promotion - sales promotion

Introduction

A good definition of sales promotion would be as follows:

“An activity designed to boost the sales of a product or service. It may include an advertising campaign, increased PR activity, a free-sample campaign, offering free gifts or trading stamps, arranging demonstrations or exhibitions, setting up competitions with attractive prizes, temporary price reductions, door-to-door calling, telemarketing, personal letters on other methods”.

More than any other element of the promotional mix, sales promotion is about “action”. It is about stimulating customers to buy a product. It is not designed to be informative – a role which advertising is much better suited to.

Sales promotion is commonly referred to as “Below the Line” promotion.

Sales promotion can be directed at:

• The ultimate consumer (a “pull strategy” encouraging purchase)

• The distribution channel (a “push strategy” encouraging the channels to stock the product). This is usually known as “selling into the trade”

Methods of sales promotion

There are many consumer sales promotional techniques available, summarised in the table below:

Price promotions

Price promotions are also commonly known as” price discounting”

These offer either (1) a discount to the normal selling price of a product, or (2) more of the product at the normal price.

Increased sales gained from price promotions are at the expense of a loss in profit – so these promotions must be used with care.

A producer must also guard against the possible negative effect of discounting on a brand’s reputation

Coupons

Coupons are another, very versatile, way of offering a discount. Consider the following examples of the use of coupons:

- On a pack to encourage repeat purchase
- In coupon books sent out in newspapers allowing customers to redeem the coupon at a retailer
- A cut-out coupon as part of an advert
- On the back of till receipts

The key objective with a coupon promotion is to maximise the redemption rate – this is the proportion of customers actually using the coupon.

One problem with coupons is that they may simply encourage customers to buy what they would have bought anyway. Another problem occurs when retailers do not hold sufficient stocks of the promoted product – causing customer disappointment.

Use of coupon promotions is, therefore, often best for new products or perhaps to encourage sales of existing products that are slowing down.

Gift with purchase

The “gift with purchase” is a very common promotional technique. It is also known as a “premium promotion” in that the customer gets something in addition to the main purchase. This type of promotion is widely used for:

- Subscription-based products (e.g. magazines)
- Consumer luxuries (e.g. perfumes)

Competitions and prizes

Another popular promotion tool with many variants. Most competition and prize promotions are subject to legal restrictions.

Money refunds

Here, a customer receives a money refund after submitting a proof of purchase to the manufacturer.
These schemes are often viewed with some suspicion by customers – particularly if the method of obtaining a refund looks unusual or onerous.

Frequent user / loyalty incentives

Repeat purchases may be stimulated by frequent user incentives. Perhaps the best examples of this are the many frequent flyer or user schemes used by airlines, train companies, car hire companies etc.

Point-of-sale displays

Research into customer buying behaviour in retail stores suggests that a significant proportion of purchases results from promotions that customers see in the store. Attractive, informative and well-positioned point-of-sale displays are, therefore, very important part of the sales promotional activity in retail outlets.