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THE IMPACT OF CONSUMER SALES PROMOTION ON CUSTOMER

BUYING BEHAVIOR WITH SPECIAL REFERENCE TO FMCG SECTOR

IN SRI LANKA

Prepared

By

H.A.J. CHANDRANATH

BM/2009/041

Facilitator : Lecturer C.B. Wijesundara

DEPARTMENT OF MARKETING MANAGEMENT

FACULTY OF COMMERCE & MANAGEMENT

UNIVERSITY OF KELANIYA

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CONTENT

1. Background of the Study………………………………………………………..3

2. FMCG sector in Sri Lanka……………………………………………………....4

3. Research Problem ………………………………………………………………6

4. Research Objectives……………………………………………………………. 7

5. Significant Of The Study……………………………………………………......7

6. Literature Review……………………………………………………………….8

7. Conceptual Frame Work………………………………………………………..20

8. Hypothesis……………………………………………………………………...21

9. Methodology…………………………………………………………………....22

10. Limitation of the Study……...………………………………………………….23

11. Time Plan……………………………………………………………………….24

12. Reference……………………………………………………………………….24

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01. Background of the study

When a consumer goes shopping, he or she implicitly, has to make four key decisions for each

product category. These are, whether to buy in the category, where, which brand and what quantity.

For these four decisions may be influenced by customer characteristic (e. g. income, purchase

frequency, family size) and marketing environment (prices and sales promotion activities,

advertising). When we consider sales promotion for FMCG sector, the different effects sales

promotion can have on customer purchasing decision are known as the possible sales promotion

reaction mechanisms. By the today, sales promotion of the FMCG sector huge effect to customer

purchasing decision. There for business organization spent lot of money on sales promotion for

specially FMCG sector due to customer buy FMCG in frequently and competition in market.

Because there are lot of brand in FMCG sector, there is a huge competition in the market. The

expenditures on sales promotions in Sri Lanka has increased considerably over the last few years.

In recent years, manufacturers have spent more and more of their marketing rupees on promotion.

Manufacturers are now spending more money on promotions than on advertising. According to

that sales promotion is big business, in fact it is bigger than advertising.

But its growth has been fuelled by several factors, including: (A) the movement towards

relationship marketing (and rewarding loyal customer, e.g.: club member benefits) (B) the

emergence of promotion – literate customers who expect promotions with certain product types,

(C) during recessions, price – conscious customers search for value – for – money promotions, (D)

powerful retailers favour suppliers whose products sell quickly (because of heavy advertising,

exciting promotions, or both), (E) high television advertising cost force marketing managers to

look for more cost – effective, below the line tools such as sales promotion (P.R. Smith and Jnathan

Taylor 2005).

When we consider sales promotion can identify three type of sales promotion. They are (1)

consumer sales promotions (2) trade promotions and (3) Business sales promotions. But most of

the time business organization spent money on consumer sales promotion. Because of business

organization can achieve their promotion objective through consumer sales promotion.

Whether they take the form of competition, price reductions, free gifts, coupons, samples, special

demonstrations, displays or point of sale, consumer sales promotions tend to effect the later stages

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of the buying process (ex: triggering action) such as a purchase or increased usage of a particular

brand, whereas advertising tends to affect the earlier stages such as awareness, interest and desire.

Promotions are action orientated, particularly as there often tempt the buyers to buy or at least try

to product and service. These kind of promotions often provide the final solve that moves a

customer towards the buying a particular product or service. Well thought out sales promotions

that embrace the brand values and deliver real customer benefits can be enormously successful

(P.R. Smith and Jnathan Taylor 2005).

Numerous variables have been proposed to describe the relationship between sales promotions and

consumer purchasing decision such as household demographics (income, household size, children,

etc.,), household psychographics (household psychological characteristics such as deal proneness,

variety seeking), and product category characteristics (volume, perishability, price).

when we talk about sales promotion, in this study, we try to identify only how consumer sales

promotion influence on customer purchasing decision with special reference to FMCG sector in

Sri Lanka. As well as we develop new insights into the “why” and “what” questions: ‘Why do

consumers react to sales promotions in their purchase behavior’, and ‘What are the effects of sales

promotions on customer purchasing decision’.

02. FMCG sector in Sri Lanka

Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) are products that

are sold quickly and at relatively low cost. Examples include non-durable goods such as soft

drinks, toiletries, Over-the-counter drugs, toys, processed foods and many other

consumables. Though the profit margin made on FMCG products is relatively small (more so for

retailers than the producers/suppliers), they are generally sold in large quantities; thus, the

cumulative profit on such products can be substantial. FMCG is probably the most classic case of

low margin and high volume business. Unilever, Nestle, Hamas, coca cola are some leading

FMCG companies in Sri Lanka.

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Fast Moving Consumer Goods (FMCG) satisfies the elemental and day-to-day household needs

other than grocery, ranging from packaged foodstuff, dairy products, cooking oil, bread, butter,

cereals, beverages like tea & coffee, pharmaceuticals, confectionery, biscuits, glassware,

stationary items, watches, toiletries, detergents, shampoos, skin care products, cosmetics,

toothpaste, dish washing liquid, shaving cream, razor, batteries, shoe polish, energy drinks, soft

drinks, clothing, furniture and household accessories to electronic goods like cell phones, laptops,

computers, digital cameras etc. (VSRD-IJBMR, VOL. 2 (8), 2012,)

The Fast Moving Consumer Goods (FMCG) sector strives to enrich the consumer’s lifestyle by

manufacturing and marketing a wide range of products in the personal care, personal wash, home

care and food market spaces. Sector revenue and net pro\t stood at Rs. 5.8Bn and Rs. 519Mn

respectively. This is an increase of 10.5% in terms of revenue and a

Reduction of 18.4% in terms of net profit, when compared to the previous year. Reduction in

profitability was mainly due to the unfavorable CESS charged on key imported materials. When

eliminating the CESS impact, the business showed steady growth in underlying profitability. The

overall FMCG market grew by 23.7% to Rs. 141Bn during the fiscal year. The key growth

segments for the Industry were food and beverages segment, personal care segments and home

care which grew by 16% , 9% and 5% respectively, against -4%, 13% and 10% growth posted the

previous year. The year 2010 saw a higher growth in demand from urban markets, while the growth

in rural markets, leveled off during the second half of 2010. (Source: LMRB).

According to a new equity research report Sri Lanka’s Fast Moving consumer goods market has

seen a rapid growth over the year. The report says this has created fierce competition among

manufactures, who are trying to provide quality products at a normal price range for the local

consumers.

According to the available data Sri Lanka’s FMCG market weighed at Rs. 141 billion during the

year 2010. According to the report, out of this potion 74% is captured by the Food and Beverage

sector which also includes the consumption of cigarettes. The report discloses that personal care

and home care compete closely with a market share of 15% and 11% respectively.

BRS points out, that despite the growth in the FMCG sector, its traditional dependence on imported

goods has slowed down as local manufacturers are substituting with equally good products.

FMCG industry, alternatively called as CPG (Consumer packaged goods) industry primarily deals

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with the production, distribution and marketing of consumer packaged goods. These are products

that have a quick turnover, and relatively low cost. Consumers generally put less thought into the

purchase of FMCG than they do for other products. Though the absolute profit made on FMCG

products is relatively small, they generally sell in large numbers and so the cumulative profit on

such products can be large. Some of the prime activities of FMCG industry are selling, marketing,

financing, purchasing, etc. The industry also engaged in operations, supply chain, production and

general management.

FMCG industry provides a wide range of consumables and accordingly the amount of money

circulated against FMCG products is also very high. The competition among FMCG manufacturers

is also growing and as a result of this, investment in FMCG industry is also increasing, specifically

in Sri Lanka, where FMCG industry total market size is Rs. 141 billion. FMCG Sector in Sri Lanka

is estimated to grow 23.7% by 2010.

03. Research problem

Most researches have been done about sales promotion. But in there, their considered sales

promotion as combination of the three type of sales promotion. Not for the different type sales

promotion such as consumer sales promotion, trade sales promotion or business sales promotion

and most researches have been done for product and service without divide different type such as

electronics, vehicle, furniture, banking, FMCG and so on. As well as there are number of factors

that influence the purchasing decision other than sales promotion such as price, quality personal

characteristics and so on. As well some researches have done different segment such as youth,

alder, rural and urban so on.

But in this study we consider about how to consumer sales promotion influence on purchasing

decision of customer in all segment with special reference to FMCG sector in Sri Lanka.

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04. Research objectives

Having gone through the study, following objectives have been set with the hopes of achieving the

same.

To find out influence of consumer sales promotion on the purchasing decision of the

customer with special reference to FMCG sector in Sri Lanka.

To identify relationship between different type of consumer sales promotions and customer

purchasing decision.

To identify most effective consumer sales promotion tools on purchasing decision.

To identify importance of consumer sales promotion to customer.

05. Significance of the study

This research gives the information and findings about how consumer sales promotions influence

on purchasing decision of customer. Significance of this study we can identify in varies angels

Study result gives information and findings about relationship or how consumer sales

promotion influence to purchasing decision of customer with special reference to FMCG

sector in the Sri Lanka. So in that companies can identifies how customer sales promotion

affect purchasing decision of the customers and companies can improve those qualities and

though that they can achieve customer satisfaction and objective of the organization.

This research finding also can be used in marketing perspective when planning the

promotion program and it gives more benefits to business.

In this study, can identify customer perception regarding the consumer sales promotion. It

is very important to the business for plan the promotion campaigns.

Under the literature review it gives some important hints about the consumer sales

promotion and customer purchasing decision. There for identify these thing in this research

they can use it for achieve comparative advantage.

Lack of information available in consumer sales promotion influence on purchasing

decision of the customer specially in marketing industry so this give some important

findings to marketers.

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06. Literature review

Under the literature review firstly define and identify the words, concepts, theory that associate

with this study.

6.1. Sales promotion

The American Marketing Association (AMA), in its Web-based "Dictionary of Marketing Terms,"

defines sales promotion as "media and non-media marketing pressure applied for a predetermined,

limited period of time in order to stimulate trial, increase consumer demand, or improve product

availability."

Sales promotion describes incentives and rewards to get customers to buy now rather than later.

Whereas advertising is a long-run tool for shaping the market’s attitude toward a brand, sales

promotion is a short-term tool to trigger buyer action. No wonder brand managers increasingly

rely on sales promotion, especially when falling behind in achieving sales quotas. Sales promotions

work! Sales promotions yield faster and more measurable responses in sales than advertising does.

Today the split between advertising and sales promotion may be 30–70, the reverse of what it used

to be. The growth of sales promotion reflects the higher priority companies are attaching to current

sales than to long-term brand building. It is a return to transaction marketing (TM) rather

than relationship marketing (RM). (Philip Kotler)

Sales promotion consists of short term incentives to encourage purchase or sales of a product or

service. Whereas advertising offers reasons to buy a product or service, sales promotion offers

reasons to buy now. Example of sales promotion are found everywhere. A freestanding insert in

the Sunday newspaper contains a coupon offering Rs. 20 off on a bottle of Cadbury Bournvita.

Sales promotion includes a wide variety of promotion tools designed to stimulate earlier or

stronger market response. Sales promotion tools are used by most organizations, including

manufactures, distributors, retailers, and not profit institutions. (Philip Kotler, Gary Armstrong,

Prafulla Y. Agnihori, Ehsan Ul Haque)

There are three type of sales promotion. They are,

Consumer sales promotion – include a wide range of tools from sample, coupon, refunds,

premiums, and point of purchase displays to contests, sweepstakes, and sponsorships. Consumer

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sales promotion tools are used to boost short term customer buying and involvement or to enhance

long term customer relationships.

Trade promotion – Marketers use sales promotions to target all customers including partners

within their channel of distribution. Trade promotions are initially used to entice channel members

to carry a marketer’s products and, once products are stocked, marketers utilize promotions to

strengthen the channel relationship. It can be defined as push sales promotions. This Push strategy

is appropriate with low brand awareness in a category and brand choice is made in store. Can be

an impulse purchase and product benefits are understood.

Manufacturers are direct more sales promotion dollars toward retailers and wholesalers than to

final consumers. Trade promotions can persuade resellers to carry a brand, give it shelf space,

promote it in advertising, and push it to consumers. Shelf space is so scarce these days that

manufacturers often have to offer price offs, allowances, buy back guarantees, or free goods to

retailers and wholesalers to get product on the shelf and, once there, to keep them on it.

Manufacturers use several trade promotions tools. Many of the tools used for consumer promotion

– contests, premiums, displays – cam also be used as trade promotions. Or the manufacturers may

offer a straight discount off the list price on each case purchased during a stated period of time

(also called a price off, off invoice, or off list). Manufacturers also may offer an allowance (usually

so much off per case) in return for the retailer’s agreement to feature the manufacturer’s products

in some way. An advertising allowance compensates retailers for advertising the product. A

display allowance compensates them for using special displays.

Manufacturers may offer free goods, which are extra cases of merchandise, to resellers who buy a

certain quantity or who feature a certain flavor or size. They may offer push money – cash or gifts

to dealers or their sales forces to “push” the manufacturer’s goods. Manufacturers may give

retailers free specialty advertising items that carry the company’s name, such as pens, pencils,

calendars, paperweights, matchbooks, memo pads, and yardsticks.

Business promotions – A small, but important, sub-set of sales promotions are targeted to the

business to business market. While these promotions may not carry the glamour associated with

consumer or trade promotions, B-to-B promotions are used in many industries.

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Companies spend billions of dollars each year on promotion to industrial customers. Business

promotion are used to generate business leads, stimulate purchases, reward customers, and

motivate salespeople. Business promotions include many of the same tools used for consumer or

trade promotions. (Philip Kotler, Gary Armstrong, Prafulla Y. Agnihori, Ehsan Ul Haque).

Whether they take the form of competition, price reductions, free gifts, coupons, samples, special

demonstrations, displays or point of sale, consumer sales promotions tend to effect the later stages

of the buying process (ex: triggering action) such as a purchase or increased usage of a particular

brand, whereas advertising tends to affect the earlier stages such as awareness, interest and desire.

Promotions are action orientated, particularly as there often tempt the buyers to buy or at least try

to product and service. These kind of promotions often provide the final solve that moves a

customer towards the buying a particular product or service. Well thought out sales promotions

that embrace the brand values and deliver real customer benefits can be enormously successful

(P.R. Smith and Jnathan Taylor 2005).

According to that sales promotion is big business, in fact it is bigger than advertising. But its

growth has been fuelled by several factors, including: (A) the movement towards relationship

marketing (and rewarding loyal customer, e.g.: club member benefits) (B) the emergence of

promotion – literate customers who expect promotions with certain product types, (C) during

recessions, price – conscious customers search for value – for – money promotions, (D) powerful

retailers favour suppliers whose products sell quickly (because of heavy advertising, exciting

promotions, or both), (E) high television advertising cost force marketing managers to look for

more cost – effective, below the line tools such as sales promotion (P.R. Smith and Jnathan Taylor

2005).

6.1.1. Sales promotions objectives

As the name suggests, a promotion is a limited period offer. It is therefore not surprising to find

that sales promotions tend to have shorter term tactical objectives. Some typical sales promotion

goals might be:

1. Increase sales (although may only be a temporary increase because customers can simply

stock up with the goods or temporarily switch brand while the promotion is running) by:

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Rewarding loyal customer,

Locking customer into loyal programmers (where they have to keep buying the

product or service over a period of time in order to collect the right number of

coupon, vouchers, or items in a collection),

Increasing repurchase rate of occasional users,

Generating ‘trial’ among new customer (by triggering an impulse purchase),

Demonstrating new features/ modifications or introducing a new product or service,

Developing new users,

Image development (awareness or repositioning),

Deseasonalizing seasonal sales (e.g. skiing holidays in the summer).

2. Develop new sales leads.

3. Satisfy retailers with a complete package – gain trade acceptance.

4. Move excess stock.

5. Block a competitor (by offering incentives to customer to stock up)

6. Match a competitor (petrol tokens)

7. Build a database (some promotions also act as database builders)

8. Generate publicity.

6.1.2. Ineffective sales promotions

Despite the phenomenal size of the sales promotions industry and the data available for analysis,

there are a frightening number of sales promotions that are relatively ineffective, and some are

actually damaging in terms of branding, sales and cash flow. Take price promotions such as

discount vouchers, two for the price of one, free extra 10 percent – they can help to boost sales in

the short term, but what do they do the brand in the long term?. Discount the price and you discount

the brand down to a point where it loses its brand value and competes solely on price (which is a

not a protectable competitive advantage.) so many sales promotions damage the core value, the

image the positioning of the brand. Other promotions attract only promiscuous consumers who

switch back to another brand as soon as the promotion is over. Other promotions create temporary

‘bumps’ in sales.

Some promotions create a temporary boost in sales followed by an immediate drop, as customer

who initially bought more and stocked up then stop buying until they have used up their extra

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stock. Other promotions actually damage the brand image and even the holding company's

’corporate image, sales, profit and cash flow.

The common error in consumer sales promotions is the lack of consumer franchise building (CFB)

within many sales promotion. Some promotions can enhance or add value to the image of the

product or service. These type of promotions build ‘consumer franchise’. This means that the gift

is in some way related to the brand, its image or its properties. As Torin Douglas puts it, a brand

property encapsulates’ the image of the product and ensures that extra mileage can be obtained out

of the advertising over a period of several years’. Franchise building promotions contrast with

price/ discount offers that dilute brand value and do not enhance brand loyalty, despite boosting

shot term sales. The now classic Miss Pears competition reinforce the brand image of gently, nature

soap. CFB promotions tend to have long term implications and are therefore more strategically

driven, while non CFB promotions can be driven by shorter term tactical goals. (P.R. Smith and

Jnathan Taylor 2005).

6.1.3. Importance of sales promotions

Price discrimination

Producers can introduce price discrimination through the use of sales promotions. They can charge

different prices to different consumers and trade segments depending on how sensitive each

segment is to particular prices.

Effect on consumer behavior

As sales promotions are mostly announced for a short period, customers may feel a sense of

urgency and stop comparing the alternatives. They are persuaded to act now rather than later.

Effect on trade behavior

Short-term promotions present an opportunity and encourage dealers to forward by. This forward

buying ensures that retailers won’t to go out of stocks. As dealers have more than the normal

stocks, they think it advisable to advertise in local media, arranged displays and offer attractive

promotion deals to consumers. These actions help in increasing the store traffic.

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Luring New Customers with Price

By offering a reduced price on a popular item, you can lure customers away from competitors,

which may ultimately help turn them into regular shoppers. For example, if you own a small

electronics store that's competing with a large retailer, offer a discounted price on a popular cell

phone model for a limited time. If you serve the customers well during the purchase process, they

may be willing to come back.

Gaining Community Favor

Create a good name for your business by staging a promotion that supports a worthy cause. For

example, if your town needs a new fire engine or police car, donate a portion of customer purchases

at your business to the cause. You'll be helping your community, which is a win-win for everyone

and may lead to more business for you.

Providing Information

A sales promotion can help you provide information to potential customers that aids them in

making a decision. This can be beneficial for products or services that are complicated or are

unfamiliar to consumers. For example, if you're a financial planner and you're attempting to gain

clients in the area of retirement planning, a free seminar allows you to explain what you do and

how some of your investment products work.

6.1.4. Consumer sales promotions

Possibly the most well-known methods of sales promotion are those intended to appeal to the final

consumer. Consumers are exposed to sales promotions nearly every day, and as discussed later,

many buyers are conditioned to look for sales promotions prior to making purchase decisions. It

can be defined as pull sales promotions. Consumer sales promotions include a wide range of tools

from sample, coupon, refunds, premiums, and point of purchase displays to contests, sweepstakes,

and sponsorships. Consumer sales promotion tools are used to boost short term customer buying

and involvement or to enhance long term customer relationships.

This pull strategy works best with high brand awareness and loyalty, or high involvement in

category and customers look for product differences.

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A pull strategy involves marketing activities (primarily advertising and customer promotion)

directed at the end users, the customers who buy the plant materials. The purpose of the pull

strategy is to induce them to ask the marketing channel participants (wholesalers and retailers) for

the particular plant, perhaps a “new” plant to the marketing scene, and thus induce the

intermediaries to order the plants from the grower/producer. The pull strategy is especially

appropriate when there is high brand loyalty (or so perceived) and high involvement in the

category; people perceive differences between brands; and people choose the brand before they go

to the retail store. When pull strategies are successful, customers will seek out certain products or

services and, in essence, by the interest they create, pull the product through the marketing channel.

A pull strategy requires marketers to carry certain plants and products or brands in order to attract

and satisfy target customers. (Dr. Forrest E. Stegelin)

6.1.4.1. Consumer sales promotions tools

There are number of consumer sales promotions tools such as

Samples – samples are offer of atrial amount of a product. Sampling is the most effective - but

most expensive - way to introduce a new product or to create new excitement for an existing one.

Some sampling are free; for others, the company charges a small amount of offset its cost. The

samples might be delivered door to door, sent by mail, handed out in a store or kiosk, attached to

another product, or featured in an ad. Sometimes, samples are combined into sample packs, which

can then be used to promote other products and service. Sampling are powerful promotional tool.

Coupons – coupons are certificates that give buyers a serving when they purchase specified

products. A coupon is a ticket or document that can be exchanged for a financial discount or rebate

when purchasing a product. Coupons offer instantly redeemable savings on certain products. That

means that consumers get an instant reduction on the price at the point of purchase. They don't

have to send anything to the manufacturer, they don't have to enter any type of contest. They walk

away from the store with the satisfaction that they have saved money. Therefore most consumers

love coupons. Coupons can promote early trail of a new brand or stimulate sales of a mature brand.

However, as a result of coupon clutter, redemption rates have been declining in recent years. Thus,

most major consumer goods companies are issuing fewer coupons and targeting them more

carefully.

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Cash refunds (or rebates) – A rebate is an amount paid, by way of reduction, return, or refund on

what has already been paid or contributed. It one of the sales incentives promotion marketers use

to supplement product sales. Cash refunds are like coupons except that the price reduction occurs

after the purchase rather than at the retail outlet. The consumer sands a “proof of purchase” to the

manufacturer, who then refunds part of the purchase price by mail.

Price packs (also called cents off deals) – offers consumers servings off the regular price of the

product. The producer marks the reduced prices directly on the label or package. Price packs can

be single packages sold at a reduced price (such as two for the price of one), or two related products

banded together (such as a toothbrush and toothpaste). Price packs are very effective – even more

so than coupons – in stimulating short term sales.

Premiums – A premium is tangible compensation that is given as an incentive for performing a

particular act usually buying a product. The premium may be given for free, or may be offered to

consumers for a significantly reduced price. Some examples of premiums include receiving a prize

in a cereal box or a free garden tool for visiting the grand opening of a hardware store. Incentives

that are given for free at the time of purchase are called direct premiums. These offers provide instant

gratification, plus there is no confusion about returning coupons or box tops, or saving bar codes or

proofs of purchase. Premiums are goods offered either free or at low cost as an incentive to buy a

product, ranging from toys included with kids’ products to phone cards and DVDs. A premium

may come inside the package (in pack), outside the package (on pack), or through the mail.

Advertising specialties, also called promotional product, - are useful articles imprinted with an

advertiser’s name, logo, or message that are given as gifts to consumers. Typical items include T

– shirts and other apparel, pen, coffee mugs, calendars, key rings, mouse pads, matches, tote bags,

coolers, golf balls, and caps. Such items can be very effective. The “best of them stick around for

month, subtly burning a brand name into a user’s brain,” notes a promotional product expert.

Point of purchase (POP) promotions – included display and demonstrations that take a place at

the point of the sale. Thing of your last visit to local retailer. Chances are good that you were

tripping over aisle displays, promotional signs, “shelf talkers,” or demonstrators offering free tastes

of featured food products. Unfortunately, many retailers do not like to handle the hundreds of

displays, signs, and posters they receive from manufacturers each year. Manufacturers have

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responded by offering better POP materials, offering to set them up, and tying them in with

television, print, or online messages.

Contests, sweepstakes, and game – give consumers the chance to win something, such as cash,

trips, or goods, by luck or through extra effort. A contest calls for consumer to submit an entry –

a jingle, guess, suggestion – to be judged by a panel that will select the best entries. A sweepstakes

calls for consumers to submit their names for a drawing. A game presents consumers with

something – bingo numbers, missing letters – every time they buy, which may or may not help

them win a prize. Such promotions can create considerable brand attention and consumer

involvement.

6.2. Purchase Decision

Most of the times, a consumer purchases the brand chosen during the evaluation stage. It should

be kept in mind that evaluations often occur at a retail store, and the purchase decision immediately

follows the evaluation. Occasionally, however, the consumer makes a different purchase decision

(Clow and Baack, 2002).

One of the reasons for this might be influence of advertising or consumer promotions. So it is

important that the consumers are targeted using well-planned promotions in this stage of the

decision making process, as this is when the actual purchase decision takes place. The consumer

has a few options in mind when they go to shop for something, but at the point of purchase if there

is some attractive sales promotion on a brand it will play an important role in the consumer’s final

decision about which brand to purchase. Also according to Schultz et al (1998), most sales

promotions mainly hit directly at the decision making and purchasing stage of the buying process.

6.2.1. Types of customer purchasing decision

Consumers are faced with purchase decisions nearly every day. But not all decisions are treated

the same. Some decisions are more complex than others and thus require more effort by the

consumer. Other decisions are fairly routine and require little effort. In general, consumers face

four types of purchase decisions:

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Minor New Purchase – these purchases represent something new to a consumer but in the

customer’s mind is not a very important purchase in terms of need, money or other reason

(e.g., status within a group).

Minor Re-Purchase – these are the most routine of all purchases and often the consumer returns

to purchase the same product without giving much thought to other product options (i.e.,

consumer is brand loyalty).

Major New Purchase – these purchases are the most difficult of all purchases because the

product being purchased is important to the consumer but the consumer has little or no previous

experience making these decisions. The consumer’s lack of confidence in making this type of

decision often (but not always) requires the consumer to engage in an extensive decision-

making process.

Major Re-Purchase - these purchase decisions are also important to the consumer but the

consumer feels confident in making these decisions since they have previous experience

purchasing the product.

For marketers it is important to understand how consumers treat the purchase decisions they face.

If a company is targeting customers who feel a purchase decision is difficult (i.e., Major New

Purchase), their marketing strategy may vary greatly from a company targeting customers who

view the purchase decision as routine. In fact, the same company may face both situations at the

same time; for some the product is new, while other customers see the purchase as routine. The

implication of buying behaviour for marketers is that different buying situations require different

marketing efforts.

6.2.2. Psychological orientations of purchasing decision

It is important to underpin marketing activities with an understanding of buyer behavior so that

marketing strategies and communication plans are more effective. Therefore, a basic

understanding of the context in which buyers process information, the way they behave, their

decision making processes and the ways in which such knowledge can be used in promotion plans

is important. In fact, there are a number of approaches that have been developed to assist our

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understanding of human behavior, but the majority have their roots in one of three psychological

orientations.

Psychoanalytical Theory: First developed by Freud, this approach is based on the way an

individual develops over time within the context of a family and their interactions with mother and

father and later with their siblings. Freud was the first to think in this way and to consider the

unconscious as an important influence on behavior. These are now referred to as psychodynamic

theories, and they hold that human behavior is primarily the function of reactions to internal (thus

mostly unconscious) stimuli: instincts, urges, and thoughts.

Instincts, urges, and thoughts are the things that a sales promotion looks to capitalize on. Instinct

based purchases form a considerable portion of the consumer’s purchases. When an individual is

out shopping there is this continuous urge to buy and when he sees a product being offered at a

price lower than the actual price or there is some other benefit like "buy one get one free"

associated with the purchase of that product, it encourages the consumer to buy that product. As a

result of the response to the urge to buy something, the consumer goes ahead and purchases the

product.

Reinforcement Theory: People behave with the knowledge of what will happen as a result of their

behavior. Therefore, behavior is dependent upon the expected outcomes or consequences. The

three rules of consequences describe the logical outcomes that typically occur:

Consequences that lead to rewards increase a behavior.

Consequences that lead to punishments decrease a behavior.

Consequences that lead to neither rewards nor punishments extinguish a behavior.

Most organizations use sales promotion to try to reward the consumer or provide some incentive

to encourage them to make a purchase. Therefore, if we relate this to the first rule above which

states that consequences that lead to rewards increase a behavior, then sales promotion is bound to

increase a behavior – that is, a consumer may purchase more.

Cognitive Theory: Assumes individuals use and process information derived from external and

internal sources to solve problems and make informed decisions.

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What are the specific elements that influence a consumer's decision to make a purchase? This

article looks a little deeper into the psychological factors that drive customers to buy or not to buy.

6.2.3. Psychological Characteristics of Purchasing Decisions

Motivation

Much of what people do can be traced to their needs. An unsatisfied need causes an inner state of

tension, feeling of disequilibrium, or dissatisfaction. A motive is an inner drive or pressure to take

action in order to eliminate tension, to satisfy a need or solve a problem, or to restore a sense of

equilibrium (Burnett 1993).

Probably the classification most closely associated with promotion divides motives into rational

and emotional motives (Burnett 1993).

Rational Motives are supported by a systematic reasoning process that people perceive as being

acceptable to their peers (Burnett 1993). He further adds that rational motives for buying a product

include lower price, greater endurance, higher quality, convenience, and better performance.

So, by using sales promotion, i.e. lowering the price of a product (price-offs, discount coupons) or

offering more for the same price (bonus packs), the organization tries to capitalize on the rational

motives which are used by an individual to make a purchase.

Emotional motives are characterized by feelings that may emerge without careful thought or

consideration of social consequences.

Learning

Learning starts with motivation, which is based on needs and goals. Motivation thus acts as a spur

to learning, with needs and goals serving as stimuli (Burnett 1993).

Some forms of learning called cognitive learning involve thought and conscious awareness –

problem solving is an example. Behavior is changed through behavioral learning, which is learning

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that does not require awareness or conscious effort but depends instead on an association between

events (Burnett 1993).

Attitudes

Motivation and learning both play an important part in determining a third key component of the

psychological background for consumer behavior: attitudes. An attitude is an enduring disposition,

favorable or unfavorable, toward some object – an idea, a person, a thing, a situation. Thus,

attitudes towards brands are tendencies to evaluate brands in a consistently favorable or

unfavorable way (Burnett 1993).

Each attitude has three components:

Cognitive component: This includes beliefs and knowledge about the object of the attitude (Burnett

1993).

Affective component: Feelings about objects make up an affective component of an attitude. People

typically evaluate separately each attribute of the object of the attitude; the combination of these

reactions determines the overall reaction (Burnett 1993).

Behavioral component: Actions taken towards the object of an attitude constitute the behavioral

component of attitude. Buying a product, recommending a company to friends, or requesting

information are examples of behavioral components (Burnett 1993).

07. Conceptual framework

This is the foundation step of research to identify the independent variables and the dependent

variable with that the conceptual framework drown follows.

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08. Hypothesis

H1. There is a positive significant relationship between consumer sales promotions and

customer purchasing decision.

H2. Sampling consumer sales promotion is the best consumer sales promotion tool.

H3. Price packs consumer sales promotion is very effective more than contest, sweepstakes and

games consumer sales promotion tools.

H4. Point of purchase consumer sales promotion is very effective more than premiums

consumer sales promotion.

H5. Cash refunds consumer sales promotion is very effective more than coupon consumer sales

promotion.

Independent variables Dependent variable

Consumer sales promotion

Samples

Coupons

Cash refunds

Price packs

Premiums

Advertising specialties

Point of purchase

Contests, sweepstakes, and

games

Customer purchasing decision

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09. Methodology

The present study employed multi-methods, using both quantitative and qualitative techniques, in

data collection with more importance on quantitative methods. It must be noted that the

questionnaire survey was used as main data collection instrument of this study because the

questionnaire survey enables researchers to examine and explain relationships between constructs,

in particular cause and effect relationships (Saunders et al. 2007). The below section is describe

the data collection methods which are used for the study and data sources which used for gather

the information.

Research instrument

This investigation requires both primary and secondary data. Primary data is the data that collected

only for this research. In order to collect primary data from respondent we can use questionnaire.

Although observation and interview be capable of use to collect the primary data and to collect the

secondary data can use

Excising research findings,

Journals,

Books relate to this area,

Websites.

Sample Design

100 respondents will be selected for the study from Gampaha district. Also use non probability

method, random sampling method.

Analysis of data

To analysis the data that collect from the respondent I wish to use SPSS data analysis software to

interpret mire reliable result. To measure the data there are different types of measurement scales

that are prevailing in the world. To analysis the result in this study researcher going to use

following tools,

Frequency tables

Central tendency measures such as Mean, Medium, and Mode

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Percentages

Standard deviation

Regression analysis

Co-Relation and Co-efficient

Different Bar charts, Pie charts and Graphs

Qualitative data analysis

Qualitative data can be arranged into categories that are not numerical. These categories can be

physical traits, gender, colors or anything that does not have a number associated to it. In this

research the qualitative data has collected through the opened ended questions in the questionnaire

and it has used to get the wider understanding about the subject area.

10. Limitations of the study

Time frame/ Resources

Time frame for this study will be consisting of four months. Scope of this study was selected based

on this time frame.

Population size

Sample size has been consisting for 100 customers of youth segment. The results could be different

if the sample size more than this and if different segments involved to the sample.

Geographic location

The sample has been selected from the youth customer in Gampaha district. Therefor the finding

of research will be based on the ideas of the above and the result could be different if takes the

sample from all island.

Use non probability sample method.

Use few assumptions it generate some artificial condition.

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11. Proposed time schedule for the study

Time table for the completion of the research is as follows.

12. List of references 1. Rajit Kumara, “Research Methodology”, issue 3, pp 61 – 88, 217 – 236.

2. Michael R. Soloman, “Consumer Behavior”, issue 7, pp 7 – 14, 340 – 352.

3. Leon G. Schiffman, Leslie Lazar Kanuk, S. Ramesh Kumar, Joseph Wisenblit (2010)

“Consumer Behavior” issue 10, pp 431 – 432, 448 -449.

4. Philip Kotler, Prafulla Y. Agnihotri, Gary Armstrong, Ehsan Ul Haque, “Principles of

Marketing”, issue 13, pp 405 – 409.

5. P.R. Smith and Jnathan Taylor, (2005) “Marketing Communication”, issue 4, pp 356 – 376.

6. Prasanna Perera- Marketing and Management Consultant, Chartered Marketer, article of

Identify patterns of Sri Lankan consumer behavior (2010)

Year 2014

Semester May June July August September October

Literature review

Proposal Development

Study of the Research

Data collection

Data analysis

Conclusion

Finalization of the research