An essential part of promotion is a new tool of driving sales that is sales promotions and we have allotted $ 4000 for channel 1 and $ 1000 for channel 2.Sales promotions are a new tool that is being used via the dealers only since these dealers show presentations, hand out brochures, announce contests and value deals to attract customers.
In this way we can offer the dealers a certain amount or quanity free for purchasing an amount of our product and these in this sense are called trade promotions that help retain the best dealers in the channel and also to drive sales. The wholesale price of Premeter 3 is $ 100 in channel 1 and $ 97 in channel 2 against which the sales promotion budget for each channel has been set.
The sales promotion budget for the year 2 remained $ 5000 but to improve the performance of channel 2 $ 4000 were invested as sales promotions and since channel 1 was reaping profits the sale promotions were reduced to $ 1000.Sales promotions gained momentum in theindustry and the competitors were using it a lot so the budget had to be increased. In year 3, $ 200,000 were invested in channel 1 and $ 76,000 were invested in channel 2. More was invested in channel 1 since it was giving more profits and the products were now being changed as features were being increased and they were eventually highly priced. Channel 2 was best for highly priced goods and more sales promotions in this channel with the strategy of innovations would churn more sales. The budget went down to $ 190,000 for channel 1 and $ 160,000 for channel 2 in year 4 since most of the budget was being spent on developing the product so a lesser amount was left for marketing and also because the strategy in year 4 did not reap much profits. In year 5, with the realization that the strategy had not worked as expected so the sales promotions budget went down to $ 150,000 each for both the channels and this year marked the low cost strategy.
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