THE IMPACT OF SALES PROMOTION ON ORGANIZATION PROFITABILITY

1.1 Introduction

Sales promotion can be defined as a broad label that applies special kinds of sales accelerating activity not necessarily classed as advertising and direct selling. According to Manale, Jose and Zacharias (2007), it has become a vital tool for marketers and its importance has been increasing significantly over the years (Manale et al., 2007). Sales promotion is one of the ways used by firms to communicate with intended target audience. Sales promotion is unique in that it offers an extra incentive for action (Adrian, 2004). Every business enterprises still operating as a going concern, must adopt its marketing strategy to meet the desired aspiration. In the same vein for any business to survive under the current unpredictable socio-eco-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.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.

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1.2 Background of Study

In Nigeria 7up Bottling Company sales promotion activities have taken several dimensions for instance the first promotional event was tagged “Animal kingdom”. A competition which offered its participants to win gifts; it lasted for a period of three months. It was a successful and rewarding promotion as it generated great awareness for 7up and its products.

Onitsha like her parent plant has also embarked on series of sales promotion activities focuses on 7up. The program was tagged 7up Actuation. The sales promotion was aimed at stimulating the demand for 7up and it offered the consumer opportunity to win gift. There was also trade promotion in which dealers were given allowance to buy in large quantities and enjoy free additional cases of 7up.

The mega million promotions was another promotional programme of NBC Plc. It took place in 2003 for just three months and it was held nationwide. Due to the increase acceptance of sales promotion by firms as a very important element of the promotional mix and its expenditure also being on the rise, it has become very import to examine whether sales promotion is actually making any impact on the volume of sales.

According to Aderemi (2003), sales promotion is an initiative undertaken by organizations to promote, increase in sales, usage of a product or services. Sales promotion act as a competitive weapon by providing an extra incentive for the target audience to purchase or support one brand over another. It is particularly effective in spurring product trial and unplanned purchases (Aderemi, 2003).

In addition, sales promotion can be an effective tool in a highly competitive market environment, when the objective is to convince retailers to carry new product or influence consumers to select it over those of competitors. Also it tends to work best when it is applied to impulse items whose features can be judged at the point of purchase, rather than more complex, expensive items that might require hands demonstration (Odunlami & Ogunsiji, 2011). Sales promotion includes communication activities between the producer of goods and services, and the end users (consumers) that provide extra value or incentives to ultimate consumers, wholesalers, retailers and other organizational customers.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Impact of Sales Promotion on Organization Profitability.

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1.2.1 Brief Historical Background of NBC PLC

Nigerian Bottling Company was incorporated in Nigeria in the year 1951 by the reverend Chief A.G. Leventis. From humble beginning in 1951 and under high inspired leadership, the company has grown to become the largest soft drinks bottler in Nigeria and one of the largest employers in the country, operating about 20 production plants as well as 65 sales depot throughout the Federation of' Nigeria with its Administrative head office at Oyingbo, Lagos State, formerly at Iddo, Lagos State.

The Nigerian Bottling Company is a noticeable giant among first class Bottling Companies and is also reputed as having the same status in all the state of the country. Because of its excellent performance over years, there is no doubt that its features of operation will provide good presentative information in other similar organizations.

Suffice is to say that the company provides range of employment opportunities to school leavers and professional in the field of commerce and marketing. In view of the fact that sales promotion programmes are just being newly developed in Nigeria and its view are only being embraced by larger scale ventures, Nigerian Bottling Company - 7up soft drink to be specific has been noted for their involvement in promotional activities, which has been increasing their level of sales and profitability.

There is no doubt, however, that the company tinder consideration with its distinct features and give a good highlight of the Impact of Sales Promotion on Organization Profitability both in the short and long run.

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1.3 Statement of Problems

Investigation revealed that the 7up Bottling Company is influenced by seasoned fluctuations and climatic changes coupled with depression in the economy. This phenomenon puts soft drink. The sensitivity of the soft drink market; often lead to sales decline, erosion of market share, low capacity utilization, reduction in overall industrial output and colossal loss of profit. Thus the success of any beverage firm that wishes to sustain the acceptability of its product hands on its intensive sale promotional activities.

Many firms pay little attention to sales promotion since they feel they can sell their product with little or no promotional activities. Likewise, many firm which could not afford the huge cost of the promotional programmes, would entail and despite the effects of sales promotion, there had been insufficient research and decision modeling devoted to it. In addition, there is an established negative perception of many firms as regards the cost of business promotion especially those whose benefits are not early and immediately reached.

Also, adequate records of sales and promotional cost are always neglected and some sales promotion programmes are introduced at the wrong time, which will therefore hinder the level of sales and profitability of the firm and thereby render sales promotions less important in the community and the country as a whole.

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1.4 Aim and Objectives of Study

The aim of the study is to examine the Impact of Sales Promotion on Organization Profitability using 7up Bottling Company by NBC PLC Ilorin as a case study. In achieving this aim, the following specific objectives were laid out as follows:

1. To find out how effective 7up soft drink sales promotion is being used in the operation of NBC Plc with respect to profitability and market share;
2. To ascertain whether sales promotion helps to level sales peak and valley that might be brought about by seasonal fluctuation in the 7up soft drink market;
3. To identify conditions under which 7up soft drink sales promotions influence customers’ purchase behavior in the area under review;
4. To find out the media used by the company in conveying sales promotion programmes in the area under review;
5. To establish whether the use of sales promotion activate the production level of 7up soft drinks; and
6. To determine the extent to which 7up soft drink sales promotion can be used to improve consumer patronage, gather channel supports and motivate the sales force of NBC Plc and the entire soft drink industry in Nigeria.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• Can 7up soft drink sales promotion be used to improve consumer patronage, gather channel supports and motivate the sales force of NBC Plc and the entire soft drink industry in Nigeria?
• Does sales promotion helps to level sales peak and valley that might be brought about by seasonal fluctuation in the 7up soft drink market?
• Does the use of sales promotion activate the production level of 7up soft drinks?
• How effective is 7up soft drink sales promotion being used in the operation of NBC Plc with respect to profitability and market share?
• What are the conditions under which 7up soft drink sales promotions influence customers’ purchase behavior?
• What are the media used by the company in conveying sales promotion programmes in the area under review?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: Sales promotion does not influence consumer purchase behavour in the area under review.
• H1: Sales promotion influences consumer purchase behavour in the area under review

Hypothesis Two

• H0: There is no significant relationship between sales promotion and organizational profitability.
• H1: There is a significant relationship between sales promotion and organizational performance.

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1.7 Significance of Study

It is a fact that sales promotion has a great impact in business organization. This study therefore intends to determine to a great extent the impact of sales promotion in business organization. Because of the important role of sales promotion, this study will therefore make a useful improvement upon the performance of business and how their level of sales and profitability can be improved.

This research will be of immense value to future researcher who might intend to carry out a research on this particular topic. It will also help to highlight how individual who may set up their own business in future to carry out their business in an effective way.

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1.8 Scope of Study

The scope of the research is focused on the Impact of Sales Promotion on Organization Profitability. This research is restricted to the 7up Bottling Company by Nigerian Bottling Company (NBC) Plc situated at Ilorin, Kwara State.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this research work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
4. Lack of Initial Cooperation from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.

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1.10 Definition of Terms

Sales Promotion:

Sales promotion can be defined as a broad label that applies special kinds of sales accelerating activity not necessarily classed as advertising and direct selling.

Business:

Business can simply be defined as the totality of all economic activities that are undertaken in the process of producing and distributing goods and services for the purpose of making profit.

Pricing:

It means the amount of money paid by the buyer to the seller of the product or service.

Organization:

Organization is defined by Robine (1987) said an organization is a consciously coordinated social entity with a relatively identifiable boundary, that function on a relatively continuous basis to achieve a common goal or set of goals.

Publicity:

This is a non-personal communication or presentation of ideal about a product, service or a cry that is not paid by an identified sponsor.

Advertising:

Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor.

Brand:

This is a name, term sign, symbol or design or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of the competitors.

Brand Loyalty:

This is consumer unreserved willingness to choose a brand over the other brands and tendency to search for that particular brand when buying.