Description
The report describing on promotional strategy followed by HCL.
Executive Summary
HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with its origins in 1976. For over quarter of a century, the company have developed and implemented solutions for multiple market segments, across a range of technologies in India. With sound macro economic condition and buoyant buying sentiment in the market, the desktop PC market grossed 23.4lc units, registering a growth of 36% over the same period last year. The notebook PC segment was the star performer, showing massive growth, 60% sequentially and 138% year-on-year and crossing the one lakh barrier. This can be attributed to strong domestic growth in requirements and aggressive sales promotion offers by the players like HP, Lenovo, and HCL among others. Again brand recognition and image play a very important role in purchase decisions. Brand managers of IT products, to increase the short-term gains and keep the cash registers ticking have started using aggressive sales promotion offers. The objective of the project was to find out whether people actually buy because of the sales offers incentives and whether they actually feel that sales promotions are an effective brand-building tool also. Also some of the insights on how to best place an effective Sales promotion program have been unleashed. The research brings out the fact that people do buy because of the sales promotion offers, but the impact promotional offers have on the Brand Image of the company offering such promotions is negligible. Thus sales promotion offers are a definite incentive to buy for a customer but they do not guarantee a longterm relationship with the customer and hence a Brand Manager must use such offers with a pinch of salt.
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CHAPTER 1
THEORETICAL BACKGROUND OF THE STUDY
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Sales Promotion
Sales promotion, a key ingredient in marketing campaigns, consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.1 Whereas advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer promotion (samples, coupons, cash refund offers, process off, premiums, prizes, patronage rewards, free trials, warranties, tie-in promotions, cross-promotions, point-ofpurchase displays, and demonstrations); trade promotion (prices off, advertising and display allowances, and free goods); and sales force promotions (trade shows and conventions, contest for sales reps, and specialty advertising). These tools are used by most organizations, including non-profit organizations. Churches, for example, often sponsor bingo games, theatre parties, testimonial dinners and raffles. A decade ago, the advertising to sales-promotion ratio was about 60:40. Today, in many consumer packaged-good companies, sales promotion accounts for 65 to 75 percent of the combined budged. Sales promotion expenditures have been increasing as a percentage of combined budget expenditure annually for the last two decades. Several factors contribute to this rapid growth, particularly in the consumer markets.2 Promotion is now more accepted by the top management as an effective sales tool; more product managers are qualified to use sales-promotion tools; and product managers are under pressure to increase current sales. In addition, the number of brands has increased; competitors use promotions frequently; many brands are seen as similar; consumers are more price-oriented; the trade has demanded more deals from the manufacturers; and the advertising efficiency has declined because of rising costs, media clutter, and legal restraints. The rapid growth of sales-promotion media has created clutter similar to the advertising clutter. Manufacturers have to find ways to rise above the clutter3
for instance, by offering larger coupon-redemption values or using more dramatic point-of purchase displays and demonstrations.
Purposes of Sales promotion
Sales-promotion tools vary in their specific objectives. A free sample stimulates consumer trial, whereas a free management-advisory service aims at cementing long-term relationship with a retailer. Sellers use incentive-type promotion to attract new triers, to reward loyal customers, and to increase the repurchase rates of the occasional users. Sales promotion often attracts brand switchers, who are primarily looking for low price, good value, or premiums. Sales promotions are unlikely to turn them into loyal users. Sales promotions used in markets of high brand similarity produce a high sales response in the short term but little permanent gain in the market share. In markets of high dissimilarity, sales promotion can alter market shares permanently. Farris and Quelch cite a number of sales promotion benefits flowing to manufacturers and consumers.3 Sales promotion enable manufacturers to adjust to short-term variations in supply and demand. They enable manufacturers to test how high a list price they can charge, because they can always discount it. They induce the customers to try new products instead of never straying from current ones. They lead to more varied retail formats, such as every-day-low-price store and the promotional-pricing store. They promote greater consumer awareness of prices. They permit manufacturers to sell more than they would sell at list price. They help the manufacturer adapt programs to different consumer segments. Consumer themselves enjoy some satisfaction from being smart shoppers when they take advantage of price specials. Today many marketing managers first estimate what they need to spend in trade promotion, then what they need to spend in consumer promotion. Whatever is left they will budget for advertising. There is danger, however, in letting advertising take a back seat, because advertising typically acts to build brand
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loyalty. The question of whether or not sales promotion weakens brand loyalty is subject to different interpretations. Sales promotion, with its incessant prices off, coupons, deals and premiums, may devalue the product offering in the buyers’ minds. Buyers learn that the list price is largely a fiction. However, before jumping to any conclusion, we need to distinguish between price promotions and added-value promotions. However, usually, when a brand is price promoted too often, the consumer begins to devalue it and buy it mainly when it goes on sale. So there is risk in putting a well-known brand leader on promotion over 30 percent of time.() Dominant brands offer deals frequently, because most deals only subsidize current users. Brown’s study of 2,500 instant-coffee buyers concluded that: ? Sales promotions yield faster and more measurable responses in sales than advertising does. ? Sales promotions do not tend to yield new, long term buyers in mature markets because they attract mainly deal-prone consumers who switch among brands as deals become available. ? Loyal brand buyers tend not to change their buying patterns as a result of competitive promotion.
?
Advertising appears to be capable of deepening brand loyalty.4
There is also evidence that price promotions do not build permanent total category volume. Small share competitors find it advantageous to use sales promotion, because they cannot afford to match the market leaders’ large advertising budgets; nor can they obtain shelf-space without offering trade allowances or stimulate consumer trials without offering incentives. Price competition is used by small brand seeking to enlarge its share, but it is less effective for category leader whose growth lies in expanding the entire category.5 The upshot is that many consumer packaged goods companies feels that they are forced to use more sales promotions than they wish. They blame the heavy use of
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sales promotion for decreasing brand loyalty; increasing consumer pricesensitivity; brand quality image dilution, and a focus on short-run-marketing planning.
Major decisions in Sales Promotions
In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results. Establishing the objectives Sales promotion objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. For consumers, objectives include encouraging purchase of larger-sized units, building trial among non-users, and attracting switchers away from competitors’ brands. For retailers, objectives include persuading retailers to carry new items and higher levels of inventory, encouraging stocking of related items, offsetting competitive promotions, building brand loyalty, and gaining entry into new retail outlets. For the sales force, objectives include encouraging support of a new product or model, encouraging more prospecting, and stimulating off-season sales. 6 See “Marketing Memo: Sales Promotions as brand builders.”)
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Mar keting Memo:
S ales Pr omotions as br
and builder s
Building brand awareness is a long-term process. What a brand does today predicts what it will do tomorrow. Sales promotions are short term and temporary. Here are some of the tips on how to make a sale promotion an effective brand-building tool. ? Make sure the promotion is justified: A new store opening, a company anniversary, and other kinds of celebrations are all good reasons for running a promotion ? Tie the promotion to brand’s image: Birth dates and anniversaries are good ? Look at every both for the sales job it can do and as a communication tool: A promotion is one of a brand’s many voices; it can help build brand awareness if it says the right things Source: Adapted from Jacques Chevron, “Branding and Promotion: Uneasy combination.” Brand week, September 14, 1998, p.24
Selecting Consumer-promotion tools The promotion planner should take into account the type of the market, sales promotion objectives, competitive conditions, and each tool’s cost effectiveness. The main consumer promotion tools are summarized in the following table. We can distinguish between manufacturer promotions and retailer promotions. Sales promotions are most effective when used together with advertising. In one study, a price promotion alone produced 15 percent increase in sales volume. When combined with feature advertising, sales volume increased 19 percent; when combined with feature advertising and a point-of-purchase display, sales volume increased 24 percent.7
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Major Consumer promotion tools:
Samples: Offer of a free amount of a product or service delivered door to door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer. Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific product; mailed, enclosed in other products or attached to them, or inserted in the magazine and newspaper ads. Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at retail shop; consumer sends a specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by mail. Price Packs (cents-off deals): Offers to consumer savings off the regular price of a product, flagged on the label or package. A reduce price pack is a single package sold at the reduce price (such as two for the price of one). A banded pack is two related products banded together (such as a toothbrush and toothpaste) Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. A with-pack premium accompanies the product inside or on the package. A free in-the-mail premium is mailed to the consumers who send a proof of purchase. A self-liquidating premium is sold below its normal retail price to consumers who request it. Frequency Programs: Programs rewarding the consumers whose frequency and intensity in purchasing the company’s products and services is higher. Prizes (Contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips, or merchandise as a result of purchasing something. A contest calls consumers to submit an entry to be examined by panel of judges who will select the best entries. A sweepstake asks consumers to submit their names in a drawing. A game presents the consumers with something every time they buy to help them win prizes. Patronage awards: Values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors. Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they will buy. Product Warranties: Explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer’s money during a specified period. Tie-in promotions: Two or more brands or companies team up on coupons, refunds, and contests to increase the pulling power Cross-promotions: Using one brand to advertise another noncompeting brand. Point-of-purchase (POP) Displays and Demonstrations: POP displays and demonstrations take place at the point-of-purchase or sale
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Selecting trade-promotion tools Manufacturers use a number of trade promotion tools. Surprisingly a higher percentage of promotion pie is devoted to trade promotion tools (46.9 percent) than to consumer promotion (27.9 percent), with media advertising capturing remaining 25.2 percent. Manufacturers use award money to the trade 1. To persuade the wholesaler or retailer to carry the brand; 2. Persuade the retailer or wholesaler to carry more units than the normal amount; 3. To induce the retailers to promote the brand by featuring, display, and price reductions and; 4. To stimulate retailers and their sales clerks to push the product. The growing power of large retailers has increased their ability to demand trade promotion at the cost of consumer promotion and advertising. 8 The different trade promotions are
Price off (off-invoice or off list): A straight discount off the list price on each case purchased during a stated time period. Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. An advertising allowance compensates the retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special product display Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size
Source: For more information, see Betsy Spethman, Trade Promotion Redefined, Brandweek, March 13, 1995, pp. 25-32 Selecting Business- and sales-force-promotion tools Companies spend billions of dollars on business-and sales-force-promotion tools as shown in the table. These tools are used to gather business leads, impress and reward customers, and motivate the sales force to greater effort. Companies
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typically develop budgets for each business-promotion tool that remain fairly constant from year to year.
Trade Shows and Conventions: Industry associations organize annual trade sows and conventions. Business marketers may spend as much as 35 percent of their annual promotion budget on trade shows Sales Contests: A sales contest aims at including the sales force or dealers to increase their sales over a stated period, with prizes (money, trips, gifts or points) going to those who succeed Specialty Advertising: Specialty advertising consists of useful, low cost items bearing the company’s name and address, and sometimes an advertising message that salespeople give to prospects and customers. Common items are ballpoint pens, key chains, flashlights, tote bags, and memo pads.
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CHAPTER 2
RESEARCH METHODOLOGY
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Objectives of the survey
The main objective of the survey was to determine the impact of the sales promotion offers on the buying behaviour of consumers of IT products on the following factors: ? The effect on their purchase decision (whether or not the consumers are buying on the basis of promotional offers) ? The brand image of the brand offering the sales promotion (does it increase or decrease) There were also a few secondary objectives of the survey, which included ? What are the sales promotion tools that are most likely to spur a purchase decision ? Whether enlarging the existing customer segments is possible through sales promotions ? What is the media that is most suitable to communicate the sales promotion offers to the consumers The hypotheses for the survey were: ? People who have bought the computers/notebooks have done so mainly during sales promotion offers ? Majority of the buyers who bought during sales offers got the information regarding the same from either a newspaper or a magazine
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Research Design: The study used an exploratory research design and was conducted for the period of 14th November 2005 to 21st January 2006 Data Collection a) Primary Data: Through survey using structured questionnaire. b) Secondary Data: Company resources Area of Study: Meerut City in the state of Uttar Pradesh, which is the education hub of Western Uttar Pradesh Period of Study: 60 days.
Sampling Plan
Sample Design The sample was selected on the basis of pre-qualifying question as to whether the respondent is an existing PC/notebook user or whether he is planning to buy one in future so that the respondents can be grouped into two categories (whose opinion was vital for the survey): ? Users (73 percent) and ? Perspective buyers (27 percent)
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80 73
60
Percent
40
27 20
0 User P ers. Buyer
User/Perspective Buyer
Sampling Technique The formulae used for calculating sample size was: ? (1- ?) x Z 2
n =
__________________
D2 Where, n = the sample size selected for the study ? = the proportion of the total population that is expected to have the required characteristics (i.e. The proportion of the total population that either uses a computer/notebook or is planning to buy one soon) Z = the amount of accuracy that is allowable (95 percent accuracy) D = the amount of deviation from standard that can be allowed (1.96 standard deviations) On the basis of the demographic data available for Meerut city the value of “?” was ascertained at 0.010 that is 10 percent of the total population of Meerut has either bought or is planning to buy computers/notebooks.
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The values of “Z” and “D” are ascertained by statisticians and are a standard. The value of “n” was ascertained as 150 (approximately) for the study. In order to have a representative sample for the survey, using techniques such as mall intercepts random sampling was done.
Data Analysis: The data analysis was done using SPSS® software; the data was analyzed using the following statistical methods: 1) Factor Analysis 2) Discriminant Analysis 3) Perceptual Mapping 4) Regression Analysis
Limitations of the study:
There are a few limitations to the study that may arise due to the following reasons:
1) Sampling plan: The sampling is done through random sampling; generally
through mall intercept interviews, which might distort the results but not to a very great extent.
2) The Area of study: Meerut city might not hold good as a representative for
the whole of India and hence the survey is location specific.
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CHAPTER 3
INDUSTRY AND COMPANY PROFILE
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INDUSTRY PROFILE:
The PC industry has been a leading driver of economic growth in the past three decades. The explosion in the use of computers in businesses has been driven by the need to modernize work processes and boost productivity, while the Internet, entertainment and other digital applications were among the primary drivers of PC adoption in the consumer market. In India, the home PC market segment is supplied by three distinct kinds of manufacturers. One; you have global companies like HP and Compaq along with many players. Two; there are the Indian brands like Wipro and HCL. And three; is the sea of kitchen tabletop PC assemblers who sell their unbranded machines at super-low prices. This last category of unbranded machines is often referred to as the 'gray market' and it has the majority share of the home PC market. It is followed by Indian brands and lastly by the multinational brands. The Indian personal computer industry witnessed a year-on-year growth of 32 per cent to 12-lakh units in the July-September quarter of 2005, an 11-per cent increase over the previous quarter AMJ (17th November 05). In the consumer desktop category HCL led over HP, with LG following the market leaders at the third slot. In the overall client PC (notebooks and desktops) market, HP retained its top slot with a sequential increase of 19% and a year-onyear 45% growth. HCL continued to stay at second position, with a 40% year-onyear growth, while Lenovo occupied the third position.
Current Market Trends
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With sound macro economic condition and buoyant buying sentiment in the market, PC sales in India are expected to touch 47 lakh units in Fiscal 2005-2006, according to MAIT’s Industry performance review for the first half of the FY 2005-06. The desktop PC market grossed 23.4lc units, registering a growth of 36% over the same period last year. The MAIT-IMRB review reveals that PC sales to the business segment improved by 55% accounting for 78% of the total PC consumption. In the households, while the sales were 5.10 lac units, the sector witnessed a decrease of 5% over the same period last year. Assembled PCs witnessed decline in market share, accounting for 34% of the PC sales in H1/2005-06. The share of the Indian brands grew to account for 31% of the market while the MNC brands accounted for the rest at 35%. The notebook PC segment was the star performer, showing massive growth, 60% sequentially and 138% year-on-year and crossing the one lakh barrier. Centrino-based notebooks constituted two-thirds of the total shipments. In terms of market rankings, HP stayed at the top, followed by Lenovo and Acer (IDC report). In H1/2005-06, about 16,000 notebooks were sold to the households segment accounting for 13% of the total market (MAIT report). The server market registered a growth of 56% over the first half of the fiscal riding on high consumption in the medium establishments where sales increased by 258%. Overall Printer sales grew by 43% over that in H1 2004-05 on YoY basis. The UPS market grew by 16% over H1 of 2004-05. The growth in the industry can be summarized in the following table:
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The market was fueled by a strong demand from the notebook and consumer desktop markets. Consistent fall in notebook prices led to a growth in this market. In this situation Brand Image/brand perception plays a major role in purchase of the products. There were massive investments in the private educational sector that provided the momentum for growth in this market. Notable among these were various management institutes and technical institutions.
COMPANY PROFILE
HCL's history goes to 1975 when six entrepreneurs-Shiv Nadar and five of his associates-decided to create a computer systems and services business in India. They faced many initial challenges and despite the lack of venture capital available in India at that time, they opened their first office in the suburbs of New Delhi, naming their business “Hindustan Computers Ltd” in 1976. After eight years, HCL became the largest computer systems and services company in India. HCL under its Umbrella has four strategic Business units HCL technologies, Info systems, Comnet and HCL Infinity. An HCL Infosystem is mainly into systems marketing. Financial Overview The company has reported consolidated revenue of Rs 2284.5 crores (USD 523.7 Mn) during the quarter ended September 30, 2005 as against Rs 1579.5 crores (USD 362.1 Mn) in the corresponding quarter of the previous year, a growth of 45%.
HCL Infosystems
HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with its origins in 1976. For over quarter of a century, the company have developed and implemented solutions for multiple market segments, across a range of technologies in India. The company has been in the forefront in introducing new technologies and solutions for wide range of markets. HCL is the pioneer of low
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cost systems. The advantage of supplying customized products makes company scale new heights. HCL Infosystems (HCLI) draws it's strength from 29 years of experience in handling the ever changing IT scenario, strong customer relationships, ability to provide the cutting edge technology at best-value-for-money and on top of it, an excellent service & support infrastructure. Today HCL is country's premier information enabling company. It offers one-stop-shop convenience to its diverse customers having an equally diverse set of requirements. Be it a large multilocation enterprise, or a small/medium enterprise, or a small office or a home, HCLI has a product range, sales & support capability to serve. Last 29 years apart from knowledge & experience have also given HCLI continuity in relationship with the customers, thereby increasing the customer confidence. Companies’ strengths can be summarized as: ? Ability to understand customer's business and offer right technology ? Long-standing relationship with customers ? Pan India support & service infrastructure ? Best-vale-for-money offerings Alliances & Partnerships: To provide world-class solutions and services to all our customers, we have formed Alliances and Partnerships with leading IT companies worldwide. HCL Infosystems has alliances with global technology leaders like Intel, AMD, Toshiba, Ericsson, Microsoft, Nokia and Sun Microsystems, SAP, Scansoft, SCO, EMC, Veritas, Citrix, CISCO, Oracle, Computer Associates, RedHat, Infocus, Duplo, Samsung, Novell. These alliances on one hand give them access to best technology & products as well enhancing their understanding of the latest in technology. On the other hand
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they enhance company’s product portfolio, and enable HCLI to be one stop shop for its customers. Core Values: The company shall uphold the dignity of the individual, It shall honor all commitments, It shall be committed to Quality, Innovation and Growth in every endeavor, It shall be responsible corporate citizens.
Products and solutions
HCL Infosystems' portfolio of products covers the entire spectrum of the information technology needs of its customers. By virtue of the immense diversity of markets and customers that it addresses, HCL Infosystems' products offerings include everything from high-end enterprise level servers for mission critical applications to multimedia home computers. The product portfolio consists of: ? Business ? PCs Home PCs ? Infiniti Powerlite Notebooks HCLI has 6 manufacturing facilities with an annual capacity of over 300,000 PCs, plus production of Servers, Color monitors, Terminals, Keyboards, racks and cabinets. Some of these facilities enjoy tax benefits for another 2-3 years. The company augments this backward integration with India’s largest network of sales and service locations – more than 5 times its nearest MNC competition. With basic customs duty down to zero on microprocessors, hard disks etc., the price gap between organized and unorganized segments has shrunk, benefiting HCLI. 59% of the commercial market is still gray, and hence there remains immense potential for growth. PC Manufacturing:
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PC manufacturing plants are located at Pondicherry, which gives following strategic advantages: • Proximity to Chennai port and proximity to vendors • Tax benefits • Established outward transport network • Economical & skilled labour Having an annual capacity of over 300,000 units, it is more than geared up to meet the company’s current & future demand for Desktop PCs & Servers. Its manufacturing facilities are versatile & adaptable, and can very quickly scale up the production or shift the emphasis from one model to another. The manufacturing facilities were first in India to get ISO 9001-2000 certification, validating the excellent quality processes that go in the design & manufacturing of its Desktop PCs & Servers. Relationships & Base of Executed projects Strong relationships with customers, principals and associates have helped HCLI attain the leadership status that it enjoys today. The company gets access to global best practices and a head start in technology due to strong relationships with its principals. They use this strategic edge to launch new technology ahead of competition in India. Some recent examples are – Pentium 4 based Desktop PC at sub Rs.40, 000 price, Media Center PC in partnership with Microsoft and currently Rs.10000 Pc. HCLI enjoy considerable market share in segments like Government, Banking & Finance and Education & Research. It has created credibility with its customers that have consistently resulted in repeat business. It has rate contracts with– NIC, Punjab National Bank, DGS & D, NICSI, ONGC, Punjab & Sind Bank. Some recent large orders bagged by us on the enterprise front are from Canara Bank, Asian Paints, Andhra Bank, South Central Railways, BSNL, ITC and Assam Electronics Development Corporation LTD (AMTRON), Dept. of Posts - DGS & D, SBI, Corporation Bank, Syndicate Bank, State Bank of Maharashtra, Indian Overseas bank, High Court (Madras), Sahara India Parivar,
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Asian Paints, Hindustan Aeronautics LTD, Institute of Chartered Accountants of India and Andhra Bank. Distribution Network: HCLI recognized early the advantages of having a distribution network. Their channel is a balanced mix of retail outlets, resellers & distributors.
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CHAPTER 4
ANALYSIS AND
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INTERPRETATION
Profile of the Respondents:
The pie charts and bar graphs below indicates the profile of the 150 respondents that were surveyed:
Age wise profile of the respondents
40-60 Years 20.0% 18-25 Years 33.3%
25-40 Years 46.7%
Gender wise profile of the customers
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Female 33.3%
Male 66.7%
Income profile of the respondents
70
60
60
50
40
40
30
30
20
20
10 8K-10K 10K-20K 20K-40K 40K and Above
Family Income
Occupation profile of the respondents
25
70
60
60
50
50
40
30
20
20
20
10 Governm ent Job Working in P Sec vt Ow n Business Student
Occupation
Total market share of different PC/Laptop brands
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Others/Assembled 9.1%
HP 45.5% HCL 36.4%
IBM/Lenovo 9.1%
From the pie chart it is very clear that majority (45.5 percent) of the total respondents own a computer from Hewlett Packard, followed closely by HCL Infosystems (36.4 percent). Thus, HP was found to be a leader in consolidated market share of PC and Laptops in Meerut city.
Satisfaction level of the customers of different brands:
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100 90 80
20
100
75
100
80
Count
70 60 50 40 30 20 10 0 HP IBM/Lenovo HCL Others/Assembled 25 No Yes
Satisfied
Satisfaction level of Customers
As is evident from the graph HP and IBM top the charts in terms of customer satisfaction. IBM leads the market in terms of customer satisfaction with 100 percent, followed by HP, which had 80 percent satisfied customers.
Major reason of dissatisfaction
28
70
60
60
50
Percent
40
40
30
20
10 0 Poor Service Poor performance
Reason for Dissatisfaction
The major reason for dissatisfaction is as shown in the graph above. The major reason for dissatisfaction is poor service (60 percent) and poor performance (40 percent).
Company offering best sales promotion offer
29
100 90 80 70 60 50 40 30 20 10 0
36
25
25 18 50 HCL Acer IBM/Lenovo Zenith HP User Non User
9 36
User/Non User
From the bar chart it can be ascertained that majority of the users believe that HCL gives best offers (36 percent) whereas majority of non-users believe that IBM offers best sales offers. This can be attributed to the aggressive sales promotion strategies adopted by HCL in the PC segment and in laptop and server segment by IBM.
Sales promotion offers best communicated through
30
100 90 80 70 60 50 40 30 20 10 0
36
50
64 25
Television 25 Magazine New spaper User Non user
User/Non User
As is evident from the graph majority of users (100 percent) and non-users seek Magazines and Newspapers for getting information about latest sales promotion offers. This gives an insight that the media that can be effective in conveying sales promotion offers is print media (magazines and newspapers). If we look at another feature that has been brought out by the survey is the fact that majority of people buy by looking at a feature in newspaper. This can be concluded from the fact that 64 percent of the buyers are those who seek information from Newspaper while purchasing a PC/Laptop.
Test of Hypotheses
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For the first hypothesis it is very evident from the graph that majority of those who bought did so during a sales promotion offer
80 73 60
Percent
40
27 20
0 Yes No
Prompted By Offer
100 90 80 70 60 50 40 30 20 10 0
38
67
63
Awareness gained thr
33 Television Magazine New spaper Yes No
Prompted By Offer
Majority of those who were prompted by the sales offers did were either prompted by a Newspaper ad (63 percent) or an ad in the magazine (38 percent).
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This is also the hypothesis of the study, which can be proved through the following chi-square statistics. Z0: Null Hypothesis: Majority of buyers, do not get information regarding the sales promotion offers through newspapers or magazines Za: Alternate Hypothesis: Majority of buyers, do get information regarding the sales promotion offers through newspapers or magazines
Prompte d By Offe r * Aware ne ss gaine d through Crosstabulation Count Awareness gained through 1.00 2.00 3.00 50 30 10 20 60 30 20 Total 80 30 110
Prompted By Offer Total
1.00 2.00
Chi-Square Te sts Asymp. Sig. (2-sided) 2 2 1 .000 .000 .000
Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 67.986 74.842 33.369 110
a
df
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 5.45.
From the statistics it is clear that the null hypothesis can be rejected and the alternate hypothesis can be selected. This proves the hypothesis that majority of buyers; do get information regarding the sales promotion offers through newspapers or magazines. This is a true occurrence and not a chance occurrence.
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The most successful offer
60 55 50 45 40
Percent
30
20
10
0 Price Discounts Freebies
Offers availed
From the bar chart we can ascertain that majority (55 percent) of those who bought a computer/laptop when there was a sales promotion offer did so by getting attracted to “Price Discounts”. Freebies or free gift offers were also quite successful in raking in customers to buy. Thus it can be said that price discounts are a hot favourite amongst buyers of IT products and services as an incentive to buy.
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The most effective sales promotion tool for potential customers
50 47 40
30 27 20
Percent
10
13
13
0 Alw ays Sometimes Can't Say Never
Price Discounts
74 percent of the respondents were positive about buying when there was a price discount offer, whereas 72 percent were positive about buying when there was a freebie attached to the offer.
35
40 36 30 36
Percent
20 18
10 9
0 Alw ays Sometimes Can't Say Never
Freebies
Dealer Influence while buying computer/IT products
70 67 60
50
Percent
40
30
20
20 13
10 0 Alw ays Sometimes
Never
Dealer Influence
From the graph we can interpret that 67 percent of the total respondents feel that the dealer always influences them when they buy a computer or IT product. Again from the next graph we can say that majority of those who bought
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during sales offer (63 percent) believe that their purchase decision was influenced by the dealer.
100 90 80
38
100
Count
70 60 50 40 30 20 10 0 Yes No Sometimes Alw ays 63
Dealer Influence
Prompted By Offer
Reason why computer/laptop/IT product is bought/upgraded Change in Technology
37
100 90 80 70
36
25
25 36
Count
60 50 40 30 20 10 0
Change In Technology
50 Disagree 27 Cant Say Agree Strongly Agree Yes No
User/Non User
From the graph we can say that IT product users are divided over whether Change in technology is a reason for them to upgrade their computers. On the contrary, for the first time buyers, change in technology is a definite reason to buy (50 percent strongly agree). This shows that change in technology is a factor highly considered by non-users who are planning to buy soon.
On Requirement Basis
38
100 90 80 70 60
45
25
50
Count
50 40 30 20 10 0
27
On requirement basis
Strongly Disagree Disagree
9 18
25
Cant Say Agree Strongly Agree
Yes
No
User/Non User
Majority of users and non-users (45 percent and 50 percent) disagree to the fact that mandatory requirement is a reason to by or upgrade the PC/laptop. This ascertains that mandatory requirements at workplace for upgrading or buying are not a strong reason to buy/upgrading a PC/laptop at home.
Promotional offers an incentive to buy
39
100 90 80 70
36
25
50 64
Count
60 50 40 30 20 10 0
Promotional Offers
Cant Say 25 Agree Strongly Agree Yes No
User/Non User
As evident from the graph both users and non-users find “Promotional Offers” a strong reason to buy a computer/laptop. Thus it is quite clear that promotional offers are a definite incentive to buy for the customers.
40
Discriminant Analysis for the most important attribute
Standardized Canonical Discriminant Function Coefficients Function 1
Importance of Good and Timely Service Importance of Sales Offers and Discounts Importance of Upgradability Importance of Configuration Importance of Ease of operation Importance of low entry price
-1.035193899 1.680696063 -0.185269039 0.350950629 1.513428467 -1.310721451
Functions at Group Centroids
User/Non user Function
1 2
-1.180252757 3.245695081
Perceptual Map for the most important attribute for a computer/laptop
41
4 -1.180252757 3 2 1 0 -2 -1 -1 -2 0 1 1 Importance of Sales Offers and Discounts
Importance of Ease of opertaion
Series1 Series2
Importance of Configuration Importance of Upgradability 2 4 Importance of 3 Good and Timely Service 5 6 7
Importance of low entry price
From the Discriminant Analysis and Perceptual map we can say that for the User group the most important attribute is “Good and timely service” and for the non user group the most important attribute is “Sales offers and discounts”.
Discriminant analysis for Brand Image
Standardized Canonical Discriminant Function Coefficients Function
Increases Awareness About the Product Increases Sales Increases Visibility of the Brand Makes it easier to choose one Brand from other Increases Confidence
1 -0.15095213 0.880789241 -1.28495582 0.53772549 -0.05717728
42
Makes you buy more
Functions at Group Centroids
0.703468368
Function
User/Non User
1 1 -0.4800446 2 1.320122651 Unstandardized canonical Discriminant functions evaluated at group means
Perceptual Map for Brand Image
2.5 2 1.5 1.320122651 1 0.5 0 -1 -0.5 -1 -1.5 -1.284955818 0 1 -0.150952135 2 2
0.880789241 0.53772549
0.703468368 Series1 Series2 7
3
4
5
-0.057177278 6
From the Discriminant analysis and the subsequent perceptual map we can say that Users attribute “Increase in sales” as the impact of the Sales Promotion offers. Whereas the non-users attribute “Increase in the awareness of the Product offerings” as the new impact of the Sales promotion offers from a company. This makes it clear that none of the groups consider Sales promotion as a factor that improves the brand image of a Brand.
43
CHAPTER 5
44
FINDINGS AND CONCLUSION
From the Analysis of the results and based on the objectives of the study the following findings can be ascertained:
Major Findings
Impact on purchase decision
45
? Majority of those who have bought a PC/laptop and are planning to buy consider “Promotional offer” as a definite incentive to buy. ? People who have already bought a PC/laptop have done so during a “Promotional Offer ? Non-users consider sales and promotion offer as the most important attribute for buying a computer/laptop Impact on Brand Image ? Majority of users believe that the only impact Promotional Offer has on the Brand is “Increase its sales” ? Majority of the non-users believe that Promotional Offers increase the “Awareness about the product offering” of the brand. ? The Brand Image is not enhanced by using “Promotional Offers” and they only serve as a tool for increasing the awareness or sales of a brand as ascertained from the survey
Minor Findings ? The market share of the Hewlett Packard (HP) brand of computers/laptops is the highest in Meerut, followed closely by HCL Infosytems in retail segment.
46
? IBM (International Business Machines) leads the pack in terms of customer satisfaction followed by Hewlett-Packard (HP). ? Major reason for dissatisfaction among existing customers is “Poor Service”. ? Majority believes that HCL Infosystems has the best “Promotional Offers” among all the players existing in the market. ? The most successful offers are “Price discounts” and “Freebies”, thus people look for monetary incentives are most sought after deals while buying an IT product. ? Majority of those who buy in a sales promotion offer do so by looking at a featured advertisement in a magazine or a newspaper. ? People look for information on what to buy (IT Products) from newspapers and magazines the most
Conclusion
From these findings it can be ascertained that Sales promotion offers provide a definite incentive to buy, but their impact on the Brand Image of an IT product is still debatable. These findings give an indication that “Promotional
47
Offers” can be used for increasing the short-term gain but their application in building brand image over a long term is limited. Promotional tools that are most successful are hence those which incentivise the customer immediately like price discounts. Again from the minor findings we can ascertain that Print Media the best media for communicating promotional offers, as this is the medium in which people seek information while they are in the “Information Search” mode of the consumer buying process. For the companies who seek to increase customer satisfaction can do so by improving their “After Sales Service” or else there might be some amount of dissonance in the mind of the customer.
48
CHAPTER 6
SUGGESTIONS AND RECOMMENDATIONS
49
From the survey many vital points were bought out in the forefront which if implemented can help companies to improve their brand image. Many companies have used promotional offers over the last decade and the proportion of promotional offer budget as a percentage of the total combined budget has been ever rising. This can be attributed to the short-term performance pressure on the product managers. But this tool should be used with caution as Promotional Offers do little to build the brand image of the product or the company in the long term. Thus, more long-term approach to marketing is Advertising and not Promotional Offers. Again as can be ascertained from the survey, most sought after promotional offers are those in which the customer gets instant incentives like Price discounts or Freebies. This can have its positives and negatives. This gives the manufacturer the ability to experiment with different price bands to ascertain price flexibility of the customers and also to deal with demand supply fluctuations effectively on the positive side. But on the negative side of it the customer will start discounting the product as inferior in quality, and also this increases the dissonance of the customers who have already bought from the manufacturer. Thus, price discounts can be effective tool for raking in the moolah but it has to be used with a word of caution and not excessively as it has many a flip sides attached to it. Information search stage for a customer buying an IT product is very extensive and serious search takes place before buying. The information regarding such products should hence are better placed in media which has higher amount of involvement. Thus print media is best suited for placing advertisements or features for the products of this nature.
50
CHAPTER 7
APPENDIX
51
QUESTIONNAIRE
Dear Respondent, We are conducting a survey on Sales Promotional Offers in IT products. This survey would help us in serving you better. Please fill the questionnaire with due care and attentiveness and to the best of your knowledge to help us gauge your likes and dislikes. The questionnaire has instructions to facilitate you while filling up the questionnaire. Please feel free to ask though, wherever necessary. 1) Do you own a computer/notebook? Yes [ ] No [ ] If No then go to: Qn No 9 2) Which brand of computer/notebook do you own? HP [ ] Zenith [ ] IBM/Lenovo [ ] Acer [ ] HCL [ ] Others [ ] 3) Was there any offer which prompted you to buy a computer? Yes [ ] No [ ] 4) How did you know about the type of computer you are using right now? Newspaper [ ] Magazine [ ] Television [ ] Radio [ ] Friends and Family [ ] Others [ ] 5) What was the offer that you got when you bought your computer? Price discounts [ ] Extended Warranty [ ] Freebies [ ] Others [ ] 6) Do you think that you get influenced by sales offers while buying computers? Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 7) Are you satisfied with the computer you are using right now? Yes [ ] No [ ]
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8) if not satisfied what is the cause of your dissatisfaction? Poor service [ ] High maintenance costs [ ] Poor performance [ ] Unwanted features [ ] Other reasons [ ] 9) Are you planning to buy one? Yes [ ] No [ ] 10) What according to you is most important attribute for a computer? 10.1 Low entry price Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.2 Good and timely service Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.3 Upgradation Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.4 Configuration Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.5 Ease of operation Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.6 Sales offers and discounts Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 11) What sort of sales offers would you generally go for? 11.1 Price Discounts Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 11.2 Freebies Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 11.3 Extended Warranty Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ]
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11.4 Unrelated Offers Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 12) The basis of buying or upgrading your computer is 12.1 Change in Technology Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 12.2 On requirement basis Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 12.3 Sales and promotional offers Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 12.4 Predefined timeframes Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 13) Does this increase while there are offers? Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 14) Where do you get the information about the latest offers? Newspaper [ ] Magazine [ ] Television [ ] Radio [ ] Friends and Family [ ] Others [ ] 15) Does the dealer have influence while buying any type of computer or IT products? Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 16) Do you think that sales promotion offers has following impact on the brand you use? 16.1 Increases awareness about the product Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.2 Increases its sales Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.3 Increases the visibility of the brand Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]
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16.4 Makes it easier to choose one brand from the other Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.5 Makes you more confident about selecting the brand Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.6 Makes you buy more than what you want Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 17) Which company do you think has the best sales offers? HCL [ ] HP [ ] IBM/Lenovo [ ] Acer [ ] Zenith [ ] Others [ ] 18) Personal Details 18.1 Age 18-25 [ ] 40-60 [ ] 18.2 Gender Male [ ] 25-40 [ ] 60 and above [ ] Female [ ] 10K - 20 K[ ] 40K and above [ ] Working in private sector [ ] Retired [ ]
18.3 Family Income 8 K - 10 K [ ] 20K - 40K [ ] 18.4 Occupation Government Job [ ] Own Business [ ] Student [ ]
Thanks for filling up the questionnaire and for your valuable time. Have a great day!!!!
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BIBLIOGRAPHY
1. From Robert C Blattberg and Scott A. Neslin, Sales Promotion
Concepts and Methods, and Strategies, (Prentice Hall, 1990).
2. Roger A. Strang, Sales Promotion: Fast Growth: Faulty Management,
Harvard Business Review (July-August 1976) 116-19.
3. Paul W. Farris and John A. Quelch, In defense of Price Promotion,
Sloan Management Review (Fall 1987): 63-69.
4. Robert
George Brown, Sales Response to Promotions and
Advertising, Journal of Advertising Research (August 1974) 36-37. Also see Carl F. Mela, Sunil Gupta, and Donald R Lehmann, The Long-Term Impact of Advertising and Consumer Brand Choice, Journal Of Marketing Research (May 1997):248-61; Purushottam Papatla and Lakshman Krishnamurti, Measuring the Dynamic effects of Promotions on Brand Choice, Journal of Marketing Research (February 1996); 20-35; Kandel Jedidi, Carl F. Mela, and Sunil Gupta, Managing Advertising and Promotions for Long-Run Profitability, Marketing Science, 18(1), (1999): 1-22.
5. F. Kent Mitchel, Advertising/Promotion Budgets: How did We get
Here, and What do We Do Now, Journal of Consumer Marketing (Fall 1985): 405-47. 6. David B. Jones, Setting Promotional Goals: A Communication Relationship Model, Journal of Consumer Marketing 11, no.1 (1994): 38-49.
7. John C. Totten and Martin p. Block, Analyzing Sales Promotion: Text
and cases, 2nd Ed. (Chicago: Dartnell, 1994) pp. 69-70.
56
8. Paul W. Farris and Kusum L. Ailawadi, Retail Power: Monster or Mouse, Journal Of Retailing (Winter 1992): 351-69.
57
doc_471837848.pdf
The report describing on promotional strategy followed by HCL.
Executive Summary
HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with its origins in 1976. For over quarter of a century, the company have developed and implemented solutions for multiple market segments, across a range of technologies in India. With sound macro economic condition and buoyant buying sentiment in the market, the desktop PC market grossed 23.4lc units, registering a growth of 36% over the same period last year. The notebook PC segment was the star performer, showing massive growth, 60% sequentially and 138% year-on-year and crossing the one lakh barrier. This can be attributed to strong domestic growth in requirements and aggressive sales promotion offers by the players like HP, Lenovo, and HCL among others. Again brand recognition and image play a very important role in purchase decisions. Brand managers of IT products, to increase the short-term gains and keep the cash registers ticking have started using aggressive sales promotion offers. The objective of the project was to find out whether people actually buy because of the sales offers incentives and whether they actually feel that sales promotions are an effective brand-building tool also. Also some of the insights on how to best place an effective Sales promotion program have been unleashed. The research brings out the fact that people do buy because of the sales promotion offers, but the impact promotional offers have on the Brand Image of the company offering such promotions is negligible. Thus sales promotion offers are a definite incentive to buy for a customer but they do not guarantee a longterm relationship with the customer and hence a Brand Manager must use such offers with a pinch of salt.
1
CHAPTER 1
THEORETICAL BACKGROUND OF THE STUDY
2
Sales Promotion
Sales promotion, a key ingredient in marketing campaigns, consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.1 Whereas advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer promotion (samples, coupons, cash refund offers, process off, premiums, prizes, patronage rewards, free trials, warranties, tie-in promotions, cross-promotions, point-ofpurchase displays, and demonstrations); trade promotion (prices off, advertising and display allowances, and free goods); and sales force promotions (trade shows and conventions, contest for sales reps, and specialty advertising). These tools are used by most organizations, including non-profit organizations. Churches, for example, often sponsor bingo games, theatre parties, testimonial dinners and raffles. A decade ago, the advertising to sales-promotion ratio was about 60:40. Today, in many consumer packaged-good companies, sales promotion accounts for 65 to 75 percent of the combined budged. Sales promotion expenditures have been increasing as a percentage of combined budget expenditure annually for the last two decades. Several factors contribute to this rapid growth, particularly in the consumer markets.2 Promotion is now more accepted by the top management as an effective sales tool; more product managers are qualified to use sales-promotion tools; and product managers are under pressure to increase current sales. In addition, the number of brands has increased; competitors use promotions frequently; many brands are seen as similar; consumers are more price-oriented; the trade has demanded more deals from the manufacturers; and the advertising efficiency has declined because of rising costs, media clutter, and legal restraints. The rapid growth of sales-promotion media has created clutter similar to the advertising clutter. Manufacturers have to find ways to rise above the clutter3
for instance, by offering larger coupon-redemption values or using more dramatic point-of purchase displays and demonstrations.
Purposes of Sales promotion
Sales-promotion tools vary in their specific objectives. A free sample stimulates consumer trial, whereas a free management-advisory service aims at cementing long-term relationship with a retailer. Sellers use incentive-type promotion to attract new triers, to reward loyal customers, and to increase the repurchase rates of the occasional users. Sales promotion often attracts brand switchers, who are primarily looking for low price, good value, or premiums. Sales promotions are unlikely to turn them into loyal users. Sales promotions used in markets of high brand similarity produce a high sales response in the short term but little permanent gain in the market share. In markets of high dissimilarity, sales promotion can alter market shares permanently. Farris and Quelch cite a number of sales promotion benefits flowing to manufacturers and consumers.3 Sales promotion enable manufacturers to adjust to short-term variations in supply and demand. They enable manufacturers to test how high a list price they can charge, because they can always discount it. They induce the customers to try new products instead of never straying from current ones. They lead to more varied retail formats, such as every-day-low-price store and the promotional-pricing store. They promote greater consumer awareness of prices. They permit manufacturers to sell more than they would sell at list price. They help the manufacturer adapt programs to different consumer segments. Consumer themselves enjoy some satisfaction from being smart shoppers when they take advantage of price specials. Today many marketing managers first estimate what they need to spend in trade promotion, then what they need to spend in consumer promotion. Whatever is left they will budget for advertising. There is danger, however, in letting advertising take a back seat, because advertising typically acts to build brand
4
loyalty. The question of whether or not sales promotion weakens brand loyalty is subject to different interpretations. Sales promotion, with its incessant prices off, coupons, deals and premiums, may devalue the product offering in the buyers’ minds. Buyers learn that the list price is largely a fiction. However, before jumping to any conclusion, we need to distinguish between price promotions and added-value promotions. However, usually, when a brand is price promoted too often, the consumer begins to devalue it and buy it mainly when it goes on sale. So there is risk in putting a well-known brand leader on promotion over 30 percent of time.() Dominant brands offer deals frequently, because most deals only subsidize current users. Brown’s study of 2,500 instant-coffee buyers concluded that: ? Sales promotions yield faster and more measurable responses in sales than advertising does. ? Sales promotions do not tend to yield new, long term buyers in mature markets because they attract mainly deal-prone consumers who switch among brands as deals become available. ? Loyal brand buyers tend not to change their buying patterns as a result of competitive promotion.
?
Advertising appears to be capable of deepening brand loyalty.4
There is also evidence that price promotions do not build permanent total category volume. Small share competitors find it advantageous to use sales promotion, because they cannot afford to match the market leaders’ large advertising budgets; nor can they obtain shelf-space without offering trade allowances or stimulate consumer trials without offering incentives. Price competition is used by small brand seeking to enlarge its share, but it is less effective for category leader whose growth lies in expanding the entire category.5 The upshot is that many consumer packaged goods companies feels that they are forced to use more sales promotions than they wish. They blame the heavy use of
5
sales promotion for decreasing brand loyalty; increasing consumer pricesensitivity; brand quality image dilution, and a focus on short-run-marketing planning.
Major decisions in Sales Promotions
In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results. Establishing the objectives Sales promotion objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. For consumers, objectives include encouraging purchase of larger-sized units, building trial among non-users, and attracting switchers away from competitors’ brands. For retailers, objectives include persuading retailers to carry new items and higher levels of inventory, encouraging stocking of related items, offsetting competitive promotions, building brand loyalty, and gaining entry into new retail outlets. For the sales force, objectives include encouraging support of a new product or model, encouraging more prospecting, and stimulating off-season sales. 6 See “Marketing Memo: Sales Promotions as brand builders.”)
6
Mar keting Memo:
S ales Pr omotions as br
and builder s
Building brand awareness is a long-term process. What a brand does today predicts what it will do tomorrow. Sales promotions are short term and temporary. Here are some of the tips on how to make a sale promotion an effective brand-building tool. ? Make sure the promotion is justified: A new store opening, a company anniversary, and other kinds of celebrations are all good reasons for running a promotion ? Tie the promotion to brand’s image: Birth dates and anniversaries are good ? Look at every both for the sales job it can do and as a communication tool: A promotion is one of a brand’s many voices; it can help build brand awareness if it says the right things Source: Adapted from Jacques Chevron, “Branding and Promotion: Uneasy combination.” Brand week, September 14, 1998, p.24
Selecting Consumer-promotion tools The promotion planner should take into account the type of the market, sales promotion objectives, competitive conditions, and each tool’s cost effectiveness. The main consumer promotion tools are summarized in the following table. We can distinguish between manufacturer promotions and retailer promotions. Sales promotions are most effective when used together with advertising. In one study, a price promotion alone produced 15 percent increase in sales volume. When combined with feature advertising, sales volume increased 19 percent; when combined with feature advertising and a point-of-purchase display, sales volume increased 24 percent.7
7
Major Consumer promotion tools:
Samples: Offer of a free amount of a product or service delivered door to door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer. Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific product; mailed, enclosed in other products or attached to them, or inserted in the magazine and newspaper ads. Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at retail shop; consumer sends a specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by mail. Price Packs (cents-off deals): Offers to consumer savings off the regular price of a product, flagged on the label or package. A reduce price pack is a single package sold at the reduce price (such as two for the price of one). A banded pack is two related products banded together (such as a toothbrush and toothpaste) Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. A with-pack premium accompanies the product inside or on the package. A free in-the-mail premium is mailed to the consumers who send a proof of purchase. A self-liquidating premium is sold below its normal retail price to consumers who request it. Frequency Programs: Programs rewarding the consumers whose frequency and intensity in purchasing the company’s products and services is higher. Prizes (Contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips, or merchandise as a result of purchasing something. A contest calls consumers to submit an entry to be examined by panel of judges who will select the best entries. A sweepstake asks consumers to submit their names in a drawing. A game presents the consumers with something every time they buy to help them win prizes. Patronage awards: Values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors. Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they will buy. Product Warranties: Explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer’s money during a specified period. Tie-in promotions: Two or more brands or companies team up on coupons, refunds, and contests to increase the pulling power Cross-promotions: Using one brand to advertise another noncompeting brand. Point-of-purchase (POP) Displays and Demonstrations: POP displays and demonstrations take place at the point-of-purchase or sale
8
Selecting trade-promotion tools Manufacturers use a number of trade promotion tools. Surprisingly a higher percentage of promotion pie is devoted to trade promotion tools (46.9 percent) than to consumer promotion (27.9 percent), with media advertising capturing remaining 25.2 percent. Manufacturers use award money to the trade 1. To persuade the wholesaler or retailer to carry the brand; 2. Persuade the retailer or wholesaler to carry more units than the normal amount; 3. To induce the retailers to promote the brand by featuring, display, and price reductions and; 4. To stimulate retailers and their sales clerks to push the product. The growing power of large retailers has increased their ability to demand trade promotion at the cost of consumer promotion and advertising. 8 The different trade promotions are
Price off (off-invoice or off list): A straight discount off the list price on each case purchased during a stated time period. Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. An advertising allowance compensates the retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special product display Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size
Source: For more information, see Betsy Spethman, Trade Promotion Redefined, Brandweek, March 13, 1995, pp. 25-32 Selecting Business- and sales-force-promotion tools Companies spend billions of dollars on business-and sales-force-promotion tools as shown in the table. These tools are used to gather business leads, impress and reward customers, and motivate the sales force to greater effort. Companies
9
typically develop budgets for each business-promotion tool that remain fairly constant from year to year.
Trade Shows and Conventions: Industry associations organize annual trade sows and conventions. Business marketers may spend as much as 35 percent of their annual promotion budget on trade shows Sales Contests: A sales contest aims at including the sales force or dealers to increase their sales over a stated period, with prizes (money, trips, gifts or points) going to those who succeed Specialty Advertising: Specialty advertising consists of useful, low cost items bearing the company’s name and address, and sometimes an advertising message that salespeople give to prospects and customers. Common items are ballpoint pens, key chains, flashlights, tote bags, and memo pads.
10
CHAPTER 2
RESEARCH METHODOLOGY
11
Objectives of the survey
The main objective of the survey was to determine the impact of the sales promotion offers on the buying behaviour of consumers of IT products on the following factors: ? The effect on their purchase decision (whether or not the consumers are buying on the basis of promotional offers) ? The brand image of the brand offering the sales promotion (does it increase or decrease) There were also a few secondary objectives of the survey, which included ? What are the sales promotion tools that are most likely to spur a purchase decision ? Whether enlarging the existing customer segments is possible through sales promotions ? What is the media that is most suitable to communicate the sales promotion offers to the consumers The hypotheses for the survey were: ? People who have bought the computers/notebooks have done so mainly during sales promotion offers ? Majority of the buyers who bought during sales offers got the information regarding the same from either a newspaper or a magazine
12
Research Design: The study used an exploratory research design and was conducted for the period of 14th November 2005 to 21st January 2006 Data Collection a) Primary Data: Through survey using structured questionnaire. b) Secondary Data: Company resources Area of Study: Meerut City in the state of Uttar Pradesh, which is the education hub of Western Uttar Pradesh Period of Study: 60 days.
Sampling Plan
Sample Design The sample was selected on the basis of pre-qualifying question as to whether the respondent is an existing PC/notebook user or whether he is planning to buy one in future so that the respondents can be grouped into two categories (whose opinion was vital for the survey): ? Users (73 percent) and ? Perspective buyers (27 percent)
13
80 73
60
Percent
40
27 20
0 User P ers. Buyer
User/Perspective Buyer
Sampling Technique The formulae used for calculating sample size was: ? (1- ?) x Z 2
n =
__________________
D2 Where, n = the sample size selected for the study ? = the proportion of the total population that is expected to have the required characteristics (i.e. The proportion of the total population that either uses a computer/notebook or is planning to buy one soon) Z = the amount of accuracy that is allowable (95 percent accuracy) D = the amount of deviation from standard that can be allowed (1.96 standard deviations) On the basis of the demographic data available for Meerut city the value of “?” was ascertained at 0.010 that is 10 percent of the total population of Meerut has either bought or is planning to buy computers/notebooks.
14
The values of “Z” and “D” are ascertained by statisticians and are a standard. The value of “n” was ascertained as 150 (approximately) for the study. In order to have a representative sample for the survey, using techniques such as mall intercepts random sampling was done.
Data Analysis: The data analysis was done using SPSS® software; the data was analyzed using the following statistical methods: 1) Factor Analysis 2) Discriminant Analysis 3) Perceptual Mapping 4) Regression Analysis
Limitations of the study:
There are a few limitations to the study that may arise due to the following reasons:
1) Sampling plan: The sampling is done through random sampling; generally
through mall intercept interviews, which might distort the results but not to a very great extent.
2) The Area of study: Meerut city might not hold good as a representative for
the whole of India and hence the survey is location specific.
15
CHAPTER 3
INDUSTRY AND COMPANY PROFILE
16
INDUSTRY PROFILE:
The PC industry has been a leading driver of economic growth in the past three decades. The explosion in the use of computers in businesses has been driven by the need to modernize work processes and boost productivity, while the Internet, entertainment and other digital applications were among the primary drivers of PC adoption in the consumer market. In India, the home PC market segment is supplied by three distinct kinds of manufacturers. One; you have global companies like HP and Compaq along with many players. Two; there are the Indian brands like Wipro and HCL. And three; is the sea of kitchen tabletop PC assemblers who sell their unbranded machines at super-low prices. This last category of unbranded machines is often referred to as the 'gray market' and it has the majority share of the home PC market. It is followed by Indian brands and lastly by the multinational brands. The Indian personal computer industry witnessed a year-on-year growth of 32 per cent to 12-lakh units in the July-September quarter of 2005, an 11-per cent increase over the previous quarter AMJ (17th November 05). In the consumer desktop category HCL led over HP, with LG following the market leaders at the third slot. In the overall client PC (notebooks and desktops) market, HP retained its top slot with a sequential increase of 19% and a year-onyear 45% growth. HCL continued to stay at second position, with a 40% year-onyear growth, while Lenovo occupied the third position.
Current Market Trends
17
With sound macro economic condition and buoyant buying sentiment in the market, PC sales in India are expected to touch 47 lakh units in Fiscal 2005-2006, according to MAIT’s Industry performance review for the first half of the FY 2005-06. The desktop PC market grossed 23.4lc units, registering a growth of 36% over the same period last year. The MAIT-IMRB review reveals that PC sales to the business segment improved by 55% accounting for 78% of the total PC consumption. In the households, while the sales were 5.10 lac units, the sector witnessed a decrease of 5% over the same period last year. Assembled PCs witnessed decline in market share, accounting for 34% of the PC sales in H1/2005-06. The share of the Indian brands grew to account for 31% of the market while the MNC brands accounted for the rest at 35%. The notebook PC segment was the star performer, showing massive growth, 60% sequentially and 138% year-on-year and crossing the one lakh barrier. Centrino-based notebooks constituted two-thirds of the total shipments. In terms of market rankings, HP stayed at the top, followed by Lenovo and Acer (IDC report). In H1/2005-06, about 16,000 notebooks were sold to the households segment accounting for 13% of the total market (MAIT report). The server market registered a growth of 56% over the first half of the fiscal riding on high consumption in the medium establishments where sales increased by 258%. Overall Printer sales grew by 43% over that in H1 2004-05 on YoY basis. The UPS market grew by 16% over H1 of 2004-05. The growth in the industry can be summarized in the following table:
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The market was fueled by a strong demand from the notebook and consumer desktop markets. Consistent fall in notebook prices led to a growth in this market. In this situation Brand Image/brand perception plays a major role in purchase of the products. There were massive investments in the private educational sector that provided the momentum for growth in this market. Notable among these were various management institutes and technical institutions.
COMPANY PROFILE
HCL's history goes to 1975 when six entrepreneurs-Shiv Nadar and five of his associates-decided to create a computer systems and services business in India. They faced many initial challenges and despite the lack of venture capital available in India at that time, they opened their first office in the suburbs of New Delhi, naming their business “Hindustan Computers Ltd” in 1976. After eight years, HCL became the largest computer systems and services company in India. HCL under its Umbrella has four strategic Business units HCL technologies, Info systems, Comnet and HCL Infinity. An HCL Infosystem is mainly into systems marketing. Financial Overview The company has reported consolidated revenue of Rs 2284.5 crores (USD 523.7 Mn) during the quarter ended September 30, 2005 as against Rs 1579.5 crores (USD 362.1 Mn) in the corresponding quarter of the previous year, a growth of 45%.
HCL Infosystems
HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with its origins in 1976. For over quarter of a century, the company have developed and implemented solutions for multiple market segments, across a range of technologies in India. The company has been in the forefront in introducing new technologies and solutions for wide range of markets. HCL is the pioneer of low
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cost systems. The advantage of supplying customized products makes company scale new heights. HCL Infosystems (HCLI) draws it's strength from 29 years of experience in handling the ever changing IT scenario, strong customer relationships, ability to provide the cutting edge technology at best-value-for-money and on top of it, an excellent service & support infrastructure. Today HCL is country's premier information enabling company. It offers one-stop-shop convenience to its diverse customers having an equally diverse set of requirements. Be it a large multilocation enterprise, or a small/medium enterprise, or a small office or a home, HCLI has a product range, sales & support capability to serve. Last 29 years apart from knowledge & experience have also given HCLI continuity in relationship with the customers, thereby increasing the customer confidence. Companies’ strengths can be summarized as: ? Ability to understand customer's business and offer right technology ? Long-standing relationship with customers ? Pan India support & service infrastructure ? Best-vale-for-money offerings Alliances & Partnerships: To provide world-class solutions and services to all our customers, we have formed Alliances and Partnerships with leading IT companies worldwide. HCL Infosystems has alliances with global technology leaders like Intel, AMD, Toshiba, Ericsson, Microsoft, Nokia and Sun Microsystems, SAP, Scansoft, SCO, EMC, Veritas, Citrix, CISCO, Oracle, Computer Associates, RedHat, Infocus, Duplo, Samsung, Novell. These alliances on one hand give them access to best technology & products as well enhancing their understanding of the latest in technology. On the other hand
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they enhance company’s product portfolio, and enable HCLI to be one stop shop for its customers. Core Values: The company shall uphold the dignity of the individual, It shall honor all commitments, It shall be committed to Quality, Innovation and Growth in every endeavor, It shall be responsible corporate citizens.
Products and solutions
HCL Infosystems' portfolio of products covers the entire spectrum of the information technology needs of its customers. By virtue of the immense diversity of markets and customers that it addresses, HCL Infosystems' products offerings include everything from high-end enterprise level servers for mission critical applications to multimedia home computers. The product portfolio consists of: ? Business ? PCs Home PCs ? Infiniti Powerlite Notebooks HCLI has 6 manufacturing facilities with an annual capacity of over 300,000 PCs, plus production of Servers, Color monitors, Terminals, Keyboards, racks and cabinets. Some of these facilities enjoy tax benefits for another 2-3 years. The company augments this backward integration with India’s largest network of sales and service locations – more than 5 times its nearest MNC competition. With basic customs duty down to zero on microprocessors, hard disks etc., the price gap between organized and unorganized segments has shrunk, benefiting HCLI. 59% of the commercial market is still gray, and hence there remains immense potential for growth. PC Manufacturing:
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PC manufacturing plants are located at Pondicherry, which gives following strategic advantages: • Proximity to Chennai port and proximity to vendors • Tax benefits • Established outward transport network • Economical & skilled labour Having an annual capacity of over 300,000 units, it is more than geared up to meet the company’s current & future demand for Desktop PCs & Servers. Its manufacturing facilities are versatile & adaptable, and can very quickly scale up the production or shift the emphasis from one model to another. The manufacturing facilities were first in India to get ISO 9001-2000 certification, validating the excellent quality processes that go in the design & manufacturing of its Desktop PCs & Servers. Relationships & Base of Executed projects Strong relationships with customers, principals and associates have helped HCLI attain the leadership status that it enjoys today. The company gets access to global best practices and a head start in technology due to strong relationships with its principals. They use this strategic edge to launch new technology ahead of competition in India. Some recent examples are – Pentium 4 based Desktop PC at sub Rs.40, 000 price, Media Center PC in partnership with Microsoft and currently Rs.10000 Pc. HCLI enjoy considerable market share in segments like Government, Banking & Finance and Education & Research. It has created credibility with its customers that have consistently resulted in repeat business. It has rate contracts with– NIC, Punjab National Bank, DGS & D, NICSI, ONGC, Punjab & Sind Bank. Some recent large orders bagged by us on the enterprise front are from Canara Bank, Asian Paints, Andhra Bank, South Central Railways, BSNL, ITC and Assam Electronics Development Corporation LTD (AMTRON), Dept. of Posts - DGS & D, SBI, Corporation Bank, Syndicate Bank, State Bank of Maharashtra, Indian Overseas bank, High Court (Madras), Sahara India Parivar,
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Asian Paints, Hindustan Aeronautics LTD, Institute of Chartered Accountants of India and Andhra Bank. Distribution Network: HCLI recognized early the advantages of having a distribution network. Their channel is a balanced mix of retail outlets, resellers & distributors.
.
CHAPTER 4
ANALYSIS AND
23
INTERPRETATION
Profile of the Respondents:
The pie charts and bar graphs below indicates the profile of the 150 respondents that were surveyed:
Age wise profile of the respondents
40-60 Years 20.0% 18-25 Years 33.3%
25-40 Years 46.7%
Gender wise profile of the customers
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Female 33.3%
Male 66.7%
Income profile of the respondents
70
60
60
50
40
40
30
30
20
20
10 8K-10K 10K-20K 20K-40K 40K and Above
Family Income
Occupation profile of the respondents
25
70
60
60
50
50
40
30
20
20
20
10 Governm ent Job Working in P Sec vt Ow n Business Student
Occupation
Total market share of different PC/Laptop brands
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Others/Assembled 9.1%
HP 45.5% HCL 36.4%
IBM/Lenovo 9.1%
From the pie chart it is very clear that majority (45.5 percent) of the total respondents own a computer from Hewlett Packard, followed closely by HCL Infosystems (36.4 percent). Thus, HP was found to be a leader in consolidated market share of PC and Laptops in Meerut city.
Satisfaction level of the customers of different brands:
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100 90 80
20
100
75
100
80
Count
70 60 50 40 30 20 10 0 HP IBM/Lenovo HCL Others/Assembled 25 No Yes
Satisfied
Satisfaction level of Customers
As is evident from the graph HP and IBM top the charts in terms of customer satisfaction. IBM leads the market in terms of customer satisfaction with 100 percent, followed by HP, which had 80 percent satisfied customers.
Major reason of dissatisfaction
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70
60
60
50
Percent
40
40
30
20
10 0 Poor Service Poor performance
Reason for Dissatisfaction
The major reason for dissatisfaction is as shown in the graph above. The major reason for dissatisfaction is poor service (60 percent) and poor performance (40 percent).
Company offering best sales promotion offer
29
100 90 80 70 60 50 40 30 20 10 0
36
25
25 18 50 HCL Acer IBM/Lenovo Zenith HP User Non User
9 36
User/Non User
From the bar chart it can be ascertained that majority of the users believe that HCL gives best offers (36 percent) whereas majority of non-users believe that IBM offers best sales offers. This can be attributed to the aggressive sales promotion strategies adopted by HCL in the PC segment and in laptop and server segment by IBM.
Sales promotion offers best communicated through
30
100 90 80 70 60 50 40 30 20 10 0
36
50
64 25
Television 25 Magazine New spaper User Non user
User/Non User
As is evident from the graph majority of users (100 percent) and non-users seek Magazines and Newspapers for getting information about latest sales promotion offers. This gives an insight that the media that can be effective in conveying sales promotion offers is print media (magazines and newspapers). If we look at another feature that has been brought out by the survey is the fact that majority of people buy by looking at a feature in newspaper. This can be concluded from the fact that 64 percent of the buyers are those who seek information from Newspaper while purchasing a PC/Laptop.
Test of Hypotheses
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For the first hypothesis it is very evident from the graph that majority of those who bought did so during a sales promotion offer
80 73 60
Percent
40
27 20
0 Yes No
Prompted By Offer
100 90 80 70 60 50 40 30 20 10 0
38
67
63
Awareness gained thr
33 Television Magazine New spaper Yes No
Prompted By Offer
Majority of those who were prompted by the sales offers did were either prompted by a Newspaper ad (63 percent) or an ad in the magazine (38 percent).
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This is also the hypothesis of the study, which can be proved through the following chi-square statistics. Z0: Null Hypothesis: Majority of buyers, do not get information regarding the sales promotion offers through newspapers or magazines Za: Alternate Hypothesis: Majority of buyers, do get information regarding the sales promotion offers through newspapers or magazines
Prompte d By Offe r * Aware ne ss gaine d through Crosstabulation Count Awareness gained through 1.00 2.00 3.00 50 30 10 20 60 30 20 Total 80 30 110
Prompted By Offer Total
1.00 2.00
Chi-Square Te sts Asymp. Sig. (2-sided) 2 2 1 .000 .000 .000
Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 67.986 74.842 33.369 110
a
df
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 5.45.
From the statistics it is clear that the null hypothesis can be rejected and the alternate hypothesis can be selected. This proves the hypothesis that majority of buyers; do get information regarding the sales promotion offers through newspapers or magazines. This is a true occurrence and not a chance occurrence.
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The most successful offer
60 55 50 45 40
Percent
30
20
10
0 Price Discounts Freebies
Offers availed
From the bar chart we can ascertain that majority (55 percent) of those who bought a computer/laptop when there was a sales promotion offer did so by getting attracted to “Price Discounts”. Freebies or free gift offers were also quite successful in raking in customers to buy. Thus it can be said that price discounts are a hot favourite amongst buyers of IT products and services as an incentive to buy.
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The most effective sales promotion tool for potential customers
50 47 40
30 27 20
Percent
10
13
13
0 Alw ays Sometimes Can't Say Never
Price Discounts
74 percent of the respondents were positive about buying when there was a price discount offer, whereas 72 percent were positive about buying when there was a freebie attached to the offer.
35
40 36 30 36
Percent
20 18
10 9
0 Alw ays Sometimes Can't Say Never
Freebies
Dealer Influence while buying computer/IT products
70 67 60
50
Percent
40
30
20
20 13
10 0 Alw ays Sometimes
Never
Dealer Influence
From the graph we can interpret that 67 percent of the total respondents feel that the dealer always influences them when they buy a computer or IT product. Again from the next graph we can say that majority of those who bought
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during sales offer (63 percent) believe that their purchase decision was influenced by the dealer.
100 90 80
38
100
Count
70 60 50 40 30 20 10 0 Yes No Sometimes Alw ays 63
Dealer Influence
Prompted By Offer
Reason why computer/laptop/IT product is bought/upgraded Change in Technology
37
100 90 80 70
36
25
25 36
Count
60 50 40 30 20 10 0
Change In Technology
50 Disagree 27 Cant Say Agree Strongly Agree Yes No
User/Non User
From the graph we can say that IT product users are divided over whether Change in technology is a reason for them to upgrade their computers. On the contrary, for the first time buyers, change in technology is a definite reason to buy (50 percent strongly agree). This shows that change in technology is a factor highly considered by non-users who are planning to buy soon.
On Requirement Basis
38
100 90 80 70 60
45
25
50
Count
50 40 30 20 10 0
27
On requirement basis
Strongly Disagree Disagree
9 18
25
Cant Say Agree Strongly Agree
Yes
No
User/Non User
Majority of users and non-users (45 percent and 50 percent) disagree to the fact that mandatory requirement is a reason to by or upgrade the PC/laptop. This ascertains that mandatory requirements at workplace for upgrading or buying are not a strong reason to buy/upgrading a PC/laptop at home.
Promotional offers an incentive to buy
39
100 90 80 70
36
25
50 64
Count
60 50 40 30 20 10 0
Promotional Offers
Cant Say 25 Agree Strongly Agree Yes No
User/Non User
As evident from the graph both users and non-users find “Promotional Offers” a strong reason to buy a computer/laptop. Thus it is quite clear that promotional offers are a definite incentive to buy for the customers.
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Discriminant Analysis for the most important attribute
Standardized Canonical Discriminant Function Coefficients Function 1
Importance of Good and Timely Service Importance of Sales Offers and Discounts Importance of Upgradability Importance of Configuration Importance of Ease of operation Importance of low entry price
-1.035193899 1.680696063 -0.185269039 0.350950629 1.513428467 -1.310721451
Functions at Group Centroids
User/Non user Function
1 2
-1.180252757 3.245695081
Perceptual Map for the most important attribute for a computer/laptop
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4 -1.180252757 3 2 1 0 -2 -1 -1 -2 0 1 1 Importance of Sales Offers and Discounts
Importance of Ease of opertaion
Series1 Series2
Importance of Configuration Importance of Upgradability 2 4 Importance of 3 Good and Timely Service 5 6 7
Importance of low entry price
From the Discriminant Analysis and Perceptual map we can say that for the User group the most important attribute is “Good and timely service” and for the non user group the most important attribute is “Sales offers and discounts”.
Discriminant analysis for Brand Image
Standardized Canonical Discriminant Function Coefficients Function
Increases Awareness About the Product Increases Sales Increases Visibility of the Brand Makes it easier to choose one Brand from other Increases Confidence
1 -0.15095213 0.880789241 -1.28495582 0.53772549 -0.05717728
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Makes you buy more
Functions at Group Centroids
0.703468368
Function
User/Non User
1 1 -0.4800446 2 1.320122651 Unstandardized canonical Discriminant functions evaluated at group means
Perceptual Map for Brand Image
2.5 2 1.5 1.320122651 1 0.5 0 -1 -0.5 -1 -1.5 -1.284955818 0 1 -0.150952135 2 2
0.880789241 0.53772549
0.703468368 Series1 Series2 7
3
4
5
-0.057177278 6
From the Discriminant analysis and the subsequent perceptual map we can say that Users attribute “Increase in sales” as the impact of the Sales Promotion offers. Whereas the non-users attribute “Increase in the awareness of the Product offerings” as the new impact of the Sales promotion offers from a company. This makes it clear that none of the groups consider Sales promotion as a factor that improves the brand image of a Brand.
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CHAPTER 5
44
FINDINGS AND CONCLUSION
From the Analysis of the results and based on the objectives of the study the following findings can be ascertained:
Major Findings
Impact on purchase decision
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? Majority of those who have bought a PC/laptop and are planning to buy consider “Promotional offer” as a definite incentive to buy. ? People who have already bought a PC/laptop have done so during a “Promotional Offer ? Non-users consider sales and promotion offer as the most important attribute for buying a computer/laptop Impact on Brand Image ? Majority of users believe that the only impact Promotional Offer has on the Brand is “Increase its sales” ? Majority of the non-users believe that Promotional Offers increase the “Awareness about the product offering” of the brand. ? The Brand Image is not enhanced by using “Promotional Offers” and they only serve as a tool for increasing the awareness or sales of a brand as ascertained from the survey
Minor Findings ? The market share of the Hewlett Packard (HP) brand of computers/laptops is the highest in Meerut, followed closely by HCL Infosytems in retail segment.
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? IBM (International Business Machines) leads the pack in terms of customer satisfaction followed by Hewlett-Packard (HP). ? Major reason for dissatisfaction among existing customers is “Poor Service”. ? Majority believes that HCL Infosystems has the best “Promotional Offers” among all the players existing in the market. ? The most successful offers are “Price discounts” and “Freebies”, thus people look for monetary incentives are most sought after deals while buying an IT product. ? Majority of those who buy in a sales promotion offer do so by looking at a featured advertisement in a magazine or a newspaper. ? People look for information on what to buy (IT Products) from newspapers and magazines the most
Conclusion
From these findings it can be ascertained that Sales promotion offers provide a definite incentive to buy, but their impact on the Brand Image of an IT product is still debatable. These findings give an indication that “Promotional
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Offers” can be used for increasing the short-term gain but their application in building brand image over a long term is limited. Promotional tools that are most successful are hence those which incentivise the customer immediately like price discounts. Again from the minor findings we can ascertain that Print Media the best media for communicating promotional offers, as this is the medium in which people seek information while they are in the “Information Search” mode of the consumer buying process. For the companies who seek to increase customer satisfaction can do so by improving their “After Sales Service” or else there might be some amount of dissonance in the mind of the customer.
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CHAPTER 6
SUGGESTIONS AND RECOMMENDATIONS
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From the survey many vital points were bought out in the forefront which if implemented can help companies to improve their brand image. Many companies have used promotional offers over the last decade and the proportion of promotional offer budget as a percentage of the total combined budget has been ever rising. This can be attributed to the short-term performance pressure on the product managers. But this tool should be used with caution as Promotional Offers do little to build the brand image of the product or the company in the long term. Thus, more long-term approach to marketing is Advertising and not Promotional Offers. Again as can be ascertained from the survey, most sought after promotional offers are those in which the customer gets instant incentives like Price discounts or Freebies. This can have its positives and negatives. This gives the manufacturer the ability to experiment with different price bands to ascertain price flexibility of the customers and also to deal with demand supply fluctuations effectively on the positive side. But on the negative side of it the customer will start discounting the product as inferior in quality, and also this increases the dissonance of the customers who have already bought from the manufacturer. Thus, price discounts can be effective tool for raking in the moolah but it has to be used with a word of caution and not excessively as it has many a flip sides attached to it. Information search stage for a customer buying an IT product is very extensive and serious search takes place before buying. The information regarding such products should hence are better placed in media which has higher amount of involvement. Thus print media is best suited for placing advertisements or features for the products of this nature.
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CHAPTER 7
APPENDIX
51
QUESTIONNAIRE
Dear Respondent, We are conducting a survey on Sales Promotional Offers in IT products. This survey would help us in serving you better. Please fill the questionnaire with due care and attentiveness and to the best of your knowledge to help us gauge your likes and dislikes. The questionnaire has instructions to facilitate you while filling up the questionnaire. Please feel free to ask though, wherever necessary. 1) Do you own a computer/notebook? Yes [ ] No [ ] If No then go to: Qn No 9 2) Which brand of computer/notebook do you own? HP [ ] Zenith [ ] IBM/Lenovo [ ] Acer [ ] HCL [ ] Others [ ] 3) Was there any offer which prompted you to buy a computer? Yes [ ] No [ ] 4) How did you know about the type of computer you are using right now? Newspaper [ ] Magazine [ ] Television [ ] Radio [ ] Friends and Family [ ] Others [ ] 5) What was the offer that you got when you bought your computer? Price discounts [ ] Extended Warranty [ ] Freebies [ ] Others [ ] 6) Do you think that you get influenced by sales offers while buying computers? Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 7) Are you satisfied with the computer you are using right now? Yes [ ] No [ ]
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8) if not satisfied what is the cause of your dissatisfaction? Poor service [ ] High maintenance costs [ ] Poor performance [ ] Unwanted features [ ] Other reasons [ ] 9) Are you planning to buy one? Yes [ ] No [ ] 10) What according to you is most important attribute for a computer? 10.1 Low entry price Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.2 Good and timely service Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.3 Upgradation Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.4 Configuration Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.5 Ease of operation Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 10.6 Sales offers and discounts Not Important [ ] Less important [ ] Important [ ] Very Important [ ] 11) What sort of sales offers would you generally go for? 11.1 Price Discounts Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 11.2 Freebies Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 11.3 Extended Warranty Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ]
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11.4 Unrelated Offers Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 12) The basis of buying or upgrading your computer is 12.1 Change in Technology Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 12.2 On requirement basis Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 12.3 Sales and promotional offers Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 12.4 Predefined timeframes Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 13) Does this increase while there are offers? Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 14) Where do you get the information about the latest offers? Newspaper [ ] Magazine [ ] Television [ ] Radio [ ] Friends and Family [ ] Others [ ] 15) Does the dealer have influence while buying any type of computer or IT products? Always [ ] Sometimes [ ] Never [ ] Can’t Say [ ] 16) Do you think that sales promotion offers has following impact on the brand you use? 16.1 Increases awareness about the product Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.2 Increases its sales Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.3 Increases the visibility of the brand Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ]
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16.4 Makes it easier to choose one brand from the other Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.5 Makes you more confident about selecting the brand Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 16.6 Makes you buy more than what you want Strongly agree [ ] Agree [ ] Can’t say [ ] Disagree [ ] Strongly disagree [ ] 17) Which company do you think has the best sales offers? HCL [ ] HP [ ] IBM/Lenovo [ ] Acer [ ] Zenith [ ] Others [ ] 18) Personal Details 18.1 Age 18-25 [ ] 40-60 [ ] 18.2 Gender Male [ ] 25-40 [ ] 60 and above [ ] Female [ ] 10K - 20 K[ ] 40K and above [ ] Working in private sector [ ] Retired [ ]
18.3 Family Income 8 K - 10 K [ ] 20K - 40K [ ] 18.4 Occupation Government Job [ ] Own Business [ ] Student [ ]
Thanks for filling up the questionnaire and for your valuable time. Have a great day!!!!
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BIBLIOGRAPHY
1. From Robert C Blattberg and Scott A. Neslin, Sales Promotion
Concepts and Methods, and Strategies, (Prentice Hall, 1990).
2. Roger A. Strang, Sales Promotion: Fast Growth: Faulty Management,
Harvard Business Review (July-August 1976) 116-19.
3. Paul W. Farris and John A. Quelch, In defense of Price Promotion,
Sloan Management Review (Fall 1987): 63-69.
4. Robert
George Brown, Sales Response to Promotions and
Advertising, Journal of Advertising Research (August 1974) 36-37. Also see Carl F. Mela, Sunil Gupta, and Donald R Lehmann, The Long-Term Impact of Advertising and Consumer Brand Choice, Journal Of Marketing Research (May 1997):248-61; Purushottam Papatla and Lakshman Krishnamurti, Measuring the Dynamic effects of Promotions on Brand Choice, Journal of Marketing Research (February 1996); 20-35; Kandel Jedidi, Carl F. Mela, and Sunil Gupta, Managing Advertising and Promotions for Long-Run Profitability, Marketing Science, 18(1), (1999): 1-22.
5. F. Kent Mitchel, Advertising/Promotion Budgets: How did We get
Here, and What do We Do Now, Journal of Consumer Marketing (Fall 1985): 405-47. 6. David B. Jones, Setting Promotional Goals: A Communication Relationship Model, Journal of Consumer Marketing 11, no.1 (1994): 38-49.
7. John C. Totten and Martin p. Block, Analyzing Sales Promotion: Text
and cases, 2nd Ed. (Chicago: Dartnell, 1994) pp. 69-70.
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8. Paul W. Farris and Kusum L. Ailawadi, Retail Power: Monster or Mouse, Journal Of Retailing (Winter 1992): 351-69.
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