Sales promotion in marketing

Sales promotion means short-term incentives designed to nudge customers to buy right now: discounts, gifts, competitions, loyalty points. They work quickly, but if overused, customers learn to wait for the next deal.

Types of sales promotions

Sales promotion falls into two main types: consumer sales promotions and trade sales promotions. Consumer sales promotions target customers and are designed to encourage direct purchase of a product. Discounts, freebies and product trials are typical examples of consumer sales promotions. Trade sales promotions, on the other hand, target retailers and are designed to increase product sales to retailers to support their customer-focused campaigns. Typical examples of trade sales promotions include trade discounts, bonus packs and special terms for resellers.

The role of sales promotions in marketing

Sales promotion plays a key role in the marketing mix. It is a tactical rather than strategic approach, used to boost sales of products or services immediately. Sales promotion can be used to attract new customers, retain existing customers, clear excess stock and gain a competitive advantage. Sales promotion can also help create demand for new products and allow a company to reach more customers.

Pros and cons of sales promotions

Sales promotion has both advantages and disadvantages. The main advantages include:

The main disadvantages include:

Editor’s tip

Sales promotion is an effective strategy for boosting sales of products or services immediately. It is important to choose the right type of sales promotion for the company’s target audience and marketing goals. It is also important to make sure the sales promotion is part of an integrated marketing programme to increase its effectiveness and long-term results.

Sources

Information on sales promotion was drawn from various sources, including Wikipedia, marketing blogs and specialist articles. The sources confirm that sales promotion is a widely used marketing tool that can have a significant impact on sales of products or services.

Common mistakes with sales promotion

• Discounting a product with a thin margin, so every extra sale makes a loss.
• Writing complicated conditions that customers do not understand or that feel misleading.
• Running out of stock during the promotion and disappointing the people it attracted.
• Not telling retailers or your own staff about the promotion in time, so the offer is not applied at the till.
• Looking only at the sales peak and ignoring the dip that often follows once customers have stocked up.

How to plan a sales promotion strategy

A promotion works best when you plan it with a clear purpose. You can follow these steps.

• Set one goal. Decide whether you want to win new customers, move old stock, launch a product or bring back inactive buyers. One promotion rarely achieves all of these.
• Choose the audience. Decide whether the incentive is for end customers, retailers or both.
• Pick a technique that fits the goal. A free sample suits a new product, while a bundle helps you clear slower-selling items.
• Calculate the margin. Work out how many extra units you need to sell to cover the discount. If a product sells for $100 with a $30 margin, a $20 discount leaves you $10 per sale, so you need three times as many sales to earn the same profit.
• Set a time limit and simple conditions. A firm end date creates urgency, and clear rules prevent complaints.
• Measure the result. Compare sales, new customers and repeat purchases with a similar period without the promotion.

Different types of sales promotion techniques

Within the two main groups, you can choose from many specific techniques. Each one suits a different goal, so it helps to know what each does before you pick one.

Consumer sales promotion techniques

• Coupons and vouchers give money off with a code or printed voucher, for example $10 off an order over $50.
• Buy one, get one gives the customer a second item free or at a reduced price. It works well for products that are used up quickly.
• Free samples and trials let people try the product before paying, which lowers the risk of buying something new.
• Contests and prize draws give customers a chance to win something. They raise interest without cutting the price of every sale.
• Cashback and rebates mean the buyer pays the full price and gets part of it back later, for example $20 after registering the purchase.
• Bundles combine two or more products at a lower total price than if they were bought separately.

Trade sales promotion techniques

• Volume discounts lower the price per unit when a retailer orders a larger quantity.
• Display allowances reward the retailer with money or goods for better shelf placement or a special display in the store.
• Co-operative advertising means the producer covers part of the retailer’s advertising costs for its products.
• Sales contests for resellers give a bonus or prize to the dealers or staff who sell the most.

Frequently asked questions about sales promotion

What is sales promotion?

Sales promotion is a set of short-term incentives that encourage customers or business partners to buy sooner or in larger amounts. It includes discounts, coupons, samples, contests and loyalty rewards. Its aim is an immediate change in buying behaviour rather than long-term brand building.

What is sales promotion with examples?

A clothing shop offering 20% off for one weekend is a sales promotion. So is a coffee brand handing out free samples in a supermarket, or a manufacturer giving retailers one free case for every ten they order. In each case, the incentive is temporary and tied to a purchase.

What is the difference between consumer and trade sales promotion?

Consumer sales promotion targets the people who use the product, for example with coupons or free gifts. Trade sales promotion targets retailers, wholesalers and resellers, for example with volume discounts or display allowances. Many companies combine both so that the product is in stock and customers have a reason to buy it.

How is sales promotion different from advertising?

Advertising mainly builds awareness and gives people a reason to buy. Sales promotion gives them a reason to buy now. Both belong to the promotional mix, together with personal selling, public relations and direct marketing.