Lecture 3 - Evaluation of Sales Promotion | Improve Sales Pitch & PR PDF Download

 Page 1


Evaluation of Sales Promotion 
1 
Institute of Lifelong Learning, University of Delhi. 
 
 
 
 
 
 
 
 
 
Subject: Commerce 
Lesson: Evaluation of Sales Promotion 
Lesson Developer: Astha Kanjlia 
Coolege/ Department: Keshav Mahavidyalaya, Business 
Studies, University of Delhi  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 2


Evaluation of Sales Promotion 
1 
Institute of Lifelong Learning, University of Delhi. 
 
 
 
 
 
 
 
 
 
Subject: Commerce 
Lesson: Evaluation of Sales Promotion 
Lesson Developer: Astha Kanjlia 
Coolege/ Department: Keshav Mahavidyalaya, Business 
Studies, University of Delhi  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evaluation of Sales Promotion 
2 
 
Institute of Lifelong Learning, University of Delhi.  
 
Table of Contents: 
 
Lesson: Evaluation of Sales Promotion 
 
1: Learning Outcomes 
2: Introduction 
3: Concept of Evaluation of Sales Promotion 
4: Need and Significance of Evaluation 
4.1: Factors considered during Evaluation 
4.2: Long-run and Short-run advantages of Sales   
Promotion 
4.3: Pre-requisites for conducting an Evaluation 
5: Basis of Evaluation 
6: Techniques/ Methods of Evaluation 
6.1: Phases of Evaluation 
6.2: A Secondary Approach to Evaluation 
 
Summary  
Exercises 
Glossary 
References 
 
1. Learning Outcomes: 
 
After you have read this chapter, you should be able to: 
  
? Explain the concept of evaluation of sales promotion, 
? understand the importance of measuring the effectiveness of 
sales promotion, 
? evaluate and assess its performance, 
? identify the objectives that form the basis of measuring sales 
promotion performance, 
? acknowledge the importance of organizing evaluation into 
different phases, 
? differentiate between the techniques of evaluation, 
? apply the knowledge of the techniques to organize sales 
promotion campaigns to achieve the pre-determined goals. 
 
 
 
Page 3


Evaluation of Sales Promotion 
1 
Institute of Lifelong Learning, University of Delhi. 
 
 
 
 
 
 
 
 
 
Subject: Commerce 
Lesson: Evaluation of Sales Promotion 
Lesson Developer: Astha Kanjlia 
Coolege/ Department: Keshav Mahavidyalaya, Business 
Studies, University of Delhi  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evaluation of Sales Promotion 
2 
 
Institute of Lifelong Learning, University of Delhi.  
 
Table of Contents: 
 
Lesson: Evaluation of Sales Promotion 
 
1: Learning Outcomes 
2: Introduction 
3: Concept of Evaluation of Sales Promotion 
4: Need and Significance of Evaluation 
4.1: Factors considered during Evaluation 
4.2: Long-run and Short-run advantages of Sales   
Promotion 
4.3: Pre-requisites for conducting an Evaluation 
5: Basis of Evaluation 
6: Techniques/ Methods of Evaluation 
6.1: Phases of Evaluation 
6.2: A Secondary Approach to Evaluation 
 
Summary  
Exercises 
Glossary 
References 
 
1. Learning Outcomes: 
 
After you have read this chapter, you should be able to: 
  
? Explain the concept of evaluation of sales promotion, 
? understand the importance of measuring the effectiveness of 
sales promotion, 
? evaluate and assess its performance, 
? identify the objectives that form the basis of measuring sales 
promotion performance, 
? acknowledge the importance of organizing evaluation into 
different phases, 
? differentiate between the techniques of evaluation, 
? apply the knowledge of the techniques to organize sales 
promotion campaigns to achieve the pre-determined goals. 
 
 
 
Evaluation of Sales Promotion 
3 
 
Institute of Lifelong Learning, University of Delhi.  
 
 
2. Introduction: 
Even in today’s competitive environment there is one important marketing concern, 
an issue, an area where the companies are delinquent. We are talking about the 
evaluation of sales promotion and its importance. The fact remains unshaken that 
most of the times organizations launch sales promotion campaigns without 
determining the effectiveness of the tools being put to use. The result is that they 
are unable to determine whether the objectives of a campaign have been 
accomplished or not. The conditions of competition that prevail in a target market 
and the result of different promotional tools must be evaluated. By doing so, 
organizations will be in a better position to understand how different tools respond in 
different market conditions; and apply this knowledge to challenge the moves of 
competitors in the market. 
 
Sales Promotion has an important role to play in an organization’s marketing 
strategy. It helps in matching the sales and profits. However, it has often been found 
that managers blame the promotional strategy when there is a mismatch between 
sales and profits. The problem could be with some other aspect of sales promotion or 
it may be that the marketing mix used by the firm is inappropriate. The top 
management must notice and appreciate the advantages that sales promotion has to 
offer. It can help in creating a positive image about a product or it can replace a 
negative pre-conceived notion into a positive one, it may even act as a cover to an 
inappropriate pricing strategy, a weak distribution channel or an unprofitable 
product. Companies and managers should realize the fact that the effects of sales 
promotion are short-term in nature; its impact is never long-lasting. It can’t leave a 
magical impact that will last forever. Hence, it becomes important to pump money 
into sales promotion regularly, but not too often as it kills the enthusiasm, thrill, fun 
and anxiety packed with the campaign. It becomes too predictable otherwise making 
the competitive move vulnerable. 
 
Value Addition 1: Image 
Cost Effectiveness in different stages of Buyer Readiness 
The per unit sales promotion cost to the company increases as the customer passes 
through the stages of awareness, comprehension, conviction, purchase and 
repurchase. This is due to the following two reasons. The cost is incurred by the 
company generally when an item is purchased in the form of free gifts, extra 
quantity and usually not before this stage. The transition of the consumers from one 
stage to another in the case of sales promotion is relatively very quick as against 
advertising. It may so happen that at a POP, a sales promotional tool may be 
effective in creating awareness, understandability, strong desire to purchase and 
finally a decision to purchase. This causes a rising cost curve in case of sales 
promotion with cost being low at the creating awareness stage and high at the 
purchase and repurchase stage.  
 
On the contrary, as the consumers go through the stages or hierarchy of effects of 
advertising, per unit cost to the company decreases. This is due to the fact that 
number of prospective consumers decrease as they move through these stages 
such that advertising is focused on narrower and still narrower and well defined 
target market. Also in this long process of shift from awareness to purchase and 
repurchase stage in case of advertising, the objectives of advertising vary from 
Page 4


Evaluation of Sales Promotion 
1 
Institute of Lifelong Learning, University of Delhi. 
 
 
 
 
 
 
 
 
 
Subject: Commerce 
Lesson: Evaluation of Sales Promotion 
Lesson Developer: Astha Kanjlia 
Coolege/ Department: Keshav Mahavidyalaya, Business 
Studies, University of Delhi  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evaluation of Sales Promotion 
2 
 
Institute of Lifelong Learning, University of Delhi.  
 
Table of Contents: 
 
Lesson: Evaluation of Sales Promotion 
 
1: Learning Outcomes 
2: Introduction 
3: Concept of Evaluation of Sales Promotion 
4: Need and Significance of Evaluation 
4.1: Factors considered during Evaluation 
4.2: Long-run and Short-run advantages of Sales   
Promotion 
4.3: Pre-requisites for conducting an Evaluation 
5: Basis of Evaluation 
6: Techniques/ Methods of Evaluation 
6.1: Phases of Evaluation 
6.2: A Secondary Approach to Evaluation 
 
Summary  
Exercises 
Glossary 
References 
 
1. Learning Outcomes: 
 
After you have read this chapter, you should be able to: 
  
? Explain the concept of evaluation of sales promotion, 
? understand the importance of measuring the effectiveness of 
sales promotion, 
? evaluate and assess its performance, 
? identify the objectives that form the basis of measuring sales 
promotion performance, 
? acknowledge the importance of organizing evaluation into 
different phases, 
? differentiate between the techniques of evaluation, 
? apply the knowledge of the techniques to organize sales 
promotion campaigns to achieve the pre-determined goals. 
 
 
 
Evaluation of Sales Promotion 
3 
 
Institute of Lifelong Learning, University of Delhi.  
 
 
2. Introduction: 
Even in today’s competitive environment there is one important marketing concern, 
an issue, an area where the companies are delinquent. We are talking about the 
evaluation of sales promotion and its importance. The fact remains unshaken that 
most of the times organizations launch sales promotion campaigns without 
determining the effectiveness of the tools being put to use. The result is that they 
are unable to determine whether the objectives of a campaign have been 
accomplished or not. The conditions of competition that prevail in a target market 
and the result of different promotional tools must be evaluated. By doing so, 
organizations will be in a better position to understand how different tools respond in 
different market conditions; and apply this knowledge to challenge the moves of 
competitors in the market. 
 
Sales Promotion has an important role to play in an organization’s marketing 
strategy. It helps in matching the sales and profits. However, it has often been found 
that managers blame the promotional strategy when there is a mismatch between 
sales and profits. The problem could be with some other aspect of sales promotion or 
it may be that the marketing mix used by the firm is inappropriate. The top 
management must notice and appreciate the advantages that sales promotion has to 
offer. It can help in creating a positive image about a product or it can replace a 
negative pre-conceived notion into a positive one, it may even act as a cover to an 
inappropriate pricing strategy, a weak distribution channel or an unprofitable 
product. Companies and managers should realize the fact that the effects of sales 
promotion are short-term in nature; its impact is never long-lasting. It can’t leave a 
magical impact that will last forever. Hence, it becomes important to pump money 
into sales promotion regularly, but not too often as it kills the enthusiasm, thrill, fun 
and anxiety packed with the campaign. It becomes too predictable otherwise making 
the competitive move vulnerable. 
 
Value Addition 1: Image 
Cost Effectiveness in different stages of Buyer Readiness 
The per unit sales promotion cost to the company increases as the customer passes 
through the stages of awareness, comprehension, conviction, purchase and 
repurchase. This is due to the following two reasons. The cost is incurred by the 
company generally when an item is purchased in the form of free gifts, extra 
quantity and usually not before this stage. The transition of the consumers from one 
stage to another in the case of sales promotion is relatively very quick as against 
advertising. It may so happen that at a POP, a sales promotional tool may be 
effective in creating awareness, understandability, strong desire to purchase and 
finally a decision to purchase. This causes a rising cost curve in case of sales 
promotion with cost being low at the creating awareness stage and high at the 
purchase and repurchase stage.  
 
On the contrary, as the consumers go through the stages or hierarchy of effects of 
advertising, per unit cost to the company decreases. This is due to the fact that 
number of prospective consumers decrease as they move through these stages 
such that advertising is focused on narrower and still narrower and well defined 
target market. Also in this long process of shift from awareness to purchase and 
repurchase stage in case of advertising, the objectives of advertising vary from 
Evaluation of Sales Promotion 
4 
 
Institute of Lifelong Learning, University of Delhi.  
informing, persuading, reminding and reinforcing such specific target market. This 
change in objectives calls for a different budget allocation to advertising in various 
stages, such that the companies normally experience a declining cost curve. 
 
The cost of personal selling is directly proportional to the time and effort committed 
by the salesman in enabling the customer to shift from various stages of readiness 
to buy. It rises until the stage of purchase and decrease beyond that for the reason 
that if the customer is satisfied with the product, he/she will repurchase it without 
any subsequent personal selling effort made by the company.  
 
As compared to the sales promotion, the company does not need to incur cost at 
repurchase stage in case of personal selling. But sales promotion cost is directly 
related to each unit sale and it increases in case at repurchase stage in the short 
run when the customer may already have previous stock of same product. 
 
Click on the link below to view the picture. 
 
Source: http://responsiblemarketing.com/blog/wp-
content/uploads/2008/11/promotional-cost-effectiveness.jpg 
 
 
3. Concept of Evaluation of Sales Promotion 
 
An additional value is provided to customers when goods are purchased under a 
promotional scheme. The aim is to motivate them to buy more during that limited 
period of promotion. Volume of sales and the costs associated with it are used to 
assess the performance of promotion. A standard sales level is set against which the 
actual sales are compared to measure the increase. The increase in sales level also 
indicates that there is an increase in profits earned. This increase in profit is then 
compared with that level of profit which the firm would have earned had there been 
no sales promotion. Brand awareness can also be measured by conducting surveys 
with customers. Improved sales result from a well-implemented and well-executed 
sales promotion. 
 
There is always a sudden bump in the sales level when the promotion is rolled. The 
promotion offers savings, extra value and free products at lesser prices. This implies 
that customers’ purchases might be influenced before and after the promotional 
period. This has a lesson for the organizations also. They must ascertain the sales 
volume pertaining to the period before and after the sales promotion period in 
addition to the promotion period. The question here is that sales volume of what 
time duration must be considered. Let us take a small example here. If the sales 
promotion is for 1 week, the evaluation period would be 4 weeks. It would include 1 
week of the promotion, 1 week before and 2 weeks after the promotion. The 
company should evaluate the volume of sales for the sales promotion period plus an 
equal period before, and at least two equal periods after, the promotion. If there is 
any fall in the sales prior to promotion (customers generally wait for the sale) or an 
increase or decrease after promotion, the same can be caught and assessed using 
this method. The costs associated with promotion also have to be a part of 
evaluation.  
 
There is always a difference in the level of sales that take place with promotion and 
that without promotion. Hence, if an organization wants to determine the effect of 
Page 5


Evaluation of Sales Promotion 
1 
Institute of Lifelong Learning, University of Delhi. 
 
 
 
 
 
 
 
 
 
Subject: Commerce 
Lesson: Evaluation of Sales Promotion 
Lesson Developer: Astha Kanjlia 
Coolege/ Department: Keshav Mahavidyalaya, Business 
Studies, University of Delhi  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evaluation of Sales Promotion 
2 
 
Institute of Lifelong Learning, University of Delhi.  
 
Table of Contents: 
 
Lesson: Evaluation of Sales Promotion 
 
1: Learning Outcomes 
2: Introduction 
3: Concept of Evaluation of Sales Promotion 
4: Need and Significance of Evaluation 
4.1: Factors considered during Evaluation 
4.2: Long-run and Short-run advantages of Sales   
Promotion 
4.3: Pre-requisites for conducting an Evaluation 
5: Basis of Evaluation 
6: Techniques/ Methods of Evaluation 
6.1: Phases of Evaluation 
6.2: A Secondary Approach to Evaluation 
 
Summary  
Exercises 
Glossary 
References 
 
1. Learning Outcomes: 
 
After you have read this chapter, you should be able to: 
  
? Explain the concept of evaluation of sales promotion, 
? understand the importance of measuring the effectiveness of 
sales promotion, 
? evaluate and assess its performance, 
? identify the objectives that form the basis of measuring sales 
promotion performance, 
? acknowledge the importance of organizing evaluation into 
different phases, 
? differentiate between the techniques of evaluation, 
? apply the knowledge of the techniques to organize sales 
promotion campaigns to achieve the pre-determined goals. 
 
 
 
Evaluation of Sales Promotion 
3 
 
Institute of Lifelong Learning, University of Delhi.  
 
 
2. Introduction: 
Even in today’s competitive environment there is one important marketing concern, 
an issue, an area where the companies are delinquent. We are talking about the 
evaluation of sales promotion and its importance. The fact remains unshaken that 
most of the times organizations launch sales promotion campaigns without 
determining the effectiveness of the tools being put to use. The result is that they 
are unable to determine whether the objectives of a campaign have been 
accomplished or not. The conditions of competition that prevail in a target market 
and the result of different promotional tools must be evaluated. By doing so, 
organizations will be in a better position to understand how different tools respond in 
different market conditions; and apply this knowledge to challenge the moves of 
competitors in the market. 
 
Sales Promotion has an important role to play in an organization’s marketing 
strategy. It helps in matching the sales and profits. However, it has often been found 
that managers blame the promotional strategy when there is a mismatch between 
sales and profits. The problem could be with some other aspect of sales promotion or 
it may be that the marketing mix used by the firm is inappropriate. The top 
management must notice and appreciate the advantages that sales promotion has to 
offer. It can help in creating a positive image about a product or it can replace a 
negative pre-conceived notion into a positive one, it may even act as a cover to an 
inappropriate pricing strategy, a weak distribution channel or an unprofitable 
product. Companies and managers should realize the fact that the effects of sales 
promotion are short-term in nature; its impact is never long-lasting. It can’t leave a 
magical impact that will last forever. Hence, it becomes important to pump money 
into sales promotion regularly, but not too often as it kills the enthusiasm, thrill, fun 
and anxiety packed with the campaign. It becomes too predictable otherwise making 
the competitive move vulnerable. 
 
Value Addition 1: Image 
Cost Effectiveness in different stages of Buyer Readiness 
The per unit sales promotion cost to the company increases as the customer passes 
through the stages of awareness, comprehension, conviction, purchase and 
repurchase. This is due to the following two reasons. The cost is incurred by the 
company generally when an item is purchased in the form of free gifts, extra 
quantity and usually not before this stage. The transition of the consumers from one 
stage to another in the case of sales promotion is relatively very quick as against 
advertising. It may so happen that at a POP, a sales promotional tool may be 
effective in creating awareness, understandability, strong desire to purchase and 
finally a decision to purchase. This causes a rising cost curve in case of sales 
promotion with cost being low at the creating awareness stage and high at the 
purchase and repurchase stage.  
 
On the contrary, as the consumers go through the stages or hierarchy of effects of 
advertising, per unit cost to the company decreases. This is due to the fact that 
number of prospective consumers decrease as they move through these stages 
such that advertising is focused on narrower and still narrower and well defined 
target market. Also in this long process of shift from awareness to purchase and 
repurchase stage in case of advertising, the objectives of advertising vary from 
Evaluation of Sales Promotion 
4 
 
Institute of Lifelong Learning, University of Delhi.  
informing, persuading, reminding and reinforcing such specific target market. This 
change in objectives calls for a different budget allocation to advertising in various 
stages, such that the companies normally experience a declining cost curve. 
 
The cost of personal selling is directly proportional to the time and effort committed 
by the salesman in enabling the customer to shift from various stages of readiness 
to buy. It rises until the stage of purchase and decrease beyond that for the reason 
that if the customer is satisfied with the product, he/she will repurchase it without 
any subsequent personal selling effort made by the company.  
 
As compared to the sales promotion, the company does not need to incur cost at 
repurchase stage in case of personal selling. But sales promotion cost is directly 
related to each unit sale and it increases in case at repurchase stage in the short 
run when the customer may already have previous stock of same product. 
 
Click on the link below to view the picture. 
 
Source: http://responsiblemarketing.com/blog/wp-
content/uploads/2008/11/promotional-cost-effectiveness.jpg 
 
 
3. Concept of Evaluation of Sales Promotion 
 
An additional value is provided to customers when goods are purchased under a 
promotional scheme. The aim is to motivate them to buy more during that limited 
period of promotion. Volume of sales and the costs associated with it are used to 
assess the performance of promotion. A standard sales level is set against which the 
actual sales are compared to measure the increase. The increase in sales level also 
indicates that there is an increase in profits earned. This increase in profit is then 
compared with that level of profit which the firm would have earned had there been 
no sales promotion. Brand awareness can also be measured by conducting surveys 
with customers. Improved sales result from a well-implemented and well-executed 
sales promotion. 
 
There is always a sudden bump in the sales level when the promotion is rolled. The 
promotion offers savings, extra value and free products at lesser prices. This implies 
that customers’ purchases might be influenced before and after the promotional 
period. This has a lesson for the organizations also. They must ascertain the sales 
volume pertaining to the period before and after the sales promotion period in 
addition to the promotion period. The question here is that sales volume of what 
time duration must be considered. Let us take a small example here. If the sales 
promotion is for 1 week, the evaluation period would be 4 weeks. It would include 1 
week of the promotion, 1 week before and 2 weeks after the promotion. The 
company should evaluate the volume of sales for the sales promotion period plus an 
equal period before, and at least two equal periods after, the promotion. If there is 
any fall in the sales prior to promotion (customers generally wait for the sale) or an 
increase or decrease after promotion, the same can be caught and assessed using 
this method. The costs associated with promotion also have to be a part of 
evaluation.  
 
There is always a difference in the level of sales that take place with promotion and 
that without promotion. Hence, if an organization wants to determine the effect of 
Evaluation of Sales Promotion 
5 
 
Institute of Lifelong Learning, University of Delhi.  
sales promotion on the sales level, it must take into account the sales that result 
without promotion and the sales that are recorded with promotion. The level of sales 
without promotion is referred to as “Base Level”. This level is best estimated by 
taking an average of the sales during the months before the period of evaluation. 
The company should make necessary adjustments to this base level for seasonal 
variations if any. The effect of sales promotion on sales can now be calculated by 
comparing this estimated sales level with the actual sales that take place during the 
evaluation period. 
 
There is also an increase in profits due to sales promotion.The additional sales that 
take place due to promotion must be sufficient enough to earn profits that would 
cover up the cost associated with sales promotion. This cost has various elements. 
Production of coupons involves cost. Promotional ads and publicity also have certain 
costs associated with them. Discounts that are offered also have a cost. The 
incentives that are given to customers add to the cost of sales promotion. All these 
costs must be subtracted from the profit earned from additional sales in order to 
arrive at the additional “Net Profit”. 
 
Sales promotions also help in developing interest among the customers and getting 
back the old ones. It acts as a less expensive catalyst as compared to other means 
of promotion, which create brand awareness. A consumer survey may be conducted 
to estimate the familiarity of the brand before and after promotion. If the result is 
increased familiarity, it would definitely result in higher sales in the long run. 
 
Value Addition 2:  Pause & Think  
Hedonic & Utilitarian benefits 
The number of products purchased or the aesthetics of the product do not 
determine the promotion’s effectiveness. It is rather determined by “Hedonic” i.e. 
“Pleasure Seeking” and “Utilitarian” i.e. “Useful Function” nature of the advantages 
offered by the product. When customers achieve both these kinds of benefits, we 
can say that the product is valued by the customer and also that the promotion is 
effective. Companies usually chose products that are “cheap” or those that appeal to 
their individual preference. But, this is a very common mistake since there is a 
difference between “cheap” and “cost-effectiveness”. Cheap implies low-cost and 
low quality. The result of such a promotion would result in: low-cost customers and 
low-quality response rate. 
 
Click on the link below to view the picture. 
Source: http://delbipromotions.co.za/the-promotional-sales-benefit-congruency-
framework-part-i 
 
 
4. Need and Significance of Evaluation 
 
Companies always try to improve their operational efficiency and effectiveness. But, 
the expenditure incurred on promotion has always been in the limelight. It is very 
difficult and challenging to analyze this cost of marketing on the basis of profit vis-a-
vis cost. The top managements are of the view that this is one area where they have 
a considerable scope for cutting the costs and elevating the profits. This idea puts a 
lot of pressure on managers to organize and implement successful promotional 
campaigns that too within the tight limits of budget set for them. Therefore, it has 
become extremely important to examine how money is spent on promotion