Ten FAQs on sales promotions.
- Why should I run a sales promotion?
- What types of sales promotions are there?
- Can I use sales promotion techniques in a service business?
- How can I measure the return on a sales promotion?
- How do I plan sales promotion campaigns?
- How should I integrate sales promotions with the rest of my marketing?
- When is the best time to run a sales promotion?
- Do customers really want free branded gifts like calendars, diaries, mouse mats and pens?
- How can I source branded gifts and promotional merchandise?
- How do I run a successful competition or prize draw?
1. Why should I run a sales promotion?
Sales promotion is a shorter-term strategy designed to:
- accelerate sales of slow-moving products;
- clear old stock to make way for new;
- level out peaks and troughs in consumer demand;
- develop customer loyalty;
- motivate your sales staff or intermediaries;
- gain a competitive edge.
These are useful activities for businesses 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.
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 not really a special offer.
But used with care, small businesses can use sales promotions to turn dead stock into cash, draw new customers into your premises and raise your profile.
2. What types of sales promotions are there?
A sales promotion is a special offer which is available for a limited period. The methods vary from straightforward price deals to competitions and prize draws. There are three common types of offer involving customer rewards:
- Discounts such as reduced prices, interest-free credit, money off next purchase, vouchers or coupons;
- Free goods such as two for the price of one, upgrades, free samples or prizes;
- Services such as - free trial, guarantees, free training, free delivery or personalised packaging.
The beneficiaries of these incentives can be your customers, your intermediaries or even your staff.
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.
Much of the cost of running a promotion will be met by not having to hold stock for long periods.
3. Can I use sales promotion techniques in a service business?
You can use promotions if you run a service business, though it may take a little imagination to think of attractive ideas. For example, a solicitor could offer a free initial consultation in order to attract new clients.
4. How can I measure the return on a sales promotion?
A 20% money-off coupon for entrance to a visitor attraction can cost you 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 (such as pens and diaries) is harder to quantify.
Sales promotions such as sales or money-off promotions can be measured and compared with the same period last year or month. However, you need to take a broader view to gauge the effect on profitability – an uplift in sales may be followed by a lull if your existing customers were going to buy the goods anyway and took advantage of the offer to buy early.
On the other hand, customers brought to your premises by a promotion for one product may have spent more overall, by buying something else as well.
5. How do I plan sales promotion campaigns?
The main factors you need to consider are:
- Objective: Why are you doing this? What is the background that justifies your action?
- Action: What precisely is it that you propose to do? How will you benefit?
- Eligibility: Who is the promotion aimed at? How do they qualify?
- Timing: When do you propose to begin running the promotion? Again, be precise in terms of when it starts and finishes.
- Ownership: Who will be responsible for seeing the promotion through to its end?
- Support: What sort of back-up is required? How will the offer be promoted? Think in terms of advertising, social media and email marketing as well as administration, stockholding and cash flow.
- Assessment: What data will you need to collect to measure the success of the promotion?
The same principles apply to planning a series of campaigns.
6. How should I integrate sales promotions with the rest of my marketing?
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:
- Make advertising, SMS campaigns or email newsletters more effective;
- Build a following on social media;
- Attract new customers;
- Generate press coverage;
- Reward existing customers and build loyalty;
- Help you understand your customers' price sensitivity.
Sales promotions can be particularly useful as a way of providing a short-term boost to sales during slow periods, or clearing out older stock when your refresh your product portfolio.
7. When is the best time to run a sales promotion?
Your marketing plan should highlight expected peaks and troughs of sales activity - for example, a pre-Christmas rush or a 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 already 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 retailers are always having sales, which 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.
8. Do customers really want free branded gifts like calendars, diaries, mouse mats and pens?
Giving free gifts is a legitimate way to help people to see you in a favourable light and remember your business - especially if the gifts are branded or carry a promotional message. You can use promotional gifts specifically to launch a new sales message.
Take care to match the value of the gift with the value the recipient associates with your business. The 80-20 rule suggests that 80% of your clients account for only 20% of your sales. Let them have the cheaper promotional gifts.
For the remaining 20% who are big spenders - and your most important customers - be more imaginative with what you offer them.
9. How can I source branded gifts and promotional merchandise?
There are several annual exhibitions of sales promotion gifts and incentives; you can also shop around online. Be aware that to get the best deals and advertised prices, you may need to commit to a large order size. Be clear on the quantities you need, and what will happen with any leftover items (can they be reused in the future, or repurposed for another promotion? Where will they be stored?) before placing your order.
10. How do I run a successful competition or prize draw?
The same principles apply to running a successful competition or prize draw as to any other form of sales promotion. You need to be sure that it 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.
You'll also need to promote your promotion widely to get a good response. Advertise the sales promotion on the home page of your website, flag it up on social media, email customers directly or try using text messaging to encourage customers to take up the offer. You can also use signage to highlight your latest offers in your premises.
However, there are codes of practice that apply when you run a promotion. You must have terms and conditions of entry and open/close dates on display. In some circumstances, you may not exclude those who wish to enter without buying your product.
Be clear on the type of promotion you’re running. 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.