Marketing strategies of institutional sales


Consumer durables and fast-moving consumer goods (FMCG) companies are now resorting to extreme hype to stand out in a fairly saturated market. Institutional marketing where companies promote their products in other organizations, companies or institutions is increasingly relying on two or three day product displays in medium to large corporate companies. A typical event, with attractive deals and discounts thrown in, would give a gamut of products instant visibility especially new or dull products.

Recently an Indian reputed group company ‘Godrej Appliances’ offered employees of ICICI Bank a fantastic deal that it was an instant hit. The offer was a free diamond locket with a microwave oven. Another top consumer durables MNC, which refuses to be named, showcased its products at one of the country’s largest groups. Its offer too was a mind-blowing free three-day stay at a resort plus a return air ticket, on an LCD television or a side-by-side refrigerator. At the lowest end of its products, the company dangled a free MP3 player. These are not random instances of organizational largesse.

This kind of positioning, through freebies create a buzz and any kind of discussion helps a product. It gives a benign feel, a softer edge to a brand. According to a marketing expert, because the advertised word isn’t working that much always in FMCG the strategy of largesse through institutional sales is followed at least for short periods.

Most companies have dedicated institutional marketing teams in place, although some employ marketing companies for these activities. The frequency of events too has risen. While Godrej taps into it twice a month, Samsung India Electronics holds out at least five events in the same time frame. The MD of Samsung India says that their institutional team has been beefed up five fold. They have now dedicated teams in charge of separate schemes for hospitality and employee welfare sectors. The employees welfare segment where companies buy products in bulk from manufacturers and offer them to their employees at a lower rate or even for free. Sometimes termed with generous deals, is also a large component of Institutional sales. Last year, employees of MICO were given LG washing machines, microwave ovens and television sets as part of wage settlement. Welfare segment apart, companies say that cross-promotions too are a big component of institutional sales. Maruti customers sometime back were offered LG coupons of various denominations, from Rs.5,000 to Rs.100,000 to be redeemed at LG offices.

Another illustration of sales through institution is a tie up Godrej with ICICI bank. The ICICI credit card users could book Godrej Air conditioners for just Re 1 and pay the rest in 9 monthly installments.

Companies say that institutional sales now account for 10% of their turnover. This figure would also, among others includes cross promotions and product that companies buy for their own end use. LG sees a 100% jump in this segment in this year. Marketing experts put the share of welfare schemes at 2%.

A niggling doubt is whether the freebies work out to be costlier than the product itself or is it economically viable.

Companies unanimously say that such offers translate into immediate sales. They mean publicity for freebies, they usually come at discounts. These types of promotions with freebies may or may not translate into future sales. The FMCG companies are setting up their own processes to track results to evaluate relationships with organizations sales.

Margins are lower in this category say marketing experts. But these activities have a largely gimmicky value. It makes the brand larger than life. But it does little for the top line, leave alone the bottom line. It works for the image line of a company. There are companies that give shareholders coupons but few redeem them.