Sales promotions are being increasingly used to influence the purchase behavior of consumers in a desired way. The major reasons for the phenomenal use of sales promotional measures can be attributed to increased competition, declining brand loyalty, consumer's sensitivity to promotional deals, and increased advertising clutter. LIC, having realized its importance has undertaken sales promotion in all its three forms, such as consumer-oriented promotion, trade-oriented promotion and salesforce promotion. In view of its importance in the highly competitive life insurance market, an attempt is made in this article to examine the sales promotional measures of LIC. Sales promotion, a key ingredient in marketing campaigns, consists of a diverse collection of incentive tools, mostly short-term, designed to stimulate a quicker or greater purchase of a particular product or service by the consumers or the traders. Sales promotion is generally defined as those marketing activities that provide extra value or incentives to the salesforce, the distributors, or the ultimate consumer and can stimulate immediate sales.1 Sales promotions add value, provide a `competitive edge', boost sales during periods when demand would otherwise be weak, hasten the introduction and acceptance of new services, and generally get customers to act quicker than they would in the absence of any promotional incentive.2 A decade ago, the advertising to sales promotion ratio was about 60:40. Today, in many consumer goods companies, sales promotion accounts for 65% to 75% of the combined budget.
Sales promotion is generally broken into three major categories, such as consumer-oriented, trade-oriented and salesforce- oriented activities. Having realized the significance of sales promotion, LIC has vigorously undertaken it and made a significant benefit out of it. The consumer-oriented promotions in fact, are a part of the promotional pull strategy. These promotions includetax benefits, payment of bonus, provision of accidental benefits and higher non-medical limits. Tax benefit is one of the major weapons in the arsenal of strategies at the disposal of the corporation to promote sales. The corporation was successful in convincing the government to exempt payments made to the corporation from the purview of Income Tax Act, subject to certain limits.
In addition to tax benefits, LIC allots bonus as a uniform percentage in addition to the sum assured, or sum assured plus prevailing bonus addition. The former case is known as simple reversionary bonus, and the latter is known as compound reversionary bonus. The former is simple, popular and flexible as every time a bonus is distributed as some addition to the policy payment. The compound reversionary bonus becomes more equitable, but it is hard to calculate. |
