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According to legendary marketing genius, Philip Kotler, usually, when a brand is price promoted too often, the consumer begins to devalue it and buy it mainly when it goes on sale. Dominant brands offer deals less frequently, because most deals only subsidise current users.

It is clear from the above comment that promotion has a negative impact on the brand. However, marketers frequently involved in promotion of products and services in order to build awareness of the product, induce trial of the product and bring visibility to new launch of product, in response to competitors' products, to increase customer frequency and to retain loyal customers. Furthermore, changing landscape of retail (kirana to modern retail format stores) enforces the need for promotion of products and services to lure customers to modern retail. Recently, modern retail stores located in Hyderabad and other places in India are offering various promos such as one free product for one or two units of product purchase and special discounted price for products such a sugar and atta.

How Mindless Promotions can Distort Forecasts

However, mindless promotion results in creating distortions in the demand forecasting, thereby, creating havoc at each level in the supply chain. This can be illustrated by a case study of leading international FMCG manufacturer, which could highlight the effect of promotion on demand forecasting and supply chain of the company. A leading International FMCG soup manufacturer regularly induced price promotion during the month of January to boost the sales of the product. Retailers responded to price promotion by stocking up the products, and in some instances, they even bought a year's supply in advance, which is common practice in industry called as Forward Buying.

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* Contributed by: -
Uppili. R,
Alumnus of Great Lakes Institute of Management & M.A. (Economics) from Madras University,
Currently working as Research Analyst at Vistasoft India Private Limited.