Consumer Sales Promotion Methods
Consumer sales promotions are discounts and incentives offered to consumers as an inducement to get them to buy. The short-term orientation of sales promotions contrasts longer-term objectives of advertising to build brand awareness. Such promotions are used to generate revenue or cash flow, clear out merchandise, or launch new products. Companies can choose from several common tools, but each one has pros and cons.
Coupons are among the most common types of consumer sales promotions. The major benefit of a coupon is that only the holder can get a discounted price. This allows a company to use discriminatory pricing practices to get higher regular prices from customers who are unaware of the coupon promotion, or are unconcerned about paying the sticker price. You can also attract new customers or get customers to switch with coupons. Difficulty in controlling redemption, costs of administration and distribution, and fraud potential are drawbacks with coupons.
One of the simplest sales promotions is the straightforward percentage or price-off deal. This is where you mark down all products, specific types of products, or a single product by a set dollar amount or a percentage. Products regularly priced at $20 on sale for 25 percent off would have a sale price of $15, for instance. The general objective is to enhance the value proposition by indicating a lower price for the same quality or service. Errors in price adjustments can lead to alienated customers.
Rebates are a crafty sales promotion technique where you actually honor the promotional inducement after the sale is completed. The customer buys an item and submits a rebate application, often including a form, product labels and receipts. Long waits for payout, and the time and costs to prepare and submit applications, lead to a low redemption rate on rebate offers. Thus, companies use them to attract customers, yet don't always have to pay out on the offer.
Contests and sweepstakes are offered to consumers to generate excitement for a company or a new product launch. In some cases, the prize is unrelated to the company offering it. Other times, the prize is the product being promoted, such as with a movie or music album. Contests require acts of skill or accomplishment to win, while sweepstakes are random drawings or entry processes.
Premiums and ad specialties are also considered consumer sales promotions in many instances, Premiums are free gifts or products that consumers get when they buy the product carrying the promotion. Buying a box of cereal and sending in for a free toy is a premium. The free gift is the inducement to buy the original product. An ad specialty is a gift branded with the giver's name or logo. Pens, pencils, calendars, mugs and t-shirts are common ad specialties that companies give away to consumers.
Free product samples and trials are an effective sales promotion category. To offset the risk customers might perceive in buying an unfamiliar item, you allow them to try a product or use a product or service before buying. Grocery stores regularly offer consumers free food samples to promote certain brands. Online service providers commonly offer one-week or two-week trials to attract new customers in hopes they will continue with the service after the trial.