The efficacy of Sales promotions in Pakistan Cellular industry

Marketing Dissertation

Academic Year:

Name

The efficacy of Sales promotions in Pakistan Cellular industry

Project submitted in part fulfilment of the Degree of Master

TABLE OF CONTENTS

TOC o “1-3” h z u HYPERLINK l “_Toc308026326” CHAPTER 1 PAGEREF _Toc308026326 h 2

HYPERLINK l “_Toc308026327” 1.0 INTRODUCTION PAGEREF _Toc308026327 h 2

HYPERLINK l “_Toc308026328” 1.1 Problem Statement PAGEREF _Toc308026328 h 3

HYPERLINK l “_Toc308026329” 1.2 Purpose of the Study PAGEREF _Toc308026329 h 4

HYPERLINK l “_Toc308026330” 1.3 Goals of the study PAGEREF _Toc308026330 h 5

HYPERLINK l “_Toc308026331” 1.4 Research Questions PAGEREF _Toc308026331 h 5

HYPERLINK l “_Toc308026332” 1.5 Research Objectives and Hypotheses PAGEREF _Toc308026332 h 6

HYPERLINK l “_Toc308026333” CHAPTER 2 PAGEREF _Toc308026333 h 8

HYPERLINK l “_Toc308026334” 2.0 LITERATURE REVIEW PAGEREF _Toc308026334 h 8

HYPERLINK l “_Toc308026335” 2.1Introduction PAGEREF _Toc308026335 h 8

HYPERLINK l “_Toc308026336” 2.2 Common Sales Promotion Techniques PAGEREF _Toc308026336 h 9

HYPERLINK l “_Toc308026337” 2.2.1 Push and Pull Sales Promotion Strategies PAGEREF _Toc308026337 h 9

HYPERLINK l “_Toc308026338” 2.2. Variables that Affect Successful sale promotion process PAGEREF _Toc308026338 h 11

HYPERLINK l “_Toc308026339” 2.3 Sales promotion using Brand Categorisation Theory PAGEREF _Toc308026339 h 12

HYPERLINK l “_Toc308026340” 2.3 Understanding Characteristics of the Target Market PAGEREF _Toc308026340 h 13

HYPERLINK l “_Toc308026341” 2.3.1 Characteristics of Pakistani Cellular Industry PAGEREF _Toc308026341 h 13

HYPERLINK l “_Toc308026342” 2.3.2 Consumer Behaviour in Pakistan PAGEREF _Toc308026342 h 14

HYPERLINK l “_Toc308026343” 3. RESEARCH METHODOLOGY PAGEREF _Toc308026343 h 20

HYPERLINK l “_Toc308026344” 3.1 Research philosophy PAGEREF _Toc308026344 h 21

HYPERLINK l “_Toc308026345” 3.2 Rationale for the Study Design PAGEREF _Toc308026345 h 21

HYPERLINK l “_Toc308026346” 3.3 Validity and Reliability PAGEREF _Toc308026346 h 22

HYPERLINK l “_Toc308026347” 3.4 Data and Analysis PAGEREF _Toc308026347 h 23

HYPERLINK l “_Toc308026348” Conclusion and Recommendations PAGEREF _Toc308026348 h 26

HYPERLINK l “_Toc308026349” REFERENCE: PAGEREF _Toc308026349 h 28

CHAPTER 11.0 INTRODUCTIONSales promotion is a business strategy that has gained prominence in many different sectors and it involves strategic approach to the marketing efforts taken by a particular business entity in reaching its desired consumers or customers effectively and efficiently. The cellular industry is one of the industries that have embraced sales promotions strategies to increase the effectiveness of their marketing efforts. This is partly as a result of increased competition in the wake of many players in the market and many cellular phone models available in the market. While it is important to come up with a good quality product to the market, the product means nothing to the firm unless it generates sales as targeted by the producing company or selling firm. Therefore, sales promotion becomes a very instrumental tool to ensure that sales revenues are generated by the business as desired.

Many studies have shown that selection of the marketing strategy is a very important aspect that determines the long-term success of the marketing efforts. In a study that investigated the Korean electronics industry, it was found that operators in North Korean electronics industry have developed increased interest in diversification of sales promotions models as a model of strategic importance in doing business and succeeding in the marketing efforts of their electronics products (Numakura, 2010). While the study by Numakura (2010) targeted electronics products in the North Korean electronics industry, it provides considerable amount of knowledge about the sales promotions strategy preferences of the electronics dealers in the Pakistani industry and by extension, a starting point to evaluate sales promotion preferences during the selection phase and implementation of sales and marketing strategies in the cellular industry, given the close relationship the two industries have.

1.1 Problem StatementThere has been a growing interest in strategic approach to sales and marketing as a way of achieving successful marketing for a number of reasons. For the last 30 years, the number of studies and attempts to develop a better understanding of sales and marketing strategies and models has continually increased. These studies have targeted various industries including the electronics, and to a limited extent, the cellular phone industry. The studies targeted aspects like development of international mobile cellular through proper sales promotions strategies, implementation of franchising business models in the mobile cellular industry, franchising in telecommunication firms or multinationals and factors that motivate practitioners to opt for proper sales promotions strategies.

Most of these studies and attempts failed to provide a comparative analysis between mobile cellular firms or multinationals and telecommunication firms or multinationals in terms of choice and implementation of franchising models yet chain telecommunication and chain mobile cellular may not have similar views in model, methods, choice and implementation of franchising models. In addition, performance of the franchise models in these two sub-sectors may not be similar even though they belong to the same class of industry.

This study aims to provide a comparative evaluation of selection and implementation of franchising business models in chain telecommunication and chain mobile cellular. The study will adopt the case study approach to assess franchising choice and implementation in two chain telecommunication and two chain mobile cellular. The results of this study will be essential in developing interventions which will be focused on improving the performance of proper sales promotions strategies in chain telecommunication and chain mobile cellular. This study will effectively address the left out sectors of the previous studies by assessing prominent factors in general that result in differences or similarities in choice and implementation of franchising models in chain telecommunication and chain mobile cellular.

1.2 Purpose of the StudyThe study explores the efficiency and effectiveness of sales promotions strategies used by cellular phone marketers in the Pakistani cellular industry in respect to strategy selection, implementation and achievement of desired objectives for the sales promotions efforts. The data collected from this study will expand the general understanding of procedures involved in selection and implementation of sales promotions strategies in the Pakistani cellular industry being scrutinised. The results of the study will also augment the existing body of literature on effective implementation of marketing and sales promotion strategies in the cellular industry.

In addition to this, the study also explores factors influencing selection of sales promotions models by practitioners across the cellular industry in the Pakistani cellular sector. By comparing these factors across the cellular sub-sector, the study intends to identify areas of divergence and convergence in selection and implementation of marketing and sales promotions business models for cellular dealers in the industry. Disparities in performance will also be identified and the study will attempt to pinpoint reasons or factors that contribute to disparities in performance and offer recommendations that may be used as intervention to boost performance of sales promotions efforts.

1.3 Goals of the studyThis study aims to assess the efficiency of various sales promotions strategies employed by the cellular marketers in the Pakistani cellular industry. The study develops a comparative analysis by focusing on these marketers and their sales promotion strategies and various measures established by research studies. By taking this approach the study will:

Enhance knowledge and understanding about sales promotion strategies in the cellular industry in Pakistan

Identify and discuss factors that lead to disparities in effectiveness and efficiency of sales promotions strategies in the cellular market in the Pakistani cellular industry

Identify barriers to the efficiency of sales and marketing strategies models in the Pakistani cellular industry

Define and describe current strategies used in approach and implementation of sales promotions of cellular products in Pakistani cellular industry

Recommend interventions designed to improve implementation of sales promotions strategies and models in the Pakistani cellular industry

Complement existing bodies of research on efficiency of sales promotions in cellular industry in Asia and Far East countries

1.4 Research QuestionsThe following research questions are formulated to engage the study:

What are the criteria used by cell phone marketers and retailers in reaching their marketing and sales promotions objectives in Pakistan?

Are there disparities in performance of sales promotions efforts among the cellular phone dealers in the Pakistani cellular industry?

What factors contribute to disparities in performance of the sales promotions strategies?

How do the practitioners come up with the optimal mix in the selection process and implementation of their marketing or sales promotions models?

What is the level of advertising for the franchising models in the two lines being compared and is the level of advertising adequate?

What economic and entrepreneurial environments support the success of the sales promotions in the cellular products industry and do these strategies differ among the various dealers or marketers?

How does the legal setup impact the success of the sales promotions strategies in the cellular phone industry in Pakistan?

1.5 Research Objectives and HypothesesThrough the research questions provided, the general objective of the study is to establish the efficiency of the sales promotions strategies in the Pakistani cellular industry. Alongside this, the study aims to meet the following specific objectives:

To establish if there is a significant relationship between sales promotions strategy deployed and the efficiency or effectiveness of the sales and marketing efforts.

To investigate the relationship (if any) between customer loyalty and sales promotions strategies deployed in the cellular industry in Pakistan

To determine if there is a significant relationship between marketing practices and employee customer satisfaction.

To explore the market characteristics of the Pakistani target cellular market

Since setting hypotheses is important to providing a direction in analysis and judgement during decision making, the following hypotheses are formulated to help in investigating the research questions.

There is a significant relationship between customer satisfaction or loyalty and sales promotions strategies used in the cellular industry in Pakistan

There is a positive correlation between sales volume and the sales promotion strategy used in marketing the cellular products in Pakistani cellular industry

CHAPTER 22.0 LITERATURE REVIEW

2.1IntroductionThis literature review is an attempt to bring a deeper understanding of the sales promotion process as an integral aspect of the marketing effort with respect to the international and national marketplace of the cellular products and create a strong basis for business organisations to adopt a systematic process when carrying out their sales promotions tasks in the Pakistani cellular marketplace to ensure efficiency and effectiveness of the process. Thus, the literature review critically digs into the works of other researchers in order to set a basis for the study. This is achieved by exploring the various works and research studies done by scholars and available in journals, scholarly databases, manuscripts, articles and books among other sources of information.

Sales promotion as a marketing business practice has a long history though the most widely identified period of modern sales branding process is the period that covered the early 20th century. During this period, sales promotion process was mainly achieved through branding basically as means of establishing customer loyalty through establishment of product labels and names. Although this ideology still forms part of the sales promotion process, modern sales promotion process is affected by many other factors than the traditional marketplace. In the traditional marketplace and especially during the early days of the process, brands were used as means of conveying how strong the manufacturer was and the stability or prestige of the producer.

2.2 Common Sales Promotion TechniquesWhile sales are an important aspect of the business, various sales promotion strategies have traditionally been used to garner an increase in sales revenue by business organisations. In the wake of heightened competition of the modern business environment, business organisations are applying various techniques to ensure that they achieve the set sales goals. Others, however, use a combination of known techniques to achieve the same objective. Whatever option the business takes, the efficiency matters a lot since it can be gauged on the basis of how it has generated maximum sales revenues while minimising costs as much as possible.

2.2.1 Push and Pull Sales Promotion StrategiesPush and pull promotional strategies are two important techniques clearly distinguished from each other by the marketing theory. Kotler (2004) observes that a company with a strong or formidable sales force can effectively make use of the sales force in a combination with trade promotion activities to build consumer demand for a particular product of the firm. In addition, companies that have established strong marketing chain in the market and a strong competitive advantage may choose to promote their products via their wholesalers, who in turn promote to the retailers and retailers ensure that promotion activities reach the target customer or consumers. Cellular phone industry has been identified as one of the industries that are integrally fit to apply the push promotional strategy by using established wholesalers and distributors who in turn avail the products to the retailers until the chain of promotional activities reaches the cellular phone customers. While a contemporary supply chain might be too long, the push strategies attempt to bypass some middle parties or channels. Nevertheless, heavy advertising campaigns are generally involved as Taylor (2005) obverses, adding that the tremendous levels of innovation necessitate this kind of approach since it also limits delays.

On the other hand, the pull sales promotion strategies require building up of consumer demand for a product by the use of huge investments in advertising and promotion of the products. It is clearly distinguished from the push strategy in that while the push strategies work by starting from the upper levels of the distribution channel, the pull strategies directly target the customers, who go to the retailers asking for the products advertised. In turn the retailers turn to the wholesalers and the wholesalers ask for the product from the producers until the cycle of demand is completely looped. Companies or firms that engage in heavy advertising for their products are able to elicit demand for their products even before the products reach the target consumers (Kotler 2004). In a study carried out in 2009 by the Market Research Watch about Coca Cola established that Coca Cola uses advertising as the most preferred source of increasing customer awareness by the company. Television advertisement allows the company to reach a hefty audience. The way they make their adverts is attractive as it captures the attention of the audience leaving them eager to try the product. Coca Cola Company also uses the radio to advertise their products. Radio is cheaper compared to television. The company benefits a lot from its involvement in the worlds most celebrated games such as the Olympics and the FIFA world cup (The Coca-Cola India website: 2010). The coca cola company takes advantage of the millions of people who watch these games to advertise their products (Market Research website: 2009). The business does pretty well during this time. The company’s highly trained sales team acts as its representative to the retailers. This strategy has proved to be very effective as it helps maintain service and product loyalty. Therefore, any business can take a similar approach where it heavily advertises its products to create demand and this approach constitutes a pull promotional strategy.

Shank (2001) argues that the whole idea of promotion is to enable the customer gain knowledge and exposure about the product. The organization should be able to persuade the customer to purchase the product through a carefully planned strategy. To achieve this, the company should apply the different types of promotional strategies (Shank 2001). These strategies include personal propaganda, where the company creates and distributes their own brochures, newsletters, fliers, posters etc. the other one is professional organization, advertising which can be done through outdoor ads, print ads, broadcast ads etc and media relations campaign. This is a plan to develop contacts and relationships with the media.

2.2. Variables that Affect Successful sale promotion processBranding is one of strategies adopted by a business in successful sales promotion, this depends on their capabilities, knowledge of branding and brand development, positioning in the market and structure of their operations. Branding activities are financially intensive which implies that businesses have to strengthen their internal systems if they are to make the most out of their available resources. The structure and cohesion within a business may also affect its ability to carry out branding activities (Spreitzer, 1995). Despite the multiple dimensions and even models that have been developed to analyze branding activities, few researchers have sought to determine if there are any differences in branding between local and international firms (Spreitzer, 1995); Kirkman and Rosen ,1999). Though a review of the requirements in branding reveals a likelihood of the existence of such differences, there are no clear direct steps on the part of researchers to determine the exact differences and the implications they have on branding. This is an issue that ought to be awarded preference considering the importance of branding in the modern business environment and the intense direct competition between local and international businesses in both local and national markets.

2.3 Sales promotion using Brand Categorisation TheoryCompanies have come up with various strategies to ensure that their brands stand out in the market. One such strategy identified by Nusair and Kandampully (2008)is brand extension or brand stretching where companies that wish to build greater trust in their new products use already established brands that have higher levels of customer trust and loyalty. Nusair and Kandampully (2008) add that high quality brands stretch improve the average quality of a company’s brands and if this is intermarried with successful intervening extensions, the impact will be an improved consumer evaluation of the brand. Kirkman and Rosen (1999) on the other hand give an elaborate evaluation of how proper brand categorisation is helpful for a business that wishes to introduce a new produce line, class or form into the international. The authors (ibid.) continue to state that a good product brand categorisation strategy is that which identifies the needs of the consumers on the international marketplace and by attempting to solve the consumer needs, motivates product search by the targeted consumers. In this manner, the authors argue, consumers are able to uniquely identify the original brand of the products with the class that has been introduced (Kirkman and Rosen, 1999). Mont and Plepys (2003) attempts to connect the ideas highlighted by Kirkman and Rosen (1999) with brand evaluation process but points out that a firm must imperatively consider the brand stretching objectives and try as much as possible to align them with the brand vision. Through such a systematic process in brand development, the business will not only have a basis for monitoring brand performance but will also be able achieve high brand essence in the market; whether national or international. By way of admonition, Cohen et al. (2007) advices that businesses should be careful and must keep themselves abreast with the negative effects of brand extension. For instance, if a brand extension exercise leads to dilution of already established brand name this could be detrimental to the business. Nevertheless, some scholars have felt that strong brand names like Nokia are not greatly affected by the brand extension failure. Despite this, many scholars agree that research has evidently given sufficient evidence to show that brand dilution affects brands of all forms.

2.3 Understanding Characteristics of the Target Market2.3.1 Characteristics of Pakistani Cellular IndustryFor the past few years, the telecommunication industry Pakistan has performed outstandingly principally due to liberalization of trade and investment, privatization and openness to modern technology. It transfers a drastic change as governments took the initiative to make it a larger player of the industry. At the time of independence Pakistan innate an insufficient telecom base of 14,000 land lines. At that phase, Post

In 1962 and prior to this period Telegraph and Telephone were acting as one unit, later in 1962 both were alienated to form independent Postal department and Telephone and Telegraph Department (T&T). In the year 1990, Pakistan started to reform measures which were meant to encourage private sector’s participation. According to United Nation’s forecast Pakistan’s population is expected to grow to 190 million by 2018. Assuming that future cellular coverage reaches 95% of all urban population and 30% of rural population and taking into account the relative geography and population density of each province, there is an expected demand of approximately 25 million cellular subscriptions by 2018*. This shows that there is a tremendous potential for growth in this sector in the future. Despite the economic down fall, deregulation of the telecom industry of Pakistan by PTA has revealed positive but slow growth in terms of revenues and subscribers. Tele density of the country has jumped from 44.06% in 2006-07 to 58.8% in 2007-08. In 1HFY09 it reached to 60% highest in the region. Cellular Mobile segment of the industry has been measured as an accelerator of the growth for the telecom industry in Pakistan. Cellular subscribers grew by about 40% in the year 2007-08, as against 82% in 2006 -07 and more than 100% during 2005-06. As PTA (Pakistan Telecom industry, 2009) has tried to put the cellular industry into new stage with the prominence on quality, value added service and competitive pricing with the aim of stabilizing the tariffs.

Figures from the Pakistan Telecommunication Authority indicate that as at 2006, Mobilink was the market leader with a total percentage of 46% of the market share.

Figure1. Market share of Pakistan cellular market, source <http://www.pta.gov.pk/index.php?option=com_content&task=view&id=650&Itemid=603>

2.3.2 Consumer Behaviour in PakistanThere is a great connection between a happy customer and successful marketer. By exploring customer behaviour, the business organisations not only gain knowledge of the customer satisfaction drivers but establish strategies to retain the customers and have a competing edge over the competitors in the market by reducing high costs of getting new customers or retaining existing ones hence improving the effectiveness of the employee turnover. This provides the rationale upon which this section examines the studies that have explored the issue of customer behaviour as a covariate determinant to customer satisfaction and retention. The review takes a multi-faceted perspective of various professional fields, deeply analysing the concept of customer behaviour in Pakistan with respect to the mobile services industry (and this closely relates to customer satisfaction) in the field.

Knowledge of the customer satisfaction factors is a strong backbone upon which an organisation can base its customer retention by knowing the satisfaction drivers of the customers it has attracted. Studies have been carried out that link customer satisfaction to increased company sales volume and found that the two have a strong positive correlation (e.g. Kersnik 2008, SSP 2006, Diaz-Serrano & Vieira, 2005 and Kusluvan 2003). Furthermore, though there is a great significance of using customer opinions and attitudes in various fields, not many studies have specifically focused on assessing the attitudes of customers with respect to their satisfaction with the products offered especially in developing economic systems (SSP 2006). This chapter attempts to give an assessment of the studies that have been undertaken in an attempt to investigate the relationship of the two broad dimensions of employee improvement through satisfaction and retention strategies. These two dimensions are powerfully related when attempts are made to understand or debunk on employee improvement relevance and approaches. After all, the ideological significance of endeavouring to satisfy the employee is to retain the attracted customer (through a retained employee that has offered quality services) and attract more hence creating a pool of loyal customer in the market. The end result: – strong customer base and hence formidable market dominance.

Research studies that have investigated efficiency and effectiveness and sales and marketing strategies in various fields are also explored. Moreover, the trend in the literature indicates that the number of research studies exploring successful sales promotions in these fields steadily increasing. This is probably due to the increasing need for information by the business organisation arising from the heightened competition for both qualified and experienced labour and for market dominance and product leadership. Businesses want to know ways of staging their competition to assert their presence in the market. This is very important, as knowledge regarding customer satisfaction should enhance customer care services by providing the customer service practitioners and sales personnel in these institutions with information that can make planning a better exercise. This knowledge should in the end lead to optimal customer satisfaction (Kacel et al 2005).

In definition, customer satisfaction can be understood as an attitudinal concept which reconciles the customer expectation and actual experience (Mont & Plepys 2003). When the difference between the two aspects (i.e. expectation and actual experience) is wide, then there is little satisfaction and an organisation stands high chances of losing the attracted manpower, reduced good quality production, poor customer service delivery and general product placement diminishes.

Kersnik (2008) carried out an investigation into the determinants of customer satisfaction in a reformed healthcare system in Slovenia. Customer satisfaction is a vital tool for operation of any business in all industries. In the health care system, Kersnik (2008) notes, the satisfaction of the customer is defining to the customer’s choice of family physician. The research used postal survey to conduct the research with a response rate of 84%. This response rate is statistically sufficient to represent the opinions of the targeted group. Since the objective of the study was to determine the customer satisfaction in the reformed health care system in Slovenia, the results of the survey study indicated that the choice of health care services provider even in the reformed system is anchored on the satisfaction of the customer (or perceived customer).

Cooper (2008) observes that because of this knowledge about customer satisfaction with the services of doctors and nurses in the field of health care services, it should therefore help in strengthening the complex intermarriage of various variables across the board with respect to satisfaction of the consumers in the healthcare industry. He further observes that consumer satisfaction will eventually lead to job satisfaction in the service providers and in turn make them dedicate their energies to giving better services. Put in the business setting of any other industry, what this implies is that when the customer is satisfied and the organisation’s employees are made aware of the fact, they too are motivated and hence become satisfied with their job; satisfaction of one is dependent on satisfaction of the other in one or more ways. It in part therefore stresses the significance of involving the employees in the customer plans.

With the changing characteristics of the market platform on which business is conducted, the aspect of customer satisfaction becomes even more relevant. Online businesses that deal with clients in a virtual world would wish to know the satisfaction of their customers. This is the basis of the research article by Nusair and Kandampully (2008) which sought to establish the factors that influence customer satisfaction in online business platforms. Nusair and Kandampully (2008) conducted a survey of travel websites with respect customer satisfaction.

In 2007, Balabanis and Souitaris conducted a related research though their research aimed at investigating the extent to which segmentation and differentiation strategies could be used to create increased customer satisfaction in online businesses. Their sample was drawn from UK grocery online buyers. Since consumer behaviour is diverse, the researchers classified their respondents as either experiential or goal-oriented. Their findings showed that each group of consumers required different approach to achieve satisfaction. However, they found out that both groups exhibited more loyalty when satisfied with the services provided (Balabanis & Souitaris 2007); which means that improving the status of the service providers is paramount to achieving customer satisfaction hence better product performance.

As a component of the contemporary business model, corporations and business organisations customarily examined the consequences of changes in customer satisfaction on sales volume and customer retention (Tang & Bougoure 2007). Tang & Bougoure (2007) posit that there is an integral link connecting customer satisfaction and service quality, a link which cannot be doubted. The two researchers make an observation, which concurs with what Bates and associates (1995) had observed in their study. The two research associates observe that for a better business standing in the market and better performance, the business should aim at providing an excess of the satisfaction customers expect out of the services (Tang & Bougoure 2007). This gives an organisation’s marketing department and customer service departments a fundamental challenge.

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