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Sales promotion

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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:

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.

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

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.
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