The Hindu Business Line : Promo predicament

With the culture of freebies and discounts spreading widely in the Indian context, brands need to consider their implications before embarking on a discount strategy. Price discounting not only affects the profitability of brands, it also affects their equity. For example, when two major detergent brands cut their prices by significant levels, what kind of perception would it create among consumers is an important implication from the viewpoint of marketing.

Why discount at all?

There are many reasons why brands offer discounted prices and sales promotion that includes freebies. With the competition and communication clutter reaching new heights during recent times, consumers seem to eternally shop for sales promotion buys or look for the lowest prices. With fragmentation of retailing, profit cut to the bones and consumers' involvement with prices, marketers especially associated with fast moving consumer goods seem to have little option but to cut prices or to offer some kind of "value addition" to the buying spree of consumers.

Income-wise, the lower end and middle segments look for such discounting and sales promotion as they have tight monthly budgets. Not all of them even receive a monthly salary. Some may be paid weekly, some daily and some even by the number of hours in a day. Aspiration levels enhanced by the advertising blitzkriegs come into play in these segments. They prefer branded offerings but may not always be in a position to afford them. Among the lower segments, using offerings from the organised sector is common and these consumers buy branded offerings at a lesser frequency than their counterparts in the middle segment. There may be a huge base of consumers who may be alternating between branded offerings across product categories over a period of time. They may try a branded tea during a week and when money is spent on a branded fairness cream, for example, in some other week, they may balance this expenditure by using loose tea. Hence discounting and sales promotion is likely to drive such behaviour towards greater usage of branded offerings.

Modern retailing, though it accounts currently for only two per cent of the total retailing market in India, has to draw more consumers belonging to the middle class or upper middle class by offering unique bundles of sales promotions. In fact, this aspect may be a compelling reason for shoppers to visit the departmental store. A consumer may plan for "an unplanned impulse" in a departmental store known for offering such bundled sales promotions. The consumer gets used to sales promotions at the store and expects to take advantage of it, though she may not clearly know what is likely to be on offer when she makes a visit. The consumer may not also find such attractive offers in the neighbourhood kirana shop that has been servicing the area for a long time.

The thrill of a compulsive buyer, regardless of the socio-economic class they may belong to, lies in `striking a good deal.' A unique sales promotion triggers the urge of such a consumer and provides the thrill.

Introductory offers with either discounts or sales promotion enable the consumer to try out a new brand in a familiar category. A brand of new cookies can create trials through such offers. Trial is necessary for any new brand which has the disadvantage of not having the equity enjoyed by well established brands. Sales promotion can bring in consumers who may have otherwise not done so to try the product. Dettol's liquid handwash or a trial offer from Heinz ketchup is likely to attract consumers who may not even be regular users of these categories.

Sales promotions create excitement and involvement among the target segment. Sunfeast is a relatively new biscuit brand. Besides its strong celebrity endorsements and distribution strengths, the brand's association with tennis and contests for children (with the possibility of winners being ball boys/girls at international tennis tournaments ) creates tremendous excitement in a mundane category.

Rewarding the current owners of the company's brands is one of the important aspects of a sales promotion, especially with categories of durables that have lengthy inter-purchase and replacement cycles. Among car brands, Maruti uses this approach. It has even extended this approach to other brand owners who would like to convert to its Baleno model.

A company entering the market late in the consumer durables categories can alter consumer preference pattern significantly with an appropriate and powerful sales promotion/exchange offer. Akai, when it entered India, realised the potential of the TV replacement market in the country as well as the potential for used second-hand sets in the country. It used an exchange scheme that literally created a market for 29-inch television sets. Besides value-oriented and price-sensitive consumers, cultural factors too create a conducive environment for sales promotion not only in India but in most parts of the world. The Christmas season heralds a spate of sales offers in developed markets. Festivities in the Indian context too make promotions a part of the celebration as shopping for these occasions is a part of the culture.

Brand associations

A brand should integrate its sales promotion and price discounting schemes into its overall branding efforts to ensure the exercise is not counter-productive to the long-term interests of the brand. For example, a retail outlet repeatedly discounting price for the lower-end consumers may be perceived as a "cheap store." A brand of snack food offering discounts for an extended period of time may attract consumers only when the discount is on and not otherwise. This may erode the value it offers. A premium brand such as Samsonite or Park Avenue may offer a promotion for a limited period of time, timing the offer with a festive season to ensure that the brand equity is not affected.

A brand like Himalaya, with its OTC herbal products, may offer a sales promotion on select products for a limited period of time. Such an approach will ensure the brand value is reinforced and the focus of consumer perception is always on the intrinsic value offered by the brand.

Timing, relevance to what the brand stands for among the target segment and how well the promotion blends with the overall brand association are some of the prerequisites for a price-off/sales promotion.

(S. Ramesh Kumar is Professor of Marketing, Indian Institute of Management, Bangalore.)

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