EFFECT OF SALES PROMOTION ACTIVITIES ON SALES VOLUME OF COMMERCIAL VEHICLE DEALERS IN VIDHARBHA (MAHARASHTRA)

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1 EFFECT OF SALES PROMOTION ACTIVITIES ON SALES VOLUME OF COMMERCIAL VEHICLE DEALERS IN VIDHARBHA (MAHARASHTRA) Dr Sadashiv. P. Kalyankar Professor Mr. Babapeer.S.Hamgi Asst. Professor ABSTRACT Indian four wheeler commercial vehicles industry is facing stiff competition, as new players and new variants / models are introduced in the market regularly making it difficult to the Dealers of Commercial vehicles to maintain their sales volume year after year. The manufacturers introduce new models / variants / improvements in the existing models from time to time. The dealers have to take advantage of these by educating their local customers and conclude the sales. Typically a commercial vehicle customer is rural based and buys the vehicle purely to earn livelihood and or to increase the efficiency of his business to earn more. Due to this peculiar nature of the business the local dealer plays a vital role by providing Pre Sales AND Post sales support to customer to win the confidence. In order to achieve the designated target the dealer is required to maintain a close rapport with the target market through various sales promotional activities The present study conducted at three commercial vehicles dealers at Nagpur and Yaotmal tries to establish an cause and effect relationship between various sales promotional activities conducted by dealer result in increase of sales volume. For this a detailed analysis was done on the data of last 2 years at 3 dealership and it was concluded that there is a direct relationship between the number of sales activities conducted and the sales volume as increased sales promotional activities have resulted in increased sales volume at 2 dealership and decline in activities has resulted in downward sales at third dealer. KEYWORDS Dealer, post sales activity, presales activity, promotion, sales promotion, sales volume. 1

2 INTRODUCTION An overview of automobile industry in India around Composition, Current Situation, Challenges in automobile marketing. COMPOSTION OF AUTOMOBILE INDUSTRY IN INDIA An Automobile industry is one of the old and basic industry in India and mainly consists of Two Wheeler Industry ( scooterretes, scooters, motorcycles of various capacities), Three Wheeler Industry ( Both Passenger carrying and Goods carrying ),Commercial Vehicles Industry ( this includes a wide range of CVs such as Small Commercial Vehicles, Medium Commercial Vehicles Heavy Commercial Vehicles Multi Axle Heavy Commercial Vehicles etc in both Passenger carrying and Goods Carrying and Special Purpose / Application Vehicles, Tractor Industry ( Both Tractors used at farmlands and for other commercial application), Passenger Vehicles(PV) industry This includes All Cars Multi Utility Vehicles Sports Utility Vehicles and its variants ) & Auto Ancillary & Auto Component Industry, This includes a large no of industries catering to Automobile Industry such as Tyres, Batteries,Auto Electric Pats and various auto component industries. CURRENT SITUATION AND OPPORTUNITIES A moderation in industrial activity and an expected slowdown in infrastructure spending are likely to restrict medium and heavy CV (MHCV) volume growth to between three per cent and five per cent this year. Light commercial vehicles (LCVs), which are more dependent on consumer non-discretionary activities and less on industrial activity, are expected to achieve volume growth of per cent this year. The increasing number of competitors (currently 27 players in the cars/utility/commercial vehicles segment and nine in the two-wheeler segment) may structurally affect operating margins in the industry. Players are likely to face difficulties in passing cost increases on to customers, and instances of prices being cut to boost demand are likely to rise. Significant increases are expected in production capacity for PVs (10 per cent) and CVs (25 per cent). As a result, industry utilization rates should decline considering muted demand growth. Capacity additions to protect market share in the face of increased competition are likely to continue in The capacity overhang in the medium term should add to pressure on margins, which are already being hit by cyclical factors such as demand moderation and structural changes such as increased competition. As it has already been stated in Motor India A continuation of the high interest rate environment or a downward revision in economic activity would significantly affect the credit metrics of companies, particularly the original equipment manufacturers (OEMs) in the MHCV segment. In the case of PVs, the volume growth rate may be negative if consumer purchasing power is further weakened due to continued high consumer inflation coupled with a less-than-commensurate rise in income levels. At the same time, a revision in the outlook to positive is unlikely in the medium term even if interest rates are reduced, due to the adverse impact of competition-led pricing pressure on the financial profiles of OEMs. Historically, LCV sales volume growth has shown higher stability than MHCV volume growth across entire business and interest rate cycles. In India, LCVs are more often linked to economic activity in the non-discretionary segment and used mostly for intra-city shipments. MHCVs are more often used for inter-city or inter-state transportation of mostly industrial 2

3 goods. Given the current interest rate scenario and expected levels of industrial activity, MHCV sales are unlikely to recover and should be driven more by replacement demand than fresh capacity additions. PROFITABILITY MARGINS Heightened competition in the Indian auto market may lead to a fall in operating margins. In addition, with overall demand in the industry likely to remain muted, OEMs are likely to respond with price discounts to shore up volumes. This is likely to further stress industry players operating margins this year. Further, profitability margins of foreign auto OEMs and JV companies may be pressured by limited indigenization levels. If the rupee continues weak against the US dollar, import costs for companies would be higher, with exports providing only a partial hedge. Competitive pressure in the past five years has restricted the ability of auto OEMs to pass on increases in the cost of key inputs such as steel, aluminum and rubber. The prices of these commodities may fall slightly, in line with lower industrial off take globally, providing some respite to OEMs. The net impact of all of the above factors will be a 250bp-300bp reduction in industry average operating margins. Considering the adverse impact of the economic slowdown on MHCV volumes, companies with a presence mainly in this segment are likely to see their financials coming under stress. Companies with a large presence in LCVs could meanwhile maintain their credit profiles at current levels based on a lower impact of economic cycles on LCV volumes. CHALLENGES IN AUTOMOBILE MARKETING Today s Automobile Marketing is facing immense competition in each segment from the local manufacturer as well as from almost all World players in Automobile. The presence of almost all brands has given the Customer a choice as never before. This situation has put all the manufacturers under pressure to perform and deliver the Value for Money. Traditionally Automobile Industry enjoyed protected environment due to either Govt. Policies or smaller market size. Today as economic pace has increased with better infrastructure facilitates the market is expanding in almost all segments of Auto Industry there by forcing industry to take cognizance various issues such as Pollution, Vehicle Recall, Policies etc. Typically any change improvement in product feature/s desired by customers and on necessitated for performance enhancement require large capital investment and time gestation. The Industry has to face these and various other challenges of ever changing Macro and Micro Environment. The above scenario clearly puts the pressure on the retailing of the vehicles to the end user/customers. A typical retailer in automobile especially in commercial vehicles has to perform various functions such as, SSS facility--providing infrastructure such as showroom, workshop, spare parts, Providing adequate working capital for the business, Providing adequate manpower for the business to conduct various sales promotional activities. 3

4 LITERATURE REVIEW Ali Akbar Balaghar in 2012 observed the main hypothesis of the missed opportunity for services marketers. There is a significant relationship promotional tools and sales volume. One of the main goals of implementing the customer retention of dissatisfied business promotional plans is to increase sales volume and achieve services customers, Managing Service Quarterly & higher profit levels. Pranav Ranjan Applied factor analysis method and arrived at four factors namely utility, technology, price, after sales service and sales promotional activities and concluded that sales & promotional activities have an impact on consumer buying behaviour and thereby on the sales volume. Shahriar Ansari found Sales promotion has become a vital tool for marketing and its importance has been increasing significantly over the years. One of the purposes of a sales promotion is to elicit a direct impact on the purchase behaviour of the firm s consumers. Firms have to rethink the relationship between attitude and behaviour of their consumers. Sales promotions are highly effective in exposing consumers to products for the first time and can serve as key promotional components in the early stages of new product presentation. He found that IKCO Co. sales promotion have a positive effect on consumers' interest to purchase. The results of significance level test indicate that out of all seven factors-music, expressing the features, techniques used, content, stimulating affect, providing information about the New products, and the advertising slogans-five factors have significant impact on viewers interest to purchase, leaving the other two factors, i.e. stimulating affect and advertising slogans had comparatively, a little lesser impact on consumers interest. OBJECTIVE OF THE STUDY 1.. To identify the various sales promotional activity required to be conducted by a dealer for commercial vehicle. 2. To study the impact of the sales promotional activity on the sales volume. 4

5 HYPOTHESIS 1.. There is a significant relationship between promotional activities and the sales volume. 2.. There is significant relationship between presales activities to sales volume and post sales activity to sales volume. RESEARCH METHODOLOGY RESEARCH DESIGN Descriptive research design is considered in the present study. Researcher has collected data from owners of the dealerships pertaining to two financial years and by personal interview method with the help of pretested questionnaire specially designed to meet the objectives of the study. SCOPE OF THE STUDY The scope of the study is limited to commercial vehicle industry. The study covers three dealerships at Nagpur and Yaotmal in. Definitions of sales promotional activity: The dealer plays a vital role between the manufacturer and the customer and is responsible for insuring continuous connectivity with the target market. For this the dealer is required to conduct various presales and post sales activities as detailed below. PRESALES ACTIVITY 1.. Demonstration-The dealer has to ensure that all the potential customers are well aware about the various features, advantages and benefits (FAB) of all the vehicles for which the dealer has to physically demonstrate the features, technical specification, etc. These demonstrations have to be conducted at the various key locations/economic centres in the geographical area in which the dealership operates. 2.. Test Drives & Trials-In order to convince the FAB of the particular vehicle it is necessary to offer test drives/ trials which help to create a confidence in the minds of the customer. 3.. Loan Mela/ Exchange Mela-In commercial vehicle industry almost 95% of the vehicles are purchased by customers on loan and about 25% of vehicles are purchased by exchanging the old vehicle. Therefore the dealer has to conduct loan melas and exchange melas to facilitate the sales. 5

6 4.. Financiers Meet-As 95% of commercial vehicles are purchased on loan it is necessary that attractive finance schemes are offered to the customer to facilitate the sale. In order to arrange the finance for customer the dealer must have excellent rapport and relationship with all the finance companies and banks. For which regular Meets of these finance companies and banks is required to be conducted. 5.. Brokers Meet-Brokers play a very important role is sale of commercial vehicles in both new and old vehicles. As the customers are spread across the geographical territory they are closer to the brokers situated in various smaller locations/localities where dealer does not have a direct reach. 6.. Customer Meet-The dealer is required to conduct potential customers meet where he gets an opportunity to showcase the entire range of vehicles available for customers and also interact on one to one basis to clarify doubts & close the deals. A detailed and organized presentation is normally arranged which helps to create the confidence level in the minds of the customer as such meets are normally participated by manufacturer s sales and service team. POSTSALES ACTIVITY 1. Service Camps-Besides offering free service and paid service to the customer a dealer also arranges service camp wherein the customer is offered free checkup, discount on labor charges, discount on spare parts, etc which helps the dealer to create goodwill and have long term relationship with the customer. 2. Remote Service Camp-The dealer is required to conduct small service camps at remote locations to offer free checkup and service to the customers. 3. Spare Parts Dealer Meet-As the customers are spread over the geographical territory, it is necessary for the dealer to have spare part availability at different locations through the multi brand independent spare part dealers. 4. Local mechanics Meet-As the customers are spread across the geographical territory they are likely to approach the local mechanics in their area. It is necessary that these local mechanics are aware about the technology and the servicing of the vehicles. The dealer needs to train the local mechanics and win their confidence so that they speak positively about the product. 6

7 RESULTS The collected data was tabulated and simple tabular analysis was done to meet the objective under study, the data analysis revealed that: The study clearly indicates a strong correlation between the various presales and post sales activities done by a commercial vehicle dealer on the sales performance of the dealership indicating a direct bearing on the sales. The sales activities have positive impact on the sales volume though it is not directly proportionate and also varies depending upon the different geographical areas. The presales activities contribute to almost 65%-75% sales and activities involving business associates results in about 25%-35% of sales. The pattern appears, as more no of activities directed towards end user/customer more is the effect on the sales volume. Though the activities conducted towards the Business Associates such as finance companies, banks, brokers, spare part dealers, mechanics, etc are not directly resulting into increase in sales no, they are necessary hygiene factors. As the sales volume increases the dealer is able to earn substantially higher amount as a dealer margin though the expenses incurred for the additional sales activity as much lesser. Vehicles Nagpur has increased the activity level from 254(350 no enquiries) no of activities to 324(800 enquiries) no, an increase of 28% which has resulted into the increase in the know of sales from 39 vehicles to 102 vehicles about 158% growth. Motors Yaotmal has increased the activity level from 361(1250 no of enquiries) no of activities to 431(1600 no of enquiries) no, an increase of 20% which has resulted into the increase in the know of sales from 150 vehicles to 186 vehicles about 22% growth. Shree Motors Nagpur has decreased the activity level from 310(750 no of enquiries) no of activities to 255(600 no of enquiries) no, a decrease of 17% which has resulted into the decrease in the know of sales from 134 vehicles to 67 vehicles about 48% decline. 7

8 CONCLUSION Vehicles Nagpur increased the sales volume by 158% over last year and Motors Yaotmal increased the sales volume by 28% where as the sales volume of Shree Motors Nagpur declined by 48%. There is definite relationship between the no sales promotional activities conducted by the dealer and the sales volume achieved by them. LIMITATIONS OF THE STUDY 1.. The study was limited to only three dealerships of commercial vehicle dealer. 2.. Though the increase in sales volume is resulting as a impact of the various sales promotional activities conducted by the dealer, there are other various factors for increase in sales such as overall increase in the market size, interest of the owner of the dealership, performance by the field sales team of the dealer, which are not covered in the present study. REFERENCES Annexure: 1.. Ali Akbar Balaghar Evaluation of effectiveness of sales promotional tools on sales volume at Iran Tractor manufacturinf complex in 2012(Middle East Journal of Scientific Research 11 ISSN ) 2.. Pranav Ranjan Effect of sales promotional activities adopted by Mahindra automobiles on rural market of Punjab(International Journal of Research in commerce and management Volume no ISSN ) 3.. Koen Pauwels New Products, Sales promotions and firm value with application to the automobile industry (Forthcoming journal of marketing 2004) 4.. Shariar Ansari The Effect of sales promotion on consumer interest to purchase IKCO automotive product(scientific papers Jornal of knowledge management June 2011) 5.. Motor India (Issue of July 2012) Table No 1 Modelwise Dealerwise Sales Volume (Nos. ) for 2 years Model Cat Vehicles Nagpur Shree Nagpur Motors Motors Yaotmal TRUMP 15 Goods

9 2 TRUMP 40 Goods TRAX KK Goods T1 DVS Goods TOT. GOODS Goods TRIP Pass TRAX Pass TRAVELLER Pass TOT. PASSENGER Pass Total Vehicles All Source-- Data provided by Dealers Table No 2 Dealerwise Sales Promotional Expenses Sales Promotional Activity 1 Demonstrations Pre Sales Shree Nagpur ( Rs. ) for 2 Years Pre Sales/ Vehicles Post Sales Nagpur Motors Yaotmal Test Drives / Trials Pre Sales Loan Melas / Exchange Melas Pre Sales Financiers Meet Pre Sales Brokers Meet Pre Sales Customers Meet Pre Sales Expenses for Total Pre Sales Pre Sales Activities Service Camps Post Sales Remote Service Camps Post Sales Spare Parts Dealers Meet Post Sales Local Mechanics Meet Post Sales Expenses for Total Post Sales 12 Post Sales Activities Total Expenses ALL Addl expenses over year Sales Volume Nos Addl Dealer Margin Earnedf on Addl Average Rs per veh Source-- Data provided by Dealers Motors 9

10 Table No 3 Sales volume Nos in relation to Type of activity for 2 Years Pre Sales/ Sales Promotional Activity Vehicles Post Nagpur Sales Shree Motors Nagpur Motors Yaotmal Tota l % 1 Demonstrations Pre Sales Test Drives / Trials Pre Sales Loan Melas / Exchange Pre Sales 89 Melas Financiers Meet Pre Sales Brokers Meet Pre Sales Customers Meet Pre Sales Sales Nos / Total Pre Sales Pre Sales Activities 79 7 Service Camps Post 33 Sales Remote Service Camps Post 60 Sales Spare Parts Dealers Meet Post 24 Sales Local Mechanics Meet Post 27 Sales Sales Nos / Total Post Sales Post Activities Sales Sales Nos / Sales Promotional Activities Source-- Data provided by Dealers ALL