CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
After the advent of industrial revolution, machines were introduced into the production system to boost the production of goods and services and this brought about large number of goods available for sales. In this regard, consumers were exposed to variety of products and were required to select the product which will give them the optimum satisfaction they desired according to their needs.
Companies on the other hand were interested in boosting their image, achieving high sales, maximizing profit and at the same time gaining competitive advantage over others. In the light of the foregoing for a company to excel above its competitors, it has to employ certain marketing strategies to attract the attention and triggered the interest of its consumers.
When a consumer goes shopping, he or she implicitly, or explicitly, has to make four key decisions for each product category. Whether to buy in the category and, if so, where (which store), which brand, and what quantity. All four decisions may be influenced by consumer characteristics (e.g., income, family size, purchase frequency) and by the marketing environment (e.g., the prices and promotion activities of the various brands and stores). Marketing mix variables can affect these four decisions to differing degrees.
In recent years, consensus have it that spending on sales promotion by firms in most developed and some developing countries of the world has significantly overwhelmed those on advertising. This is not surprising when its inevitable role in complementing other methods of product promotion in order to achieve short-term gains is considered. Sales promotion involves gaining consumer loyalty, increase repeat purchase and facilitate profit maximization. Promotion campaigns are probably the most important of four marketing mix element: product, price, place and promotion that can help to solve company’s problem and gain competitive advantage if well implemented.
The greatest disadvantage of sales promotion lies on its long-term ineffectiveness, even though it accounts for over 65 percent of a typical marketing budget. This is the result of the research work by Abraham and Lodish in (1990). However, further efforts by Perreault and Mccarthy in (2002) submits that sales promotion can instigate a continuous increase in sales in the long-term if it has successfully resulted in brand loyalty, repeat purchase and customer satisfaction in short term.
Furthermore, the issue of getting the most out of each promotional naira has become an increasingly important one. However, some managers’ studies reveal that 80 percent of promotion users are, in fact, loyal customers who presumably would have bought the brand regardless of the promotion (Levine 1989).
Basically, promotion is an exercise that performs the role of information, persuasion and influence to purchase certain products. Promotion also affects the demand elasticity of a product, making the demand inelastic when the price increases and elastic when the price decreases.
The main purpose of promotion is for effective and efficient communication. Basically, the promotion exercise is usually aimed at achieving the following:
1. Achieving high sales volume, which in turns affects the contribution of profit ratio.
2. Directing and ensuring that product flow through the appropriate channels till the products get to the final consumers so that wants may be satisfied.
3. Identification of markets and buyers motives that enables want to be satisfied.
The objectives of promotion are as follows:
1. To inform that is making the market aware of a new product or service. Promotion informs the market of a price charge, the product or service usage and the available services.
2. To increase the demand for products and services
3. To persuade consumers by building brand name and encouraging consumers to switch to a firm’s brand.
4. To reduce customer’s fears and anxiety and also to build good company image.
5. It supports personal selling program.
6. Reminding customers of where to buy products that are needed immediately and those needed in future, most especially when they are off-season products.
7. Announcement of special sale.
8. To introduce new business to the community.
This study will be used to highlight or evaluate the effectiveness of sales promotion on the buying decision of consumers. This is very important as it would bring about rapid growth if the promotional strategies are well planned and implemented.
Finally, marketers should constantly evaluate promotional effectiveness in terms of its ability to make clients or consumers to respond more favourably towards the firm’s product than they would respond towards firms’ competitors. This is because it would provide information about the effectiveness of promotional activities on the management, employees, the sales of the company’s product and competitive advantage relevant to most firms or companies producing and marketing consumer products.
1.2 STATEMENT OF THE PROBLEM
Major external factors such as socio-economic, regulatory and technological issues have shaped the structure of communication service and also the nature of competition within it. The Nigerian telecommunication industry cannot be isolated from the list of industries where product promotion and incentives are wholly adopted. The reason for this can be associated with oligopolistic nature of the industry. In other words, the major challenge of the telecommunication companies in Nigeria is how to be the choice of majority of the over 140 million interconnected Nigerians.
However, many promotion and sales incentives adopted by companies these days are so ineffective, dull and dreary that they bore the prospective consumer.
However, considering the level of economic resources committed to these promotional mix and program, a good business manager must weigh the cost of a promotion against the expected increase in sales that will result from the promotion rather than “buying sales” at the cost of reduced profit i.e. carry out a cost benefit of the promotion program. A sales promotion is only effective and appropriate if it can prompt its target and it possess a high degree of creativity and flexibility. Obviously since the aforementioned applies to the Nigerian telecommunication sector, there is therefore a void to fill by carrying out this study.
1.3 RESEARCH QUESTIONS
The following research questions relevant to the study are raised:
1. How does sales promotion affect increase in sales and to what extent?
2. What are the factors that influence consumer loyalty of a particular package?
3. Does sales promotion have a short-term impact rather than long-term impact on buyers’ decision?
4. What are the impacts sales promotions have on buyers’ buying decision?