Ten FAQs on sales promotions.
Sales promotion is invariably a shorter-term strategy designed to:
These are useful activities for companies of all sizes.
Sales promotion is a method of increasing sales over the short term, to win business from competitors in a well-developed sector, where 'me-too' products abound and differences between perceived benefits are slight or non-existent. Sales promotion is a powerful weapon in areas like newspapers, supermarkets and petrol.
To many observers, sales promotion as practised by the big players produces dubious long-term effects. If you are always giving 50% off your new kitchen installation or double glazing, then even the most gullible person will realise it is fictitious. But used with care, sales promotion can turn dead stock into cash, draw new customers into your premises and raise your profile.
A sales promotion is a special offer (different from your normal conditions of sale) which is available for a limited period only. The methods vary from straightforward price deals to exciting competitions. There are three types of common offer involving customer rewards in the form of:
The beneficiaries of these special incentives can be:
A plan that pushes more product into your intermediary is called a 'push strategy', while that which encourages the customer at the other end of the chain is called a 'pull strategy'. The best option for you will be the one that best fits your individual circumstances.
For example, suppose your peak sales are in spring and autumn and it is very quiet outside those months. Promotions aimed at providing greater incentives for your sales force to sell out-of-season might raise sales. Equally, promotions aimed at customers or intermediaries at those times could also stimulate demand.
The nature of the promotions would have to be attractive to the target audiences, but much of the cost will be met by having better filled capacity and not having to hold stock for long periods.
Certainly, though it may take a little imagination to think of attractive ideas. For example, a newly opened Testing Laboratory offered a reduced price service, as well as free collection of test samples, to all first time customers who approached them by a certain date.
This added incentive enabled the company to attract more customers in a short space of time than it might otherwise have done. However, the increased demand meant that the laboratory had to provide an absolutely first class service in order to keep those customers when the terms of business returned to normal. In another example: a Solicitor offered a free initial advisory meeting to attract a larger paying project.
A 20% money-off coupon for entrance to a visitor attraction can cost very little. If the visitor has to produce the leaflet/coupon to gain a reduction, the response can be directly measured. The effectiveness of business gifts (calendars, diaries) is much harder to quantify.
Sales promotions such as sales or money-off promotions should be capable of comparison with the same period last year or month. However, you need to take a broader view to gauge the effect on profitability - your sale may just have stocked up the buyer's larder in advance for goods they would have bought anyway. On the other hand, customers brought to your premises by a promotion for one product may have bought something else as well.
The main factors you need to consider are:
The same principles apply to planning a series of campaigns.
To be effective, you need to understand your target market and the competitive environment, and design your sales promotion efforts to help you achieve your overall marketing objectives. How sales promotion fits in will depend on your circumstances. For example, you can use sales promotion to:
Sales promotion can be particularly useful as a way of providing a short-term boost to sales during slow periods.
The marketing plan should highlight expected peaks and troughs of sales activity - for example, a pre-Christmas rush or February slump. Sales promotion, used intelligently, should be used to iron out these distortions to make best use of management and staff time, plant and resources, and to even out cash flow.
If sales are meeting expectations, then sales promotion may just waste your time and money. But when a new rival appears on the scene or a new product is launched, you need to promote to avoid losing sales and market share.
Some shops are always having sales, which rather tends to negate the meaning of the word. Others always hold a pre-season sale to generate cash to stock up for the summer. It depends on what sector you are in, what your demands are, and what competitive pressures you are under.
Successful sales promotion tends to be short and sharp. Generate plenty of activity and hype if you can, then return to normal trading once the effect starts to wear off.
Giving away complimentary gifts is ultimately a rapport builder or a different form of memo. Even providing a free lunch for a colleague could be seen as a form of relationship-building that might assist your business. Giving free inducements is a legitimate way of helping people to see you in a favourable light and to remember you - especially if the gifts are branded or carry a promotional message. You can even use promotional gifts specifically to launch a new sales message.
Do take care to match the value of the gift with the value the recipient assumes to have on your business. The 80-20 rule suggests that 80% of your clients account for only 20% of your sales. Let them have the 'Christmas cracker' gifts. For the remaining 20% who are big spenders - your most important customers - be more imaginative with what you offer them.
There are several annual exhibitions of sales promotion gifts and incentives. Any of these could be a good starting point for you.
The internet is naturally a big shop window for most things including promotional goods from around the world. However, working on the basis that it is useful to have somebody close at hand that you can rely on, you will find several sales promotion consultants listed in your local Yellow Pages.
The same principles apply to running a successful competition as to any other form of sales promotion. You need to be sure that a competition is the most effective way of achieving your business objectives, that it will be of interest to enough of the right kind of people, and that you can organise and carry it off effectively.
However, there are professional codes of practice which apply to competitions. You must have terms and conditions of entry plus open/close dates on display. In some circumstances you may not exclude those who wish to enter without buying your product. Are you planning to use skill and judgement as the winning criteria or are you promoting a blind gamble? Either way, this is a specialist area and you should take advice before setting out.