Sales Promotion Activities

In Nestlé Bangladesh Ltd

Table of Contents

Title Page No.

Introduction 1

About Nestlé 1

Nestlé Bangladesh Limited 2

Core Brands in Bangladesh 3

Sales promotion 3

Sales Promotion in Nestlé Bangladesh Limited 4

Major sales Promotion Tools 4

Trade promotion Tools 4

Consumer Promotion Tools 5

Process of Developing Sales Promotion Program 7

Communication Medium 8

Factors to consider before launching sales promotion

8

Conclusion 9

Introduction

Sales Promotion is a most commonly used phenomenon in today’s business world. It’s two way benefit is that it helps to increase sales as well as it increases customer loyalty. So most of the business firms consider it as an important marketing tools. Nestlé Bangladesh Limited is food and beverage manufacturer. It is the subsidiary of it’s mother company world’s largest food and beverage manufacturer Nestlé S.A. Before going to the discussion of sales promotion in Nestlé Bangladesh Limited we will first know the company.

About Nestlé

Nestlé is the world's largest food group not only in terms of its sales but also in terms of its product range and its geographical presence. Nestlé covers nearly every field of nutrition: infant formula, milk products, chocolate and confectionery, instant coffee, ice-cream, culinary products, frozen ready-made meals, mineral water etc. They are also a major producer of pet food. In most of these product groups and in most markets, Nestlé is the leader or at least a strong number two. Nestlé is a very focused Company, with more than 94 percent of the sales coming from the food and beverage sector. Nestlé is present around the globe, on all continents, with around 230,000 people working in more in an 84 countries with 466 factories and with sales representatives in at least another 70 countries. Many of its brand names are world familiar: Nescafé, Nido, Maggi, Polo, Smarties, Milo, Perrier, Friskies, KitKat, Crunch….Some of its products have broken records: 3,000 cups of Nescafé are consumed every second. and KitKat merited an entry in the Guinness Book of World Records as the world's best-selling chocolate bar with 418 KitKat fingers eaten every second around the world!

Key Information About Nestlé S.A.

World’s Largest food Company Founder: John Heinrich Nestle in the year of 1967 Present in all countries

Tk. 7,000,00 Crore sales in 2008 ( that is 6.2 times of is year Bangladesh Budget)

Over 280,000 employees 456 factories in 84 countries

Core Brands

Nestlé Bangladesh Limited

Nestlé Bangladesh Limited started its first commercial production in Bangladesh in 1994. In 1998. Nestlé Bangladesh's vision is to be recognized as the most successful food and drink Company in Bangladesh, generating sustainable, profitable growth and continuously improving results to the benefit of shareholders and employees.

The factory is situated at Sripur, 55 km north of Dhaka, the factory produces instant noodles, cereals and repacks milks, soups, beverages and infant nutrition products.

Today Nestlé Bangladesh Ltd. is a strongly positioned organization. The Company will continue to grow through the policy of constant innovation and renovation,

concentrating on its core competencies and their commitment to high quality, with the aim of providing the best quality food to the people of Bangladesh.

• First commercial production start from 1994.• Total Employee 437 nos • 560 Core taka sales in 2008 • Total # of Distributor 78• Total # of Outlet 100000+

Core Brands In Bangladesh:

Nestlé Bangladesh Limited divides its core brands into two categories:

1. Infant category Lactogen Cerelac

2. Food and Beverage category Nido Maggi

Nescafe

Sales Promotion

Sales promotion is the activity that provides special incentives to bring about immediate response from consumers, distributors and organization’s sales force.

Sales promotion activities can be divided into two broad categories: consumer promotions and trade promotions. Consumer promotions refer to those activities that are designed to stimulate consumer purchase, in effect to help pull the product through the distribution channel. Common type of consumer promotion activities include coupons, free sample offers, contests, cash-back offers, and a variety of frequent buyer programs. Trade promotions refer to those activities designed to encourage distributors to purchase additional volume and provide additional support to stimulate consumer purchase. In effect, trade promotions help push the product through the distribution channel. Common types of trade promotion activities include price discounts and allowances, co-operative advertising funds, and point –of –purchase display materials.

Sales Promotion in Nestlé Bangladesh Ltd.

Nestlé Bangladesh Ltd is one of the leading food and beverage manufacturer in Bangladesh. They consider ‘Quality’ as their most valuable product. Still they have to face tremendous competition from their local and global competitors. As a part of their marketing strategy Nestlé also use sales promotion to accomplish their objectives. Basically they prefer trade promotions than consumer promotions, but they use both of them when it is necessary.

Major Sales Promotion Tools Used By Nestlé Bangladesh Ltd.

Nestlé Bangladesh Ltd use two types of sales promotion:

1. Trade promotion

2. Consumer promotion

Trade Promotion Tools

Nestlé Bangladesh Ltd. uses trade promotion to persuade its retailers to carry its brands, give it shelf space, promote it in advertising and push it to consumers.

Figure: Trade promotion in Nestlé Bangladesh Ltd.

In Nestlé Bangladesh Ltd. Product supply chain consists of Nestlé itself, distributors, retain outlets or traders, and shoppers and consumers. Distributors collect the product from the Nestlé factory at net product price. Nestlé has 78 distributors around the country. Then they sell it to the retail outlets at a price including their commission. Then the retail outlets or traders sell the product at maximum retail price.

In Nestlé trade promotions are directed towards the retailers. They persuade them to sell more and more and receive special benefits. Then retailers encouraged to purchase more and more products and push them to the ultimate shoppers or consumers. Following techniques they most frequently use as trade promotion:

Communicates to the

Cash discountIn this method retailers are encouraged to purchase a large volume of product at a discounted price. Nestlé set the conditions to get the discount. When a retailer purchase a fixed amount of product then he becomes eligible for the discount. For example, Normal price of per case MAGGI noodles is TK. 600. They may ask retailers to buy 5 cases at a time at TK. 550 per case.

Free productsBy following this technique Nestlé offers retailers free product on a fixed amount purchase. Retailers are asked to purchase a fixed amount of product to get the free product. For instance, they may asked to the retailers to purchase five cases of MAGGI noodles to get two packets extra with each case.

Special DriveIn this technique Nestlé encourage the retailers to sell more and more product throughout the season. In return they attractive benefits to them. Sometimes they offer special trip, and other attractive prizes.

Consumer Promotion

Nestlé Bangladesh Ltd. uses consumer promotion urge prompt purchase from the customer and create long term relationship with the customers.

Figure: Consumer promotion in Nestlé Bangladesh Ltd.

In consumer promotion Nestlé communicate directly to its target market then the purchasers come to the retailers and demand the product. So it is a pull process for them. In this promotion distributors and retailers don’t get any benefit. All benefits enjoyed by the consumers. Most commonly used consumer promotion tools for Nestlé are following:

1. Premium Sometimes Nestlé offers special gifts to the purchasers to encourage prompt purchase. This gifts may be related to the product or may not be related to the product. For example, sometimes they offer ‘Coffee Mug’ with NESCAFE or small bowl with MAGGI soup.

2. ContestIn this method Nestlé calls for consumers to submit an entry – essays, drawings, or other creative activities to be judged by a panel that will select the best entries. Often the condition is that an empty pack of that particular product have to be attached with the entry.

Communicates directly to the target market

3. Cash discount In consumer sales promotion Nestlé also offers cash discount for the consumers. In this technique they reduce the price of the product to get the higher sales volume or new customers for the product. For example sometimes the reduce the price of MAGGI noodles for a particular period of time.

Process of Developing Sales Promotion Program in Nestlé Bangladesh Ltd.

Before launching a sales promotion ‘sales team’ of Nestlé Bangladesh Limited do a number of calculations. The terms they frequently use are following:

SKU = Store Keeping Unit

AMS = Average Monthly Sales

Incremental Sales = Projected Sales – AMS

Marginal Contribution (MC)=Sales- Product Cost ( Cost of goods sold + distribution Cost + other fixed costs)

ROI ( Return On Investment) = on average 20% - 50%

For example,

Say, AMS for MAGGI Noodles is 30,000 cases

Price per case = TK. 600

Marginal Contribution = 20%

In a particular month company’s SKU comes to 60,000 cases

In this situation if the company think of a trade promotion to launch where it would cost TK. 20 per case then they do the calculation as following:

Projected Sales during promotion = 50,000 cases

Incremental Sales = 40,000 – 30,000 = 10,000 cases

Value of Incremental Sales = 10000 × 600 = TK. 60,00,000

Marginal contribution = 20%

So, Incremental Marginal contribution = 60,00,000 × 20% = Tk. 12,00,000

Cost of Promotion = 40,000 × 20 = TK. 8,00,000

ROI ( Return On Investment)

Incremental Marginal contribution = Tk. 12,00,000

Less Cost of Promotion = TK. 8,00,000

Profit = Tk. 4,00,000

Communication Medium

Nestlé Bangladesh Limited use different mediums to communicate the sales promotion. Mediums they use are following:

News paper Magazine Television Radio Posters Bunting Dangler etc

Factors To Consider Before Launching a Sales Promotion Program

1. PreparationNestlé Bangladesh Limited takes proper preparation before launching a sales promotion which leads to the success of the program. Specially consumer promotions takes long time to prepare. Normally it takes one month to six month to prepare for a sales promotion.

2. Media SupportMedia support is vital for the success of a sales promotion program. Nestlé Bangladesh Limited always manage to get proper media support. Before launching a sales promotion they contact with the media and book air time paper space.

3. Channel Members SupportNestlé Bangladesh Limited believe that without channel members help it is not possible to run a sales promotion program. Both in trade promotion and consumer promotion co-operation from the channel members are necessary.

4. PackagingFor consumers promotion special packaging is necessary. Nestlé Bangladesh Limited prepare different packages for the product they are going to promote.

5. POSM( Point of Sales Materials)To make a sales promotion program successful Point of sales materials is necessary. It will inform a well as support the promotion. Nestlé Bangladesh

Limited prepare different point of sales materials and place it rightly during sales promotion.

Conclusion

Finally we can say that Nestlé Bangladesh Limited is using sales promotion activities perfectly. By using valuable marketing tools they are creating competitive advantage for themselves which ultimately helping them to reach their marketing as well as organizational objectives. Again their successful sales promotion program are making profit as well as customer base for their company.