Sales promotion is a type of “Pull marketing” technique. If you have a product which is new in the market or which is not receiving a lot of attention, then you can promote this product to customers via sales promotions. You can use various techniques like giving discounts on the product or offering 1 + 1 free schemes.
In short, sales promotion is the process of persuading a potential customer to buy the product.
Sales promotion is designed to be used as a short-term tactic to boost sales – it is rarely suitable as a method of building long-term customer loyalty. Some sales promotions are aimed at consumers. Others are targeted at intermediaries and at the firm’s sales force.
The American Marketing Association (AMA), in its Web-based “Dictionary of Marketing Terms,” defines sales promotion as “media and nonmedia marketing pressure applied for a predetermined, limited period of time in order to stimulate trial, increase consumer demand, or improve product availability.”
There are surely a lot of benefits a business can gain by using Sales Promotion strategies. Here are some of the most beneficial ones.
1. Luring New Customers with Price
By offering a reduced price on a popular item, you can lure customers away from competitors, which may ultimately help turn them into regular shoppers.
Example: If you own a small electronics store that’s competing with a large retailer, offer a discounted price on a popular cell phone model for a limited time. If you serve the customers well during the purchase process, they may be willing to come back.
2. Gaining Community Favor
Create a good name for your business by staging a promotion that supports a worthy cause.
Example: If your town needs a new fire engine or police car, donate a portion of customer purchases at your business to the cause. You’ll be helping your community, which is a win-win for everyone and may lead to more business for you.
3. Encourage Repeat Purchases
Businesses like airlines and hotels successfully use rewards programs to encourage customer loyalty, and you can do the same for your small business.
Example: If you own a coffee shop, for instance, give customers a rewards card that you hole-punch each time they make a purchase. After they make five or 10 purchases, they can redeem the card for a free cup of coffee. This is done by one of the most well-known coffee shop in the world — Starbucks.
4. Entice Reluctant Consumers
Giving away free products or services is a good way to get people to try them for the first time, which may lead to a purchase.
Example: If you own a deli and you’ve added a new sandwich to the menu, pass out small samples to each of your customers as they come in the door. If you operate a health club, offer a free trial membership or free personal training sessions to get people to give you a try.
5. Providing Information
A sales promotion can help you provide information to potential customers that aids them in making a decision. This can be beneficial for products or services that are complicated or are unfamiliar to consumers.
Example: If you’re a financial planner and you’re attempting to gain clients in the area of retirement planning, a free seminar allows you to explain what you do and how some of your investment products work.
Promotions, when done well, are an effective way for you to market your business or products and services.
I’m not talking about promotions where you drop the prices on your existing products significantly, or when you have a blowout sale to move stale inventory. Instead, I mean a well-planned, seasonally relevant focus on themes or solutions wrapped around your products that your customers will take note of and value and that prospects will be enticed to try for the first time.
In general, there are two types of Sales Promotion — consumer and trade.
1. Consumer Sales Promotion
Any sales promotion activity that you do keeping the end consumer in mind is known as consumer sales promotions. Example – if an E-commerce website gives 10% discount on its products, then it wants the consumers to make the best of this deal. This is a consumer focused promotional activity and hence can be called as consumer sales promotions.
The objective of Consumer sales promotions might be various. A consumer might be asked to test a sample of a completely new perfume in the market and rate it. An existing customer might be asked to use a Scratch card so that he receives a gift.
At the end, the result should be an action from the consumer. Either the consumer should purchase the product right away, or he should come to know about the product so that further awareness is created for the brand.
2. Trade Sales Promotion
If your promotional activities are focused on Dealers, distributors or agents, then it is known as trade promotions. There is a lot of competition in any field. And in channel sales, to get the products moving and to motivate the dealer to perform better, trade discounts are given.
There are other types of trade sales promotions which can be used to motivate the dealer and distributor. More such techniques of sales promotions are discussed below.
As the noise of competitors rises, you will find more and more companies using sales promotions techniques. The advantage of sales promotion is that they are not too expensive for the company when compared with ATL advertising mediums like Television or newspaper. Hence, even small businesses use it quite effectively.
If you want your sales promotion to be effective and gain positive results, follow these three important steps:
1. Target your effort
Promotions can spur purchases by established customers, reel in new customers, draw customers from competitors, get current customers to buy differently, and stimulate business during slow periods. But rarely can one promotion accomplish all of those objectives at once.
2. Plan your incentive
A well-thought-out, properly targeted promotion prompts customers to take action by offering the appropriate incentives.
3. Know what you want to achieve
Promotions work especially well when consumers are in need of a jolt to take buying action. Just be clear about what you want to achieve. Set the number of sales you want to ring up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve. Then determine what your desired change will mean financially to your business.
Each and every business is different and therefore, the type of sales promotion used by each business needs to be different.
Being a competitive world, most companies use a combination of various sales promotional methods to defeat competitors, attract and retain customers and most importantly, to increase the sale of their products or services.
