The purpose and strategies of sales promotion

Sales promotion involves tactics designed to boost sales in the short term. Unlike advertising, which focuses on long-term goals like raising awareness and building trust in a brand, sales promotion actively encourages immediate action from buyers.

Sales promotion seeks to stimulate quick responses, such as trying a new item or increasing the amount purchased. It goes beyond simply providing information by motivating consumers to act right away.

Main strategies in sales promotion:

• Pull strategy - Targets end consumers directly to create demand, prompting them to seek out and buy the product.
• Push strategy - Focuses on intermediaries like shops, encouraging them to stock, promote, and sell the item to customers.

Price offers and money-off coupons

Certain sales promotion methods rely on reducing costs to attract buyers, but they come with potential drawbacks for the business.

Price offers

Price offers involve short-term cuts in the selling price, also known as discounting.

Objectives:

• Motivate regular buyers to purchase larger quantities.
• Draw in people who have not tried the product before.

Limitations:

• Each discounted sale lowers the gross profit per unit.
• Frequent use might harm how customers view the brand's quality or value.

Money-off coupons

Money-off coupons provide targeted price reductions and can be distributed via till receipts, print ads, or product labels.

Objectives:

• Offer a flexible way to cut prices selectively.
• Encourage trial or repeat buys without a blanket discount.

Limitations:

• Buyers might have purchased anyway, wasting the discount.
• Shops could run out of stock if demand surges unexpectedly.
• Small savings might not motivate enough people to use them.

Customer loyalty schemes and money refunds

These methods focus on building ongoing relationships or providing post-purchase incentives to encourage loyalty and data collection.

Customer loyalty schemes

Customer loyalty schemes reward buyers with points, credits, or perks for repeated purchases.

Objectives:

• Gather useful data on buying habits, which supports tailored marketing.
• Foster stronger connections with customers.

Limitations:

• Discounts eat into gross profit on every transaction.
• Running the scheme can involve high setup and management costs that exceed the gains from loyalty.
• Effectiveness drops if customers join multiple schemes and split their spending.

Money refunds

Money refunds are given when buyers send back proof of purchase, like receipts, to the producer.

Objectives:

• Encourage purchases by offering cash back after the sale.
• Boost short-term demand.

Limitations:

• The need to fill out forms and post them can put off potential claimants.
• Delays in processing and receiving the refund reduce its appeal.

Buy one get one free offers

Buy one get one free (BOGOF) promotions provide extra value by giving an additional item at no cost when one is purchased.

Objectives:

• Encourage buying in multiples.
• Shift demand away from rival products by offering better perceived value.

Limitations:

• They cause a large drop in gross profit per sale due to the free item.
• Customers might think the standard price is inflated.
• It could suggest the product struggles to sell without incentives.
• Sales might dip later as buyers use up their stockpiled goods.

Point-of-sale displays and games on packaging

These techniques use visual or interactive elements to capture attention and engage shoppers directly.

Point-of-sale displays

Point-of-sale displays involve eye-catching setups in stores that provide information and highlight products.

Objectives:

• Maximise visibility and influence buying decisions at the moment of purchase.
• Use well-designed and strategically placed displays to attract attention.

Limitations:

• Prime spots are often taken by leading brands.
• Lesser-known or new items may need to offer incentives to retailers for better placement.

Games and competitions on packaging

Games and competitions printed on product wrappers or boxes invite participation.

Objectives:

• Spark interest and involvement.
• Encourage consumers to buy to join in or win prizes.

Limitations:

• Success depends on the appeal of the game or prize.
• Low participation can make the effort ineffective.