Cost and financial benefits of product promotion : a case study

Abstract

Sales Promotion has been in constant growth in recent years and has today become one of the key factors in the promotional mix. The methods used have become more sophisticated and an increasing number of companies are realising the importance of a well structured promotional strategy. Sales promotion tools are continuously employed by retailers and manufacturers with the purpose of stimulating the purchase and the consumption of their products and brands. The reason for the wide use of these techniques lies on the assumption that they are very effective for substantially increasing sales in the short-term. The purpose of this dissertation is to provide a better understanding of how sales promotion features in the company's accounts. In order to reach this purpose, research questions regarding the objectives of the sales promotion, the sales promotion tools used as well as how sales promotion costs and revenues are dealt with in accounting have been discussed. Based on these research questions, a review of the relevant literature was conducted, resulting in a framework, which was used to guide this study's data collection. A qualitative approach was used, with interviews at two leading local fast moving consumer good importers. Based on its complex nature to record all costs and benefits arising from a promotional activity, promotional accounting can not always be calculated accurately, since it is impossible to allocate each exact cost and determine precisely all the benefits deriving exclusively from that promotional activity.