CHAPTER ONE

INTRODUCTION

1.0     BACKGROUND OF THE STUDY

                    An organization can be viewed as successful if it can achieve

its planned objectives and set goals. In order to realize these set goals and objectives, organizations need to develop marketing strategies that will help them achieve their objective and position them for the future (Bamigbola, 2006). In an ever competitive business environment, in a time when customers are exposed daily to a myriad of promotional messages and with today’s rapid technological advancement, many marketers have come to discover that advertising alone is not enough to move members of a target market to take action, such as getting them to try a new product. Rather, marketers have learned that to meet their goals, they must use additional promotional methods. Certain characteristics of the target market (e. g. small but geographically dispersed) or characteristic of the product (e.g. highly complex) make advertising a less attractive option. For marketers better results may be obtained using other promotional approaches. Therefore, this dissertation will focus on “The Use of Sales Promotion in the Distribution of Drugs: A Case Study of Rhokyn Pharmacy and Stores”.

Sales Promotion is an important component of a business overall marketing strategy. The American Marketing Association (AMA) defines Sales Promotion as “media and non – media marketing pressures applied for a pre – determined limited period of time in order to stimulate demand, or improve product quality.

Companies use Sales Promotion tools to draw a stronger and quicker response (Kotler, 2000). Sales Promotion acts as a competitive weapon by providing an extra incentive for the target audience to purchase or support a brand over another. It consists of tools for consumer promotion, trade promotion and sales force promotion.

There are three primary parties relevant to sales promotion: Manufacturers, Retailers and Consumers. (van Heerde, 1999). These three groups have become increasingly involved with sales promotion.

To move their products through the distribution channel from the point of manufacture to the point of consumption, marketers employ three types of sales promotion strategies thus: Push, Pull or a combination of the two.

Theories relating to sales promotion include adaptation level theory, assimilation contrast theory, and economic theories of promotion etc. However, for the purpose of this study, focus shall be 3on the Economic Theories of Promotions.

Although, sales promotion is an important strategy for producing quick, short – term positive results, it has its limitations. It is not a cure for a bad product, poor advertising or an inferior sales team. Consumers may wait to buy certain items knowing that prices will eventually be reduced. Another draw back of sales promotion is its high cost.

A key step in sales promotion management is deciding which devices will help the organization reach its promotional goals. The following factors influence the choice of promotional devices:

v Nature of the target audience

v Nature of the product.

v Cost of the device.

v Current economic conditions etc.

There are several sales promotion techniques used by marketers. They include: coupons, cash rebates, premiums, free samples, cash contests, and trade shows. Others are exhibitions, point of purchase displays and sales training manuals etc.

In the practice of sales promotion, a company must establish its objectives, select the tools, develop the programmes, pretest the programmes, implement and control it, and evaluate the results (Kotler, 2000).

1.1         RESEARCH PROBLEMS:

As stated above, sales promotion is an important component of a business overall marketing strategy. It directly stimulates consumer purchasing, selling effectiveness or the effort of the sales force. It increases the value of a product basically for a limited time.

The question therefore, is how acquainted is Rhokyn Pharmacy and Stores with the use of sales promotion in the distribution of drugs? What are the effects of the efficient and effective use of sales promotion on sales volume, profitability and the overall success of the company in achieving its sales targets? These problems are what informed the researcher’s effort in determining the use of sales promotion in the distribution of drugs.

1.2         RESEARCH QUESTIONS:

1.    What are the common sales promotion techniques adopted in the distribution of drugs?

2.    Of what significance is the effective application of sales promotion to the success of a business?

3.    What is the effect of sales promotion on the consumer buying behaviour?

4.    What is the impact of the use of sales promotion on sales volume?

5.    What are the problems associated with the use of sales promotion?

6.    Why do consumers respond to sales promotion?

7.    What is the influence of sales promotion on the effort of the sales force?

1.3         RESEARCH HYPOTHESES:

To test the answers to the above research questions, the following hypotheses are formulated and tested at 5% level of significance:

HO: There is no significant relationship between the use of sales                            

        promotion and the consumer buying behaviour.

H1:  There is a significant relationship between the use of sales

        promotion and the consumer buying behaviour.

HO:   There is no significant relationship between the use of sales     

         promotion and the efforts of the sales force.

H1:   There is a significant relationship between the use of sales     

         promotion and the efforts of the sales force.

HO:   There is no significant relationship between the use of sales

  promotion and sales volume.

 H1:  There is a significant relationship between the use of sales        

        promotion and sales volume.

HO: There is no significant relationship between the use of sales

promotion and the overall success of the firm in achieving its sales target.

 H1:  There is a significant relationship between the use of sales

promotion and the overall success of the firm in achieving its sales target.

1.4         OBJECTIVES OF THE STUDY:

This study is aimed towards fulfilling the following objectives:

v To determine the common sales promotion techniques adopted in the distribution of drugs.

v To examine the extent to which sales promotion is practiced by Rhokyn Pharmacy and Stores.

v To find out why consumers respond to sales promotion.

v To determine the impacts of the use of sales promotion on sales volume, profitability and the general success of the business.

v To examine the problems associated with the use of Sales promotion and proffer solutions to these problems.

1.5         THE SIGNIFICANCE OF THE STUDY:

This study will be useful to managers, manufacturing organizations and academic researchers etc in the following ways:

v It will broaden the knowledge of marketers and management on the efficient and effective practice of sales promotion.

v It will be of great value to manufacturers of products who are involved to a large extent in promotional activities. It will help them to know the various parties at play, why consumer do respond to sales promotion, understand and manage the various problems associated with the use of sales promotion, and when and how to apply sales promotion efficiently and effectively.

v Finally, it is hoped that this study will be of great relevance to subsequent study into the use of sales promotion in the distribution of drugs, in the future.

1.6         SCOPE AND LIMITATIONS OF THE STUDY:

This research is intended to give in-depth analyses of the use of sales promotion as practiced by Rhokyn Pharmacy and Stores.

Information will be sought from management, sales force, retailers, and wholesalers who are involved from time to time in the practice of sales promotion with Rhokyn Pharmacy and Stores.

An exploratory study of various pharmaceutical stores would have been very useful for this study, but for time, the researcher will focus on Rhokyn Pharmacy and Stores. Also, the huge sum of money involved in carrying out such exploratory study in terms of cost, constitute a great limitation to the use of such exploratory study. How the exercises of skills adopted by the researcher make this dissertation a reliable one.

1.7         OPERATIONAL DEFINITION OF TERMS AND CONCEPTS:

At this juncture, it may be necessary to define the terms used in this study with a view to achieving conceptual and operational clarity.

SALES PROMOTION

Those activities other than advertising and personal selling aimed at stimulating product sales. Some of the components of sales promotion are trade shows, premiums, incentives and specialty advertising (in which a firms name may be printed on a calendar, for example) – Dictionary of Marketing Terms, 2000.

MARKETING STRATEGY

A statement (implicit or explicit) of how a brand or product line will achieve its objectives (Dictionary of Marketing Terms, 2000).

CONSUMER

Traditionally, the ultimate user or consumer of goods, ideas and services. The term also is used to imply the buyer or decision maker as well as the ultimate consumer (Dictionary of Marketing Terms, 2000).

CONSUMER BEHAVIOUR

 The behaviour of the consumer or decision maker, in the market place of products and services (Dictionary of Marketing Terms, 2000).

BUYER BEHAVIOUR

This term is often used as an alternative to consumer behaviour but also is used when the purchaser is not the ultimate consumer but rather an industrial buyer, a buying center, or middleman between the seller and the ultimate user (Dictionary of Marketing Terms, 2000).

ADVERTISING

The placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, non – profit organizations, government agencies and individuals who seek to inform and/or persuade members of a particular target market audience about their products, services, organizations, or ideas (Dictionary of  Marketing Terms, 2000).

TARGET MARKET

The particular segment of a total population on which the retailer focuses its merchandizing expertise to satisfy that sub – market in order to accomplish its profit objectives (Dictionary of Marketing Terms, 2000).

CONSUMER SALES PROMOTION

 Externally directed incentives offered to the ultimate consumer. These usually consist of offers such as coupons, premiums, rebates, etc., designed to gain one or more of the following: product trial; repeat usage of product; more frequent or multiple product purchases; introduce a new/improved product; introduce new packaging or different size packages; neutralize competitive advertising or sales promotions; capitalize on seasonal, geographic, or special events; encourage consumers to trade up to a larger size, more profitable line, or another product in the line. (Dictionary of Marketing Terms, 2000).

TRADE SALES PROMOTION

 Marketers’ activities directed to channel members to encourage them to provide special support or activities for the product or services (Dictionary of Marketing Terms, 2000).

RETAILERS

 A merchant middleman who is engaged primarily in selling to ultimate consumers (Dictionary Marketing Terms, 2000).

WHOLESALER

 A merchant establishment operated by a concern that is primarily engaged in buying, taking title to, usually storing and physically handling goods in large quantities, and reselling the goods (usually in smaller quantities) to retailers (Dictionary of Marketing Terms, 2000).

SALES VOLUME/QUOTA

A quota that emphasizes sales or some aspect of sales volume. Sales volume quotas can be expressed in dollars, physical units, or points (a certain number of points are given for each dollar or unit sales of particular products.) The point system is typically used when a firm wants to give selective emphasis to certain products in the line (Dictionary of Marketing Terms, 2000).

 CHANNEL OF DISTRIBUTION

          An organized network (system) of agencies and institutions which, in combination, perform all the functions required to link producers with end customers to accomplish the marketing task (Dictionary of Marketing Terms, 2000).

PROMOTION MIX

         The various communication techniques - such as advertising, personal selling, sales promotion, and public relations/product publicity available to a marketer that are combined to achieve specific goals (Dictionary Marketing Terms, 2000).

DIRECT SALES FORCE

 A sales force consisting of salespeople employed by the company for whom they sell products or services (Dictionary of Marketing Terms, 2000).

PREMIUM

 1. (Retailing definition) Merchandise offered at a lower price, or free, as an additional incentive for a customer to make a purchase. 2. (Sales promotion definition) an item of value, other than the product itself, given as an additional incentive to influence the purchase of a product (Dictionary of Marketing Terms, 2000).
SALES CONTEST

A short-term incentive program designed to motivate salespeople to accomplish very specific sales objectives. Although a contest should not be considered part of the firm's ongoing compensation plan, it does offer salespeople the opportunity to gain financial as well as non-financial rewards. Contest winners often receive prizes in cash or merchandise or travel that have monetary value. Winners also receive non-financial rewards in the form of recognition and a sense of accomplishment (Dictionary of Marketing Terms, 2000).

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