What Are the Advantages & Disadvantages of Transactional Marketing?

by Neil Kokemuller; Updated September 26, 2017
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Transactional marketing is a strategy that focuses on a single point of sale to maximize sales volume for a company or product. It is a contrast to typical long-term marketing approaches that emphasize building and maintaining relationships with customers. While transactional marketing drives traffic and sales, it may actually inhibit long-term revenue and profit.

Inventory Turnover

Inventory is costly to hold and manage, and transactional marketing aids the process of getting inventory out the door more quickly. A prominent merchandise display near the front checkout area likely catches the attention of shoppers. Transactional marketing is especially beneficial to clearing out seasonal merchandise or items that don't sell-through in a timely manner. When you sell through discounted items, you clear space for more in-demand items that enable you to potentially generate greater profit.

Relatively Low Costs

Transactional marketing is driven by price incentives rather than brand messages. The promotional costs are much lower than what you pay to develop a long-term branding campaign. You simply communicate the price inducement through external messaging and in-store signage. With brand building, you pay for the design, development and distribution of the message. You also commit to long-term communication with relationship-oriented promotion. Transactional marketing is managed with a one-at-a-time communication strategy.

Limited Emotional Attachment

When the primary incentive for customer purchases is a price inducement, the likelihood of an emotional commitment is limited. Price-oriented buyers aren't as concerned with the high quality and elite service that more-discerning consumers appreciate. The connection you have with the induced buyer is short term. Unless you maintain the discount or promotion, the consumer is going to seek out another lower-priced option for his next purchase.

Reduced Profit Margins

When you reduce prices to drive sales, you also minimize your gross profit margin. This margin represents the difference between your revenue and costs of goods sold. If you pay $5 to acquire a product and promote it as good value at $10, you earn $5 per sale. However, if you market the product with a 50 percent off discount, you only get $5 on each sale. While you likely increase volume, you actually net zero gross profit on each transaction.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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