versus
competitors across 70 countries and has a range of questions including awareness, trial,
purchase, loyalty and image (Ambler, 2003). The key therefore is to balance financial and non
financial goals and many authors do agree that top management must support this and regular
review of both financial and non-financial goals is necessary to drive a market orientated
business. Dunn and Davies (2004), suggest that having a brand focused business should be a top
bottom approach driven by the top executives. The concept of market orientation therefore
plays a significant role. According to Barwise & Farley (2004), both external and internal forces
are steadily forcing firms to be more market oriented and research suggests that market-oriented
firms tend to enjoy superior performance. This view is supported by Best (2005), who says that
a strong market orientation cannot be created by a mere proclamation but by adopting a market
based management philosophy whereby all members of the organization are sensitive to
customers‘ needs and are aware of these needs. The benefits of strong market orientation are:

53
better understanding of competitors, customer focus, customer satisfaction and high profits
(Best, 2005; Ambler, 2003).Davis (2002) adds that brands should be managed as assets using a
top down approach where senior executives embrace the concept that marketing should have a
leading seat at the strategy table and use the brands to drive key strategic decisions. Also if
senior executives are vocal and show commitment to the brands, then employees within an
organization will start taking ownership of the brand.
At this point, it is useful to define what mean by the terms "expected price" and "price
promotion." Following Thaler (1985), it is viewed that the price consumers‘ use as a reference in
making purchase decisions as the price they expect to pay prior to a purchase occasion. Further,
the expected price may also be called the "internal reference price" (Klein and Oglethorpe 1987)
as opposed to an external reference price such as the manufacturers' suggested list price. Finally,
a brand is on price promotion when it is offered with a temporary price cut that is featured in
newspaper advertising and/ or brought to consumers' attention with a store display sign. The
price expectations hypothesis has been used to provide an alternative explanation for the
observed adverse long-term effect of price promotions on brand choice (Kalwani et al. 1990).
Previous research has shown that repeat purchase probabilities of a brand after a promotional
purchase are lower than the corresponding values after a non promotional purchase (Dodson,
Tybout, and Sternthal 1978; Guadagni and Little 1983; Shoemaker and Shoaf 1977). Dodson,
Tybout, and Sternthal evoke selfperception theory to predict that if a purchase is induced by an
external cause (such as a price promotion) as opposed to an internal cause (e.g., the brand will
be reduced when the external cause is removed. Alternatively, Kalwani et al. argue that
consumers form expectations of a brand's price on the basis of, among other things, its past
prices and the frequency with which it is price promoted. Consumers' reactions to a retail price
then may depend on how the retail price compares with the price they expect to pay for the
brand.Specifically, during a price promotion, they are apt to perceive a price "gain" and react
positively; correspondingly, when the deal is retracted, they are apt to perceive a price "loss" and
are unlikely to purchase the brand. Neslin and Shoemaker (1989) offer yet another alternative
explanation for the phenomenon of lower repeat purchase rates after promotional purchases.
They argue that the lower repeat purchase rates may be the result of statistical aggregation rather
than actual declines in the purchase probabilities of individual consumers after a promotional
purchase. Specifically, "if the promotion attracts many consumers who under non promotion
circumstances would have very low probabilities of buying the brand, then on the next purchase
occasion the low probabilities of these consumers bring down the average repurchase rate among

54
promotional purchases". The behaviour of households that have low probabilities of buying a
brand upon the retraction of a deal can be explained readily in a price expectation framework. It
has been suggested that the price they expect to pay for the brand may be close to the deal price
and they may forego purchasing the focal brand when it is not promoted because its retail price
far exceeds what they expect to pay for it.It has been investigated that the impact of price
promotions on consumers' price expectations and brand choice in an interactive computer-
controlled experiment. Manohar U. Kalwani and Chi Kin Yim discussed that expected prices
were elicited directly from respondents in the experiment and used in the empirical
investigations of the impact of price promotions on consumers' price expectations. Further, rather
than studying the impact of just a single price pro- motion and its retraction, they assessed the
significance of the dynamic or long-term effects of a sequence of price promotions. They have
concluded that both the price promotion frequency and the size of price discounts have a
significant adverse impact on a brand's expected price. Consistent with the findings of Raman
and Bass (1988) and Gurumurthy and Little (1989), they also found evidence in support of a
region of relative price insensitivity around the expected price such that changes in price within
that region produce no pronounced change in consumers' perceptions. Price changes outside that
region, however, are found to have a significant effect on consumer response. Further, they
discussed that promotion expectations are just as important as price expectations in
understanding consumer purchase behaviour. In particular, consumers who have been exposed to
frequent price promotions in support of a given brand may come to form promotion expectations
and typically will purchase the brand only when it is price promoted. Added to it, in the case of
price expectations, consumer response to promotion expectations was asymmetric in that losses
loom larger than gains.Applying Helson's (1964) adaptation-level theory to price perceptions,
Sawyer and Dickson (1984) suggest that price promotions may work in the short run because
consumers may use the brand's regular price as a reference and then are induced by the lower

deal price to purchase the brand. However, frequent temporary price promotions may also lower

the brand's expected price and lead consumers to defer purchases of the brand when it is offered

at the regular price.Tversky and Kahneman (1974) have shown that people rely on a limited

number of heuristic principles that reduce complex tasks of assessing probabilities and predicting

values to simpler judgmental operations. In some cases, people may anchor and adjust their

forecasts by starting with a preconceived point and weigh that point heavily in arriving at a

55
judgment. When the frequency of past price promotions is "very low," consumers identify a price

promotion offer as an exceptional event and may not modify the brand's expected price. The

brand's expected price then will be anchored around the regular price because of insufficient

adjustment. In other cases, people may arrive at a judgment on the basis of how similar or

representative the event is to a class of events. Therefore, when a brand is price promoted "too

often," consumers come to expect a deal with each purchase and hence expect to pay only the

discounted price on the basis of its representativeness.

Clearly, given a certain level of price discount, the brand's expected price will be

bounded by the regular price and the implied sale price. That line of reasoning suggests that the

relationship between the price promotion frequency and the expected price can be approximated

by a sigmoid function. Whether a price discount will affect the brands expected price depends on

how consumers perceive the discount. Uhl and Brown (1971) postulate that the perception of a

retail price change depends on the magnitude of the price change. They report results from an

experiment indicating that 5% deviations were identified correctly 64% of the time whereas 15%

deviations were identified correctly 84% of the time. Della Bitta and Monroe (1980) find that

consumer' perceptions of savings from a promotional offer do not differ significantly between

30%, 40%, and 50% discount levels. However, they find significant differences between the 10%

and 30 to 50% levels. They also discuss some managers' beliefs that at least a 15% discount is

needed to attract consumers to a sale. Apparently, small price changes may not be noticed and

even a large price reduction (say, 60 or 70%) may not be assimilated to affect the brand's

expected price if it is considered exceptional. Hence, the impact of the depth of price discounts

on lowering the brand's expected price is likely to occur when the price discount offered by the

brand is relatively large but not so large that it is seen as an exceptional event.Price discounts

ranging from 10 to 40%, a range commonly used in past research on price discounts in the

consumer packaged goods categories (Berkowitz and Walton 1980; Curhan and Kopp 1986).

56
Within that range, the findings of Uhl and Brown (1971) and Della Bitta and Monroe (1980)

suggest that it is reasonable to expect the relationship between the brand's expected price and the

depth of price discounts to be concave. However, Manohar U. Kalwani and Chi Kin Yim (1992)

found that the brands expected price is a linear function of the price promotion frequency and

the depth of price discounts at conventional significance levels. Nevertheless, the results provide

some directional support for nonlinear relationships between the expected price and the two

elements of a price promotion schedule. Given the important implications of such potential

nonlinear effects of price promotions on brands' expected prices, further research testing those

nonlinear effects of price promotions should prove

fruitful for the design of optimal price promotion policies. They also contributed that promotion

expectations suggest that unfulfilled promotion expectation events among consumers who have

come to expect promotions on a brand because of frequent exposure to them will have an adverse

impact on the brand. Analogously, unexpected promotion events will enhance the probability of

purchasing a brand among consumers who have not been exposed to many price promotions and

therefore do not as a rule expect the brand to be available on a promotional deal. they suggest

that those results are consistent with the rational expectations view that "any policy rule that is

systematically related to economic conditions, for example, one observed with stabilization in

mind, will be perfectly anticipated, and therefore have no effect on output or employment" (

Maddock and Carter 1982). Policy actions that come as a surprise to people, in contrast, will

generally have some real effect. Clearly, the design of optimal price promotion schedules

requires consideration of the fact that an increase in the use of price promotions could erode

long-term consumer demand by lowering the prices that consumers anticipate paying for the

brand. Price promotional deals may come to be "perfectly anticipated" and have much less

impact on consumer response than they do when they come as a surprise to consumers. Apart of

it they suggested that Evaluation of the tradeoff between the short-term sales gain from a price

57
promotion and the adverse effect on future sales because of consumers forming price and

promotion expectations requires knowledge of how price promotions affect the formation of

consumers' expectations under different market conditions. Promotions have increased in

popularity during the past few decades. The positive short-term impact of price promotions on

brand sales is well documented. A price promotion typically reduces the price for a given

quantity or increases the quantity available at the same price, thereby enhancing value and

creating an economic incentive to purchase. However, if consumers associate promotions with

inferior brand quality, then, to the extent that quality is important, a price promotion might not

achieve the extent of sales increase the economic incentive otherwise might have produced.

58
 CHAPTER–3

RESEARCH METHODOLOGY

Research always starts with a question or a problem. Its purpose is to find answers to questions

through the application of the scientific method. It is a systematic and intensive study directed

towards a more complete knowledge of the subject studied.

Technology and customers tastes and preferences play a vital role in today’s generation.

Research Methodology is a set of various methods to be followed to find out various information

regarding market strata of different products. Research Methodology is required for every

industrial service industries for getting acquire knowledge of their products.

Period of Study: This study has been carried out for a maximum period of 5 weeks.

Area of study: The study is exclusively done in the area of marketing. It is a process requiring

care, sophistication, experience, business judgment, and imagination for which there can be no

mechanical substitutes.

Sampling Design: The convenience sampling is done because any probability sampling

procedure would require detailed information about the universe, which is not easily available

further, it being an exploratory research.

Sample Procedure: In this study “judgmental sampling procedure is used. Judgmental sampling

is preferred because of some limitation and the complexity of the random sampling. Area

sampling is used in combination with convenience sampling so as to collect the data from

different regions of the city and to increase reliability.

Sampling Size: The sampling size of the study is 200 users.

59
 Data Collection: - Data is collected from various customers through personal interaction.

Specific questionnaire is prepared for collecting data. Data is collected with mere interaction and

formal discussion with different respondents

Tools of Analysis: - The market survey and the techniques for marketing and investment of

finance is carried out by physically interacting with the potential customers in big bazaar.

Research Design: - The research work is exploratory in nature, and is meant to provide the basic

information required by research objectives. It is a preliminary study based on primary data and

the findings can be consolidated after a detailed conclusive study has been carried out.

Acc. to Kerlinger, “Research design is the plan structure & strategy of investigation

conceived so as to obtain answers to research questions and to control variance.

Acc. to Green and Tull, “A research design is the specification of methods and

procedures for acquiring the information needed. It is the overall operational pattern or

framework of the project that stipulates what information is to be collected from which sources

by what procedures.

Research Design Used

(i) Descriptive Research

(ii) Analytical Research

(i) Descriptive Research

Descriptive approach cannot be changed every now & then it is therefore, necessary that the

researcher gives sufficient thought to framing research questions and deciding the types of

data to be collected and the procedure to be used for this purpose.

60
(ii) Analytical/Causal Research

As the name implies, a causal design investigates the cause & effect relationship between
two or more variable. The design of causal research is based on reasoning along will tested

DATA SOURCE : Primary Data & Secondary Data

RESEARCH APPROACH : SURVEY/ANALYSIS
RESEARCH INSTRUMENT : QUESTIONNAIRE

3.1 TYPES OF DATA

1) Primary Sources
2) Secondary Sources

1) Primary Sources: Data through questionnaires and interaction with consumers etc.

2) Secondary Sources: Data through internet & previous findings.

3.2 Data collection Method:

(a) Primary Data Collection Method:

⮚ Survey method was used for primary data collection.
⮚ We used questionnaire as an instrument for survey method.
⮚ Structured questionnaire.
⮚ Type of questionnaire: Open ended and closed ended.

(b) Secondary Data Collection method:

⮚ Reference books.
⮚ Internet.

61
 SAMPLING DETAILS

Target population : The population for this researchstudy consists of the

residence of Delhi - NCR.

1. Sampling unit : In this study the sampling unit is individual consumer.

2. Sample size : 100 consumers, 100 retailers.

3. Sampling method ; The sample is selected by using convenience sampling method.

62
CHAPTER - 4

DATA ANALYSIS AND INTERPRETATION

Consumers

Q1. Which brand of Soap / Detergent do you use?

Respondent
Bathing –soaps s
Lux 41
Pears 3
Vivel 14
Santoor 8
Others 34

Bathing soaps
50

40

30

20

10

Respondents 41 3 14 8 34

Interpretation:

The above question has been formed to know the soaps and detergents at the top of the
mind of the customers. It shows those consumers’ purchase and use of that particular brand. It
will help to the company to know the market scenario and the major brands in the market.

63
Form the above result it is clear that out of 100 customers more than 40 are consumers are
having the same brand as the image in their mind, whereas others category is also showing the
higher graph than these 3 major player(Lux, Vivel , Santoor).

Detergent Respondent
powder s
Nirma super 19
Wheel 14
Surf 35
Ariel 18
Others 14

Detergent Powder
40
35
30
25
20
15
10
5
0
Nirma sup Wheel Surf Ariel Othres
Respondents 19 14 35 18 14

Interpretation:

Form the above result it is clear that out of 100 customers 35 are purchasing the same
brand of detergent, whereas all others are on same level.

64
Q2. Do you always buy the same brand of Soap / Detergent?

Respondent
Particulars s
Yes 56
No 44

Brand loyal
60

50

40

30

20

10

0
Yes No
Respondents 56 44

Interpretation:

The objective behind the formation of this question is to know the level of brand loyalty
of the consumers towards the brands of soaps available in the market. The above figure shows
that on 56% of the respondents are loyal to their brands of detergent/soap. FMCG are such a
market where the level of loyalty remains low and this is because of many reasons.

65
Q3. Which factors do you normally consider while purchasing a particular brand of Soap /
Detergents?

Bathin Det
Factors g soap .powder
Fragrance 19 18
Quality 33 36
Company image 16 13
Price 23 19
Packaging 6 11
Others 3 3

Factors affecting purchase behavior

40

30

20

10
0
Company
Fragrance Quality Price Packaging Others
image
Bathing soap 19 33 16 23 6 3
Det.powder 18 36 13 19 11 3

Interpretation:

The objective behind this question is to know the effect of influencing factors in the
purchase decision of the soaps and detergent powders. It mainly contains the factors like, quality
which players an important role in the purchase decision of the soaps and detergents both.
If we look at the graph of the soaps and detergent it shows quality as the most influencing
factors in the purchase decision while price is also an important for purchase decision.

66
Q4. Do you consider promotional schemes while purchasing a particular brand of Soap /
Detergent?

Respondent
Particulars s
Yes 78
No 22

H0: Promotional schemes have a significant effect on the purchase of brand.

H1: Promotional schemes do not have an effect on the purchase of brand.

Effect of schemes purchase behavior

100

80

60

40

20

0
Yes No
Respondents 78 22

Interpretation:

Answer of this question will give idea about the effect of promotional schemes in the
purchase decisions. Such types of schemes always attract more and more consumers towards
particular brand. Simultaneously it gives idea about the factors which consumers look most in
the product before they make final decision.
Here H0 is accepted as the graph shows that 78 out of 100 consumers are looking for
such schemes before they make purchase.

67
Q5. Which of the following promotional schemes you have come across so far?

Promotional Respondent
schemes s
Coupons 16
price off 84
Freebies 24
scratch cards 12
lucky draw 9
Bundling 31
extra qty. 44

Familiarity of promotional Schemes

100

80

60

40

20

0
scratch
Coupons price off Freebies lucky draw Bundling extra qty.
cards
Respondents 16 84 24 12 9 31 44

Interpretation:

The above stated question clearly states the awareness of promotional schemes offered in
the market by the marketers to attract more and more consumers.
The results show that price off and extra quantity is the two main offers/schemes which
consumers have came across at the time of purchase. It will help the manufacturers and
marketers too how too launch their new products in the market with which schemes.

68
Q6. Which medium do you feel is suitable to promote the various promotional schemes?

Respondent
Source s
Radio 11
TV 69
Newspaper 43
Hoarding 15
Others 12

Mediums to promote the promotional schemes

80

60

40

20

0
Radio TV News.ppr Hoarding Others
Respondents 11 69 43 15 12

Interpretation:

This question gives stress on the media habit of the people and through which the product
should be launch or they think it would be better than other Medias.
The above result shows TV as the best media to market the product which will cover
majority of the viewer ship. On the second place it shows newspapers as the media to promote
the product in the market.

69
Q7. Is there any existing scheme on the Soap / Detergent you are currently using?

Respondent
Particulars s
Yes 58
No 42

Existing scheme on the Soap / Detergent

70
60
50
40
30
20
10
0
Yes No
Respondents 58 42

Interpretation:

The answer of the respondents give idea about the awareness of the promotional schemes
offered in the market on their existing soaps and detergents.
In this situation more than 40% of the people are not aware or having vague idea about
the promotional schemes running into the market.
It shows that people are not much aware of the schemes which continue in the market it
may be because of the present stock of the product at their place.

70
Q8. If yes, please specify?

Particular Respondent
s s
3+1/Other
Free 36
Discount 22
No idea 6
No answer 36

Interpretation:

This question supports the above question. It enlists the answers of those customers who
are aware of the present schemes offered in the market and also those schemes which are more
demanded in the market.
The result shows that 1+1 or 2+1 or other free schemes are more demanded and more
aware schemes in the market.
So manufacturers may go for the same at the time of launching their product.

71
Q9. If you get an attractive promotional offer in the product other than of your choice will
you switch over?

Respondent
Particulars s
Yes 73
No 27

Switching behavior
80
70
60
50
40
30
20
10
0
Yes No
Respondents 73 27

Interpretation:

It shows the level of brand loyalty among the consumers. The result clearly shows that
out of 100, 73 people are ready to switch over to another brand if they find better promotional
schemes which suits their budget means more qty + less cost + quality.
Combination of all these schemes will run better in the market.

72
Q10. Give reason for the same?

Respondent
Particulars s
Cost+ qty 16
Quality 17
Satisfaction 2
Brand loyal 5
More
benefit/budget 22
Season change 2
No answer 36

Reason
40

30

20

10

0
More Season
Cost+qty Quality Brand loyal No answer
Benefit/bud change
Satisfaction
Respondents 16 17 2 5 22 2 36

73
Interpretation:

Above question it gives specific reasons for switching too other products. It shows that
extra quantity with less or same price, more satisfaction, quality and other factors influence
consumers to switch over too other brands.

Q11. Give suggestions about futuristic promotional schemes?

………………………………………………………………………………………………………
…………………………………………………………………………………………………….

(This show the consumers’ future expectations from the whether company to come with
new schemes or continue with present one. It shows consumers demand which the manufacturers
have to meet.)

74
Retailers

Q1. Since how long are you in this business?

Particulars Respondents
1-5 Years 24
5-10 Years 27
More than 10 years 49

Interpretation:

This question gives idea about the benefit to the retailers who are on the market from
long period of time and the benefits they are getting more as compare to others. It also shows
their experience in the field and the services they are providing too their new and regular
customers. It also gives idea about the benefits they are gaining for wholesalers and direct from
the company.

75
Q2. Name the Soap / Detergent (Company) you stock for.

Companies Respondent
s
Nirma 96
HUL 100
P&G 90
Godrej 94
Others 68

Soap / Detergent in stock

120

100

80

60

40

20

0
Nirma HUL P&G Godrej Others
Series1 96 100 90 94 68

Interpretation:

It gives idea about the capacity of the retailers to stock the goods and also the variety of
the products they are stocking. It will also make clear the demand of the goods in their stores and
the selling of the product in market. Most of the retailer stocks all types of soap and detergent.

76
Q3. Rank the following factors that customers look for in the purchase of Soap / Detergent.
(Rank from 1 to 6)

Factors 1 2 3 4 5 6
Fragrance 3 24 33 22 10 8
Quality 66 23 7 3 1 0
Company 9
Image 18 34 24 11 4
Price 17 28 24 16 6 9
Packaging 4 5 2 27 38 24
Others 1 2 0 8 34 55

Bathing Soap
70

60

50

40

30

20

10

0
1 2 3 4 5 6
Fragrance 3 24 33 22 10 8
Quality 66 23 7 3 1 0
Company Image 9 18 34 24 11 4
Price 17 28 24 16 6 9
Packaging 4 5 2 27 38 24
Others 1 2 0 8 34 55

Interpretation:

It gives an idea about the priority the influencing factors too the consumers and also the
weight age of that factor over other factors.
In the above result people are more quality and price oriented. On the other hand people
are also conscious about the company image. Because sometimes the consumer remember that
name of the product by the company name and also from the past

77
Performance of that company. Fragrance and packaging are not influencing factor as per the
respondents.

Factors 1 2 3 4 5 6

Fragrance 11 17 41 21 7 3

Quality 43 34 16 6 1 0

Company
Image 13 16 27 26 11 7

Price 27 28 14 9 6 16

Packaging 6 5 2 33 43 11

Others 0 0 0 5 32 63

Detergent
70
60
50
40
30
20
10
0
1 2 3 4 5 6
Fragrance 11 17 41 21 7 3
Quality 43 34 16 6 1 0
Company Image 13 16 27 26 11 7
Price 27 28 14 9 6 16
Packaging 6 5 2 33 43 11
Others 0 0 0 5 32 63

Interpretation :

It gives an idea about the priority the influencing factors to the consumers and also the
weight age of that factor over other factors.
In the above result people are more quality and price oriented. On the other hand people
are also conscious about the company image. Because sometimes the consumer
78
remembers that name of the product by the company name and also from the past performance of
that company. Fragrance and packaging are also play important role for purchasing detergent
powder.

Q4. Do you suggest customers to purchase a certain brand?

Particula Respondent
r s
Yes 33
No 67

Suggestion
80
70
60
50
40
30
20
10
0
Yes No
Series1 33 67

Interpretation:

This could be a very help question to understand the role of retailers in the purchase
decision.
In above graph 67% of retailer are not suggest to purchase particular brand because of
personal relation or that customer are brand loyal. While 33% of the retailer are suggesting the
consumers to buy particular brand. There could be many reasons like, extra margin, relations
with consumers and quality of the products which retailer may get the benefit of the same.

79
Q5. If Yes why?

Particular Respondent
s
High 9
margin
Quality 17
Relationshi
p 7
No reason 67

If yes
80
70
60
50
40
30
20
10
0
High margin Quality Relationship No reason
Respondents 9 17 7 67

Interpretation:

it gives idea about the reasons why retailers suggest the consumers to buy particular
brand.
In above graph and table it is clear that for margin and of better relations with consumers
and too provide quality product to consumers they suggest consumers too bye particular brand.
For the company it may be helpful to target such retailers to sell their product in the market
easily.

80
Q6. Do customers look for various schemes in the product?

Particular Respondents

Yes 92
No 8

Customers look for various schemes

100

80

60

40

20

0
Yes No
Respondents 92 8

Interpretation:

This gives a real helpful data for checking the effect of sales promotions in the market
and how seriously consumers follow the promotions before they go for purchase particular
brand.
The above result shows that only 8 out 0f 100 didn’t go for the promotion otherwise all
are looking for any type of the promotions on the product.

81
Q7. If yes which schemes?

Promotional Respondents
Schemes
Coupons 11
Price Off 82
Freebies 35
Scratch Cards 2
Lucky Draws 19
Bundling Offer 65
Extra Quantity 79

Which schemes
100

80

60

40

20

0
Scratch Lucky Bundling Extra
Coupons Price Off Freebies
Cards Draws Offer Quantity
Respondents 11 82 35 2 19 65 79

Interpretation:

The above stated results show the demand of various types of promotional schemes in the
market by the consumers. Almost all types of schemes are being demanded by the consumers in
the market but there are three major schemes which consumers generally look at the time of
purchase or before that.
Price off, product bundling and extra quantity are more demanded by the consumers over
others schemes.

82
Q8. Which Trade Promotions do various companies offer?

NIRMA
Promotion Respondent
s s
Extra
Margin 46
Extra Units 34
credit
facility 55
Gifts 24
promo.
Exp. 8

H0: Effect of trade promotions for all four brands is similar.

H1: Effect of trade promotions for all four brands is not similar.

Trade Promotions by Nirma

60

50

40

30

20

10
0
Extra Margin Extra Units credit facility gifts promo. Exp.
Series1 46 34 55 24 8

Interpretation:

From the above graph shows the trade promotions offered by the NIRMA Ltd to the
retailers to attract them towards stocking their goods and also stop them switching them too other
major players in the market.
NIRMA is mainly offering credit facility which is offered by all major players it may
differ in the time limit of the credit. It is also providing extra margin, and units with occasional
gift with their schemes.

83
 HUL
Respondent
Promotions s
Extra
Margin 47
Extra Units 34
Credit
facility 58
Gifts 25
Promo. Exp. 22

Trade Promotions by HUL

70
60
50
40
30
20
10
0
Extra Margin Extra Units Credit facility Gifts Promo. Exp.
Series1 47 34 58 25 22

Interpretation:

The advantage of HLL over NIRMA is that it bare promotional expenses which NIRMA
is not doing. It attracts more consumers through such promotions, such as display of the product,
banners etc.
So this may help it to attract more retailers. It may because of its less cost of production
in other segments in which nirma is not operating.

84
 P&G
Respondent
Promotions s
Extra
Margin 40
Extra Units 33
Credit
facility 55
Gifts 20
Promo. Exp. 12

Trade Promotions by P&G

60

50

40

30

20

10

0
Extra Margin Extra Units Credit facility Gifts Promo. Exp.
Series1 40 33 55 20 12

Interpretation:

P&G is also a big player in the FMCG market. It is also providing all the facilities which
others are providing to retailers.

85
 GODREJ
Respondent
Promotions s
Extra Margin 46
Extra Units 32
Credit facility 57
Gifts 19
Promo. Exp. 18

Trade Promotions by Godrej

60

50

40

30

20

10

0
Extra Margin Extra Units Credit facility Gifts Promo. Exp.
Series1 46 32 57 19 18

Interpretation:

Godrej is a big player in the FMCG market. It is also providing all the facilities which
others are providing to retailers. But it is lacking in bearing expenses which HUL is providing to
maximum number of retailers.

86
 OTHERS
Promotion Respondent
s s
Extra
Margin 30
Extra Units 18
Credit
facility 38
Gifts 15
Promo.
Exp. 7

Trade Promotions by Others

40
35
30
25
20
15
10
5
0
Extra Margin Extra Units Credit facility Gifts Promo. Exp.
Series1 30 18 38 15 7

Interpretation:

Others include local players, as well as we established players like, wipro but their
products are not in demand like other players but still they are providing all the facilities to
retailers to attract towards stocking their products.

87
Anova: Single Factor
GODRE NIRM
J A HUL P&G
Extra
Margin 46 46 47 40
Extra
Units 32 34 34 33
Credit
facility 57 55 58 55
Gifts 19 24 25 20
Promo.
Exp. 18 8 22 12
34.4 33.4 37.2 32

SUMMARY

Groups Count Sum Averag Varianc

e e
Column 1 5 172 34.4 289.3
Column 2 5 167 33.4 339.8
Column 3 5 186 37.2 229.7
Column 4 5 160 32 284.5

ANOVA

Source of SS df MS F P-value F crit

Variation
Between Groups 72.55 3 24.18333 0.084609 0.967457 3.238872
Within Groups 4573.2 16 285.825
Total 4645.75 19

All the big players provide promotion to the retailers due to cut throat competition;
Interpretation: from the one factor anova analysis, it is clearly seen that there is a effect of trade
promotion on various brands and are similar too. As p> 0.05, it is the evidence that the null
hypothesis is accepted

88
 Q10. Any Suggestions.
………………………………………………………………………………………………………
………………………………………………………………………………………………………
…………………………

(Retailer suggested that packaging should be further improved and used as promotional tool, to
encourage sales during certain periods the company should provide price of or extra quantity
because that influences directly to the consumer.)

89
 CHAPTER – 5

FINDINGS

Sales Promotion, a short-term inducement, offered to a consumer or trade has gained momentum
as a promotional tool world over. It represents nearly three fourth of the marketing budget at
most consumer product companies. Sales promotions can enhance consumers’ self- perception of
being “smart” or a “good” shopper

● FMCG are such a market where the level of loyalty remains low and this is because of
many reasons.

● Quality as the most influencing factors in the purchase decision while price is also an
important for purchase decision.
● Schemes always attract more and more consumers towards particular brand.
Simultaneously it gives idea about the factors which consumers look most in the product
before they make final decision

● Price off and extra quantity is the two main offers/schemes which consumers have came
across at the time of purchase

● TV as the best media to market the product which will cover majority of the viewer ship.
On the second place it shows news papers as the media to promote the product in the
market

● People are not much aware of the schemes which continue in the market it may be
because of the present stock of the product at their place.

● 1+1 or 2+1 or other free schemes are more demanded and more aware schemes in the
market.
● People are ready to switch over to another brand if they find better promotional schemes
which suits their budget means more qyt + less cost + quality.

● Extra quantity with less or same price, more satisfaction, quality and other factors
influence consumers to switch over too other brands.

● Retailer stocks all types of soap and detergent because of competition.

90
● People are more quality and price oriented.

● Consumer remember that name of the product by the company name and also from the
past performance of that company

● Consumer remembers that name of the product by the company name and also from the
past performance of that company

● Retailers are not suggest to purchase particular brand because of personal relation or that
customer are brand loyal

● Margin and of better relations with consumers and too provide quality product to
consumers they suggest consumers too bye particular brand.

● Customers are looking for any type of the promotions on the product before them going
to purchase.

● Price off, product bundling and extra quantity are more demanded by the consumers over
others schemes.
● NIRMA is mainly offering credit facility which is offered by all major players it may
differ in the time limit of the credit.

● HUL attracts more consumers through such promotions, such as display of the product,
banners etc.

91
CHAPTER- 6

CONCLUSION

The study reflects that the use of sales promotion undeniably has increased over the years in
India. Future holds lot of promise for such schemes across wider range of product-markets.

Sales Promotion has ceased to be major differentiator at least in the metros, with almost all
companies offering similar freebies and gifts. As a result now marketers have to find out some
innovative ways of sales promotion to differentiate from competitors. Currently Price off and
Bye one get one free offers are very effective to attract the consumers towards the products.

We have noted that these kind of promotional tools are useful for short term increase in sales and
to induce first trial. These types of promotional schemes should be consistent and changed from
time to time depending upon season and competitor’s schemes.

With the Increasing number of supermarket, the branded packaged goods work as silent sales
person. So in such stores, sales promotion plays a more effective role in stimulating consumers’
demands.

One of the very important facts we came to know from this project is that sale of goods which
contain large quantity and having big packaging e.g. detergent are stagnating because consumer
prefer to buy small pack goods, the reasons are: small pack goods reduce risk of bad quality, It
had low cost or say price, and last but important factor i.e. mentality to purchase just to try first.
Sales of small pack goods are quite high, but from the company’s point of view small pack
goods is less profitable compare to large pack goods.

So here marketer tries to increase sales of large pack goods by using sales promotion tactics like
price off and percentage extra.

92
CHAPTER-7

SUGGESTIONS FOR FUTURE RESEARCH

The findings of the empirical study indicate that unless the brand to be promoted is in the
consideration set of the consumer, sales promotion by itself is unlikely to have any major impact.
Clearly this shows that managers need to invest into brand building exercise so that his/her brand
appears in the consideration set of the target consumers. Only after this should he spend time,
money and energy on sales promotion activities.

Sales promotion should not be used in isolation but need to be integrated with other tools and in
line with the overall positioning of the brand. Also the importance of the role of mass media
came out clearly in the study.

Companies need to create sufficient awareness about sales promotion schemes through mass
media in order to create awareness. FMCG products are low involvement products characterized
by switching behavior. Also the person going to the shop for the purchase of soap is the final
decision maker of the brand. Hence it is essential that companies need to design attractive,
striking, visible POPs for scheme announcements.

With respect to nature of scheme, the finding suggested that premium (free gift) was popular
with companies. While both retailers and consumers preferred price offs. So it is necessary that
the perceived value of a free gift has to be appealing and high for the target consumers.

Repetitive use of the same premium for a prolonged period may have negative effect on the loyal
customers. When the company is giving its own product free as premium, it needs to ensure the
quality of the product from it as it is likely to jeopardize the image of both its products.

The findings exhibited that both the retailers and consumers perceived that sales promotion
activities carried out by the companies for increasing sales in short term and clearing

93
excess stocks. What it implies is that companies need to use sales promotion synergistically and
communicate so that they provide value to the target audience and enhance brand quality/image
perceptions.

Companies need to systematize information flow regarding sales promotion activities

particularly at dealer and retailer level. Ensuring proper information flow and devising checks
and measures to reduce misappropriations and implementation flows should be considered
critical aspects for the success of sales promotion activities by the companies. As retailing is
fragmented, direct reach by companies is next to impossible. Through dealers and proper
feedback mechanism, companies keep in touch with the market.

From the study it was found that smaller retailers felt neglected and not enthused to implement
the schemes, particularly when additional handling, stocking, accounting was required on the
part of a retailer without compensatory margins. It can be seen that the retailer and consumer
perceptions matched with respect to preferences of schemes, underlying motivations and role of
mass media. This implies that the retailer would be a rich source of information about the
consumer and the likely response to sales promotion activities.

Developing a system to tap such responses from time to time both at retailer and consumer level
would be helpful for planning future sales promotion activities. In order to build trust and
commitment companies should tap preferences, perceptions of retailers as well as consumers.
So far as FMCG market is concern there is new trend is emerging known as Joint sales
promotion. Actually it is old concept but it was more prevailing in durable products now it is
coming intro non durable goods also. When any sales promotion scheme either for trade or
consumer is announced by more than one company and /or more than one brand of the same
company, it is referred as joint sales promotion or horizontal co-operative sales promotion or
cross promotion or umbrella sales promotion.

94
Classification of joint sales promotion:

● Use complementarily due to natural use

● New use catering complementary relationshipsCommonality of need due to use time
● Tie-up of a new /slow moving brand with an established brand
● Target market commonality
● Seasonal demand
● Distribution commonality
● Targeting new segment
● Derived demand
● Countering competitive joint sales promotions

95
BIBLIOGRAPHY

BOOKS

⮚ Philip Kotler, “Marketing Management”, 11th edition, Pearson education Asia

Publication.
⮚ C.R.Kothari, “Research Methodology methods & techniques”, New Age International (p)
ltd.publishers, 2nd edition.
⮚ Belch MA & Belch GE – Advertising and Promotion- An integrated Marketing
communication Perspectives (TMH, 6th edition)

WEBSITES

⮚ http://www.nirma.co.in_files
⮚ http://www.hul.co.in_files
⮚ http://www.pg-india_files
⮚ http://www.godrej_files

96
APPENDIX

Questionnaire-1
For Customers

I am a student of PGDM studying in I.M.S College, GHAZIABAD and carrying out a survey for
our academic project to “Role of sales promotions in FMCG”. So please fill this questionnaire.
Your identity would not be revealed and information will only be used for academic purpose.

Q1. Which brand of Soap / Detergent do you use?

Detergent powder Respondent
Nirma supper
Wheel
Surf
Ariel
Others
Bathing –soaps Respondent
Lux
Hamam
Lifebuoy
Nirma
Others

Q2. Do you always buy the same brand of Soap / Detergent?

Responden
Particulars t
Yes
No

Q3. Which factors do you normally consider while purchasing a particular brand of Soap /
Detergents?
Bathing Det.powde
Factors soap r
Fragrance
Quality
Company image
Price
Packaging
Others

97
Q4. Do you consider promotional schemes while purchasing a particular brand of Soap /
Detergent?
Responden
Particulars t
Yes
No

Q5. Which of the following promotional schemes you have come across so far?

Promotional
schemes Respondent
Coupons
price off
Freebies
scratch cards
lucky draw
Bundling
extra qty.
Q6. Which medium do you feel is suitable to promote the various promotional schemes?

Responden
Source t
Radio
TV
Newspaper
Hoarding
Others

Q7. Is there any existing scheme on the Soap / Detergent you are currently using?

Responden
Particulars t
Yes
No

Q8. If yes, please specify?

Particulars Respondent
3+1/Other
Free
Discount
No idea
No
answer

98
Q9. If you get an attractive promotional offer in the product other than of your choice will you
switch over?

Particulars Respondent
Yes
No

Q10. Give reason for the same?

Responden
Particulars t
Cost+qty
Quality
Satisfaction
Brand loyal
More
benefit/budget
Season change
No answer

Q11. Give suggestions about futuristic promotional schemes.

………………………………………………………………………………………………………
………………………………………………………………………………………………………
……………………………………. .

99
QUESTIONNAIRE-2

For Retailers

I am the students of PGDM studying in I.M.S College, GHAZIABAD and carrying out a survey
for our academic project “Role of sales promotions in FMCG”. So please fill this questionnaire.
Your identity would not be revealed and information will only be used for academic purpose.

Q1. Since how long are you in this business?

Particulars Respondent
1-5 Years
5-10 Years
More than 10 years

Q2. Name the Soap / Detergent (Company) you stock for.

Companies Respondent
Nirma
HUL
P&G
Godrej
Others

Q3. Rank the following factors that customers look for in the purchase of Soap /

Detergent. (Rank from 1 to 6)

Factors 1 2 3 4 5 6
Fragrance
Quality
Company
Image
Price
Packaging
Others

Q4. Do you suggest customers to purchase a certain brand?

Particula Responden
r t
Yes
No

Q5. If Yes why?

100
 Particular Responden
t
High margin
Quality
Relationship
No reason

Q6. Do customers look for various schemes in the product?

Particula Responden
r t
Yes
No
Q7. If yes which schemes?
Promotional Responden
Schemes t
Coupons
Price Off
Freebies
Scratch Cards
Lucky Draws
Bundling Offer
Extra Quantity

Q8. Which Trade Promotions do various companies offer?

NIRMA
Responden
Promotions t
Extra Margin
Extra Units
credit facility
Gifts
promo. Exp.

HUL
Responden
Promotions t
Extra Margin
Extra Units
Credit facility
Gifts
Promo. Exp.
101
GODREJ
Promotions Respondent
Extra Margin
Extra Units
Credit facility
Gifts
Promo. Exp.
P&G
Promotions Respondent
Extra Margin
Extra Units
Credit facility
Gifts
Promo. Exp.

OTHERS
Responden
Promotions t
Extra Margin
Extra Units
Credit facility
Gifts
Promo. Exp.

Q9 Give reasons for not stocking a particular brand.

………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
…………… .

Q10 Any Suggestions.

………………………………………………………………………………………………………
………………………………………………………………………………………………………
……………………………….. .

102