An Investigation of Sales Promotion and Its Influence on Business Performance

CHAPTER ONE

INTRODUCTION

Background Of The Study

In the last few decades, the financial and commercial activities of most businesses have been affected by the unfavourable state of the Nigerian economy. Hence, businesses have experienced a declining level of sales and profitability and strive to survive (Latif, 2011). In essence, every business enterprise in operation must implement a marketing strategy in order to survive unfavorable circumstances and achieve the desired goal (Hackley, 2008). Similarly, Achumba (2016) asserted that for any business to survive under the current unpredictable socio-economic political dispensation in the country (be it profit-making or non-profit-making), it has to effectively market its products or services, which have to be promoted on a regular basis. In view of these facts, business organizations as posited by Wannur, (2004), therefore consider different types of measures such as sales promotion in order to increase their sales and also remain in business since there is no doubt that without adequate sales promotion, most of the business objectives will not be reached.

In respect to the above, Ricky (2004), opined that businesses employ promotional strategies to provide information about themselves and their products to the public and industrial purchasers in free-market economies such as Nigeria. Promotion was defined by Griffin and Pustay (2007), as “any attempts by an organization to increase the desirability of its products among potential consumers.”

Sales promotion appears to be one of the channels for delivering marketing strategy, and its importance to the performance of a business cannot be overstated. sales promotion as specified by Kotler and Armstrong (2001), is a short-term incentive to stimulate the purchase of a product or service. In other words, it is a short-term promotional activities aimed at encouraging consumer purchase or collaboration from distributors, sales agents, or other members of the trade. Kotler (1984), claimed that sales promotion comprises of a variety of promotional methods meant to elicit the earliest and/or strongest market response. Furthermore, coupons, point-of-sale displays, purchasing incentives, trade exhibitions, and contests and sweepstakes according to Griffin & Pustay, (2007), are all common components of a business’s sales promotional mix. The adaptability of sales promotions, in particular, makes them suitable for a marketing campaign suited to local conditions (Griffin & Pustay, 2007). This will invariably have an impact on organizational performance.

Additionally, sales promotions improve the reputations of dealers and distributors, who benefit from increased store traffic and a high rate of stock turnover. They also encourage the trial and recurrent purchase of products and services, which is an important component in stimulating product patronage. In light of the above, it is quite evident that no business entity that desires to survive can afford to neglect the importance of sales promotion in the marketing of its product or services. It is on the basis of this invaluable contribution to organizational success that this study is being carried out to focus on sales promotion and business performance.

 Statement Of The Problem

Most manufacturing industries are being influenced by seasonal fluctuations and climatic changes coupled with depression in the economy (Srinivasan, 2004). The sensitivity of their market environment often leads to sales decline, erosion of market share, low capacity utilization, reduction in overall industrial output, and a colossal loss of profit. Therefore, to revamp the market and competitive force, businesses must adopt and implement intensive sales promotional activities so as to sustain the acceptability of their product. However, despite the magnitude and relative importance of sales promotion, comparatively little attention is given to it by most business organizations (Hanssens, 2004). He further posited that many businesses that have gained a level of acceptance pay little attention to sales promotion as they perceive that without a promotional strategy, their product can still sell. Likewise, other businesses lament the huge cost of carrying out sales promotion programs (Joshi, 2004). Thus, despite the ever-prevailing positive impact of sales promotions, various businesses still handle them with a sense of laxity. Hence, the major purpose of this study is to critically investigate the influence of sales promotion on business performance.

Objective Of The Study

Generally, this study aims to investigate the influence of sales promotion on business performance. To achieve this, the following specific objectives will guide the study:

1.        Determine the various sales promotion strategies that are commonly used by business organizations.

2.        Determine if there is any significant relationship between sales promotion and the sales volume of business organizations.

3.        Ascertain the effect of sales promotion on the performance of business organizations.

4.        Identify the factors affecting the adoption and effectiveness of sales promotion in business organizations.

Research Hypotheses

The validity of the following hypotheses will be tested in the course of this study:

H01: There is no significant relationship between sales promotion and the sales volume of a business organization.

H02: Sales promotion has no significant effect on the performance of business organizations.

Significance Of The Study

Some business owners and managers do not recognize the essence and benefit of constant sales promotion, especially in Nigeria where competitiveness is high. As a result, the findings of this study will be mostly informative and educative to business entities and organizations, particularly administrative officials, as they will reveal the numerous benefits of sales promotion and the risk of losing potential customers in the absence of sales promotion.

Additionally, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to sales promotion and its influence on business performance.

 Scope Of The Study

Generally, the study is designed to investigate the influence of sales promotion on business performance. However, the study will further identify the various sales promotion strategies commonly utilized by business organizations, determine if there is any significant relationship between sales promotion and sales volume of business organizations, ascertain the effect of sales promotion on the performance of business organizations, and identify the factors affecting the adoption and effectiveness of sales promotion in business organizations. Hence, the study will be limited to selected manufacturing companies in Onitsha, Anambra State.

 Limitations Of The Study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents.

In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed.

More so, the findings of this study are limited to the sample population in the study area and, hence, may not be suitable for use in comparison to other regions of Nigeria.

 Definition Of Terms

Advertisement: Advertisement is any paid form of non-personnel presentation and production of ideas, goods or services by identified sponsor

Sales promotion– Short term incentives to encourage purchases or sales of a product or services.

Organization– A business or profit oriented outfit that produces goods and services for the society.