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In marketing, sales promotion is one of the four aspects of promotion. (The other three parts of the promotional mix are advertising, personal selling, and publicity/public relations.) Sales promotions are non-personal promotional efforts that are designed to have an immediate impact on sales. Sales promotion is media and non-media marketing communications employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples include:

• coupons
• discounts and sales
• contests
• point of purchase displays
• rebates
• gifts and incentive items
• free travel, such as free flights

Sales promotions can be directed at either the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumer are called consumer sales promotions. Sales promotions targeted at retailers and wholesale are called trade sales promotions. Some sale promotions, particularly ones with unusual methods, are considered gimmick by many.

Consumer sales promotion techniques

• Price deal: A temporary reduction in the price, such as happy hour
• Loyalty rewards program: Consumers collect points, miles, or credits for purchases and redeem them for rewards. The two most famous examples are Pepsi Stuff and AAdvantage.
• Cents-off deal: Offers a brand at a lower price. Price reduction may be a percentage marked on the package.
• Price-pack deal: The packaging offers a consumer a certain percentage more of the product for the same price (for example, 25 percent extra).
• Coupons: coupons have become a standard mechanism for sales promotions.
• Loss leader: the price of a popular product is temporarily reduced in order to stimulate other profitable sales
• Free-standing insert (FSI): A coupon booklet is inserted into the local newspaper for delivery.
• On-shelf couponing: Coupons are present at the shelf where the product is available.
• Checkout dispensers: On checkout the customer is given a coupon based on products purchased.
• On-line couponing: Coupons are available on line. Consumers print them out and take them to the store.
• Rebates: Consumers are offered money back if the receipt and barcode are mailed to the producer.
• Contests/sweepstakes/games: The consumer is automatically entered into the event by purchasing the product.
• Point-of-sale displays:
  • Aisle interrupter: A sign the juts into the aisle from the shelf.
  • Dangler: A sign that sways when a consumer walks by it.
  • Dump bin: A bin full of products dumped inside.
  • Glorifier: A small stage that elevates a product above other products.
  • Wobbler: A sign that jiggles.
  • Lipstick Board: A board on which messages are written in crayon.
  • Necker: A coupon placed on the 'neck' of a bottle.
  • YES unit: "your extra salesperson" is a pull-out fact sheet.

Promotional Pricing ]

One of the most frequently used sales promotional techniques is that of offering promotional discounts; `buying' extra sales - albeit only in the short term. These can be grouped into a number of main categories:

• Price reductions - The simple `money-off' promotion is the most direct and hence may have the most immediate impact on sales levels. As it is shown on the `pack', it is also difficult for any retailer to avoid passing it on to the consumer. It is the most expensive technique, because to be effective it usually needs to represent 15 to 20 per cent off the regular retail price. It may also prove difficult to restore the price to its original level at the end of the promotion, as consumers, and in particular retailers, may decide to stock-pile in order to hold off their purchases until the next promotion. It may also do considerable damage to the image of quality products or services, especially where the price-off `burst' or `flag' may visually dominate the label.

• Free goods - The offer of more product for the same price has a number of advantages. It often costs the supplier significantly less than a price cut, and it forces the customer to buy more than usual; possibly setting a new pattern of usage. Also, it possibly has less impact on the established price; although it can set an awkward precedent.

• Banded offers - Two or more products, often banded together using adhesive tape, almost invariably at a lower price (although one product may be offered as a `premium') are typically meant to offer greater `value'; but this normally poses problems in terms of requiring changes to the production lines - often with considerable reductions in productivity.

• Vouchers or coupons - Where the aim is to extend the penetration (or trial) of the product or service to new customers (particularly in the case of a new product launch), coupons are often used. They are most effectively delivered door-to-door, where they achieve high redemption rates. They may also be incorporated in Press advertisements - which are cheaper to run but have a considerably lower redemption rate. Depending upon the generosity of the offer, this is supposed to tempt consumers away from their existing brands to try the new one. This can be a very effective type of promotion if coupon redemption levels are high enough, and may be more cost-effective than sampling; and it clearly has only limited impact on the prices paid by existing customers.

• Cash refund - A cash refund (from the retailer or by mail), usually on the basis of a `voucher' which is attached to, or is part of, the pack, is a way of offering a controlled price reduction. On the other hand, the redemption procedures may be complex (and unwelcome to the trade). It can also be expensive: sometimes (when `trial' is being sought) the refund may even be as much as the whole purchase price, although the redemption rates reported (of only a few per cent) indicate that many purchasers never redeem the offers - and so actual costs may be significantly reduced.

• Money off next purchase - A somewhat similar coupon offer, this time on the label of the product itself, may be used to extend buying patterns; and build customer loyalty.

• Loss leader pricing - In the case of the service and distribution industries, a product or service may actually be priced below cost in order to attract customers into the branch, in the hope that they will buy other products or services which 'are' profitable.

• Cheap credit - Where credit is offered, lower-priced or even free credit may be used instead of a simple price reduction. This may be cheaper to the vendor who has access to cheaper lines of credit (although the cost of bad debts must also be covered). It may be particularly attractive to the more naive consumer who sees it as a way of getting something now, and paying later. It may also be a means of introducing the consumer to the use of the supplier's credit facilities.

• Special events - Certain sectors of the retail trade offer `special', usually seasonal, events to encourage buying during periods of traditionally low turnover.

Non-price Promotions ]

There are a number of other forms of promotion which aim to offer `added value', but which are not so directly price-related:

• Competitions - In this case the purchaser receives the right to one or more entries in a competition. Exceptionally, if the main prize is very large (and it is the size of the top prize which reportedly determines the interest of the consumer), this can be a very attention-getting form of promotion. It can be very easy and cheap to mount, and has a guaranteed fixed maximum cost. In its normal form, though, it has a lower level of interest for the consumer, with a low `redemption' rate; and is now often just used as a means of gaining extra in-store impact.

• Personality promotions - In former times, in particular, teams of `sales promoters' toured the country (sometimes dressed in the most outlandish of costumes), offering incentives such as `instant prizes' to potential users. More recently, this has been largely superseded by `in-store promotions', staffed by personnel who are usually part-timers employed by specialist agencies. The process can be expensive, and difficult to control, although it may occasionally generate some of the benefits of face-to-face selling.

• Free gifts and mail-ins - These give the customer an additional offer (a `giveaway' either `on-pack', or at point of sale, or by mailing in). They can be expensive to run (depending on the value of the `free offer'). The technique can be used to establish repeat purchase if a 'number' of coupons (and hence packs) have to be collected. However, the administration can be complex, and additional sales may just come from heavy users buying forward. A special form of the `giveaway' is one where the container itself is `reusable' (for instance, a shelf-storage jar containing instant coffee). Such free gifts are not restricted to FMCG products. Some banks, for example, have offered free legal help and surveys to those taking out a mortgage.

• Self-liquidating offers - In this case the offer is not free, as a result of which some writers call it a `premium' offer. Like a competition it can add interest and the impression is usually given that the supplier is subsidizing the offer, so that the customer will obtain a good deal on the item. In practice, the intention is usually to cover the cost within the amount paid by the customer; in effect offering the customer only the benefit of the supplier's buying power (or the special deal which has been negotiated). It is now seen as having low consumer interest and is only used in the few situations in which such marginal impact is worthwhile; though there would appear to be few of these. It can also have significant hidden costs, since it is difficult to administer; and forecasting stock levels is a very problematic experience.

• Multibrand promotions - A number of brands, typically from one supplier, share a single promotion, in order to maximize impact for given costs. This technique can be used to recruit new users to these other brands, but it will only work well if all these brands are in widespread distribution, and there is some logic to the link.

Sampling ]

This is generally the most powerful form of promotion for `new products', the immediate aim being to obtain `trial' by users. It is normally used as one of the very early elements in a launch.

It is a very expensive promotional device; often less cost-effective than any of the other forms of promotion. But it is the most effective, direct and immediate way of obtaining consumer trial. Retailers also recognize its power to pull in customers, and it may accordingly also help to achieve distribution. Indeed, it is often combined with a money-off voucher, to ensure that a successful trial is rapidly followed by a purchase.

Trade sales promotion techniques

• Trade allowances: short term incentive offered to induce a retailer to stock up on a product.
• Dealer loader: An incentive given to induce a retailer to purchase and display a product.
• Trade contest: A contest to reward retailers that sell the most product.
• Point-of-purchase displays: Extra sales tools given to retailers to boost sales.
• Training programs: dealer employees are trained in selling the product.
• Push money: also known as "spiffs". An extra commission paid to retail employees to push products.

Advantages and Disadvantages of Sales Promotion ]

Despite its reent widespread use as the an important element of marketing campaigns, at least in terms of money spent, the essence of sales promotion is that it is intended as a very short-term influence on `sales': it typically has an insignificant long-term effect, but may be used as a powerful additional factor, included in the competitive balance, in the short term, to sway sales in the supplier's favour, and to bring forward sales.

Advantages

• sales increase - the main short-term benefit

• defined target audience - it can be targeted on specific groups (especially selected retailers and their customers)

• defined role - it can also be targeted to achieve specific objectives, such as increasing repeat purchase

• indirect roles - it can also be used to achieve other objectives, such as widening distribution or `shelf facings'

Disadvantages

• short term - almost all of the effect is immediate. There is rarely any lasting increase in sales

• hidden costs - many costs, not least the management/salesforce time and effort, do not appear in the direct costs

• confusion - promotions can conflict with the main brand messages, and confuse the customer as to what the image really is.

• price-cutting - which can persuade users to expect a lower price in future, and potentially damage `quality'

Perhaps its greatest disadvantage, though, may be the lack of effectiveness. Abraham and Lodish reported that:

"... only 16% of the trade promotion events we studied were profitable, based on incremental sales of brands distributed through retailer warehouses. For many promotions the cost of selling an incremental dollar of sales was 'greater' than one dollar."

In line with its essentially short-term objectives, a promotion may realistically be expected to achieve a number of limited objectives:

• Trial purchase - Some promotions are expressly planned to induce consumers to try the product or service. The classic example is that of `money-off' coupons, or samples of the product, at the time of the launch (possibly `banded' as a free gift on a related product).

• Extra volume - Other promotions are designed to stimulate the user's decision at point of sale; on-pack price cuts are the obvious example. It may often be found that a cheaper alternative is to offer more of the product (`free 20% extra') for the same price.

• Repeat business - Yet others are meant to build repeat business. A good example is that of `money off next purchase' coupons.

• Point of sale impact'. Free gifts, for example, may provide additional interest for an advertising campaign, or a competition may lead to a better display at the point of sale; but it is the extra shelf space that sells the product, rather than the promotion itself.

It should be added that sales promotion and advertising (or, indeed, any of the other forms of promotion) are complementary; and the most effective, well-balanced, campaign will often include a mix of several types of promotion.

Political issues

Sales promotions have traditionally been heavily regulated in many advanced industrial nations, with the notable exception of the United States. For example, Canada formerly operated under a "resale price maintenance" regime in which manufacturers could legally dictate the minimum resale price for virtually all goods; this practice was abolished in 1964.

Most European countries also have controls on the scheduling and permissible types of sales promotions. Germany is notorious for having the most strict regulations. Famous examples include the car wash that was barred from giving free car washes to regular customers and a baker who could not give a free cloth bag to customers who bought more than 10 rolls.

See also

• Marketing
• Promotion
• Pricing
• Alcohol advertising
• Tobacco advertising

References

1. Stuart Mitchell, "Resale price maintenance and the character of resistance in the conservative party: 1949-64," Canadian Journal of History 40, no. 2 (August 2005): 259-289.
2. Anonymous, "Handcuffs on the high street," The Economist 355, no. 8170 (13 May 2000): 62.

3. M. M. Abraham and L. M. Lodish, Getting the most out of advertising and promotion, 'Harvard Business Review' (May-June 1990)

• Promotion and marketing communications
• Marketing
• Sales promotion