Sales Promotions are an important ingredient of the marketing mix. By utilizing media as well as non-media channels and marketing communications strategies, sales promotions aim to stimulate customer interest in a particular product or service. Without proper sales promotions, consumers are left in the dark about valuable offerings which they can utilize to their own benefits.
This article is going to dive deep into the art of sales promotions and take a look under the hood to understand what sales promotions actually are, how they work and why they are absolutely necessary.
So, without further ado, let us tackle the biggest question of all first: how do you define a sales promotion?
What Is Sales Promotion?
Put simply, a sales promotion is any activity that a business undertakes to promote sales of its products or services. Sales promotions can be targeted to a particular product, or may include multiple products and services offered under a brand name. Companies aim to get new customers interested in their offerings through the use of promotional activities such as discounts, contests and freebies, just to name a few.
When executed properly, sales promotions can get stock moving fast and work wonders for attracting new customers, as well as retaining and re-igniting the interest of regular patrons. However, these need not be the only objectives of sales promotions, as is explored in the next section.
Objectives of Sales Promotions
Sales promotions can have multiple objectives. These can be classified under the following heads:
To Introduce New Products Or Services
One of the primary objectives of sales promotions is to motivate customers to try out new products or services. This is usually done through free product giveaways and discounts. Dealers can also be incentivized to sell the new products.
Exploring New Markets
Sales promotions can prove to be an important tool for businesses which want to branch out to new markets and attract a steady customer flow.
Gaining New Customers
Sales promotions also aim to attract new customers. By offering attractive discounts and conducting contests, companies hope to add new patrons to their existing customer base.
Increasing Sales During Off–Seasons
Certain products or services have seasonal demands, or are purchased more during festive occasions. In order to maintain a steady demand during off-seasons businesses undertake sales promotions to entice customers for making purchases.
Increasing Brand Loyalty And Awareness
Through sales promotion campaigns, companies strive to increase awareness of their brands in the minds of customers, and to maintain a loyal customer base. Customer loyalty can prove to be a deciding factor in the success of a business.
To Remain Competitive In The Market
Finally, sales promotions help a company to remain competitive. If you are not attracting customers through promotions, then you risk losing them out to your competitors.
The Importance Of Sales Promotions
Sales promotions provide a means of reaching out to potential customers directly, often at the point-of-sale. Effective sales promotions can influence customers to make on-the-spot purchases. In this way, sales promotions help to spread the word and increase demand of a particular product or service. These promotional activities also help to improve customer satisfaction.
Types Of Sales Promotions
Broadly, sales promotions can be broken down into the following two types:
Consumer Sales Promotion
Consumer Sales Promotion covers any sales promotional activity targeting the end-user. The purpose of such a sales promotion may be to spread awareness about the product, or to nudge the customer into making a purchase. Discounts, sample offerings and contests are some common forms of this type. The desired result of such sales promotions should usually be an action on part of the consumer, preferably a purchase.
Trade Sales Promotions
This type of sales promotion is geared towards business stakeholders such as dealers and distributors. By providing incentives, usually in the form of discounts for increased product sales, companies motivate dealers to move a greater amount of stock and thus increase revenue. Skillful motivation of the dealers and distributors can go a long way towards improving profitability and scoring over competition.
Next, let’s discuss the various sales promotion techniques that businesses use to improve sales and achieve profitability.
Sales Promotion Techniques
With competition intensifying every day and market conditions in a state of constant flux, effective sales promotion techniques can go a long way towards helping companies achieve their business goals. The various sales promotion techniques can again be divided under the same heads as above.
Consumer Sales Promotion Techniques
Consumer Sales Promotion Techniques are geared to target the end-customers specifically and elicit positive action from them. Some common techniques that can be classified under this head are as follows:
- Big Discounts And Special Prices. These two are perhaps the oldest techniques in the book, but still have a very large impact. By offering large discounts, the seller stands to move inventory and recover costs while the buyer gets the benefit of reduced prices.
- Free Gifts And Giveaways. The only thing better than a discount is a free gift! Giveaways can help to gain loyal customers quiet effectively.
- Buy One Get One Free. This is another familiar method of boosting sales. Giving away two for the price of one gives customer the right incentive to make the purchase.
- Reward Points. This is a great way to win loyal patrons and boost repeat sales, thus ensuring a steady flow of customers.
- Shipping Schemes. High shipping costs can turn away many a potential customer. By providing discounted or free shipping, a seller encourages customers to make the buy.
- Financing Schemes. Providing customers with low-interest financing options is one of the proven ways to sell an item they may not otherwise be able to afford upfront.
- Holiday Promotions. Nothing works better than a well-rounded sales promotion during the festive seasons. Be sure to include a sound digital strategy in your promotional efforts.
- Seasonal Promotions. For seasonal products, there is no better way to improve sales than a well-crafted seasonal sales promotion.
Trade Sales Promotion Techniques
Trade Sales Promotion Techniques are obviously directed towards the dealers and retailers. Some techniques under this head are as below:
- Trade Allowances. These are short term benefits provided to encourage retailers to stock and sell a particular product.
Loader. This form of incentive is provided to retailers for
purchasing and displaying a product.
Trade Contests. By engaging retailers in a contest to sell the most of your products you stand to achieve maximum sales volume.
- Point-of-Purchase Display. This is a very effective tool to stimulate on-the-spot purchases and encourage impulsive buying.
- Training Programs. Adequate training of dealer and retailer employees can also help to boost sales of a product.
- Push Money. This is a targeted form of sales promotion that incentivizes retail employees to push or promote the sales of particular products.
It must be mentioned that this is only the tip of the iceberg. When it comes to sales promotions, a business is only limited by its imagination and innovative ideas.
Sales Promotion Examples
With so much talk about sales promotions, it only makes sense to look into some actual examples. Here are two significant sales promotions in action.
McDonald’s $6 Classic Meal Deal
Promoted as a steal-deal for those looking for a full meal at affordable prices, this offering clubs a McDonald’s entrée, a drink, fries as well as a dessert item together in a neat little package to attract more customers and increase sales. A classic example of consumer sales promotion.
Stadium Nissan Loyalty Program
Again targeted towards consumers, this loyalty program by automobile giant Nissan works in the form of a cash rewards card that offers discounts and monetary incentives to loyal patrons.
Advantages and Disadvantages of Sales Promotion
Advantages of Sales Promotions
- Increased Customer Engagement. One of the primary benefits of sales promotions is that they augment customer flow and sales volumes. By offering attractive prices a business stands to gain both in terms of sales as well as customer acquisition.
- Move Inventory. Static inventory can prove to be a cause for concern for any business, especially those dealing in perishable goods. Efficient sales promotions can help to move excess stock, thus generating revenue and clearing up occupied storage space.
- Enhanced Brand Awareness. Apart from boosting sales, one of the major advantages of sales promotions remains the fact that they help spread the word about your products or services.
Disadvantages of Sales Promotions
- Impact on Reputation. Excessive promotional activities can put a dent in the customer’s opinion about a brand or service; this can harm the reputation of the business in the long run.
- Lowers Margins. Promotional activities such as large discounts bring down profit margins on a per item basis, thus requiring you to sell a larger volume of products to maintain the desired levels of profitability.
In spite of its challenges, sales promotions remain an attractive method to improve sales, drive revenue and create brand awareness among customers. With more innovative methods and catchy techniques, sales promotions look set to remain relevant for the times to come.
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