What Are the Benefits of a Sales Promotion?
Everybody, it seems, loves a good deal. As a small-business owner, you can ensure your customers get one by using one of the many available sales promotion tactics. Yet, while they may be surefire ways to attract attention and bolster sales, even the simplest sales promotions cost money and require a deft touch. In the short term, they may be worth the effort, but it helps to be sure before you put one in place.
Understanding the objectives of sales promotions, the reason for their use, which types of business use them and whether or not this mode of promotion has proven to be effective is an important first step.
With this knowledge, you will be prepared to consider the objectives and the pros and cons of sales promotions before examining 10 of the most common tactics and choosing the ones that best suit your needs.
New business owners often use sales promotions. They tend to rely on sales promotions to:
- Scoop prospective customers into their marketing funnel and introduce their product or service.
- Persuade those customers to purchase an ancillary product or service.
- Provide a quick burst of sales activity.
New small-business owners do not corner the market on sales promotions. Established business owners also understand the importance of sales promotions and rely on them to generate sales, especially during slow periods.
Business owners also count on sales promotions to:
- Sustain customers' interest.
- Engender customer loyalty.
- Remain competitive.
These promotional objectives represent more than wishful thinking on the part of small-business owners. They also reflect the result of consumer research confirming that most shoppers like a good deal, pursue a good deal and go out of their way to get a good deal.
A RetailMeNot study of more than 1,000 adult online shoppers showed that:
- 94 percent said they hunt for a promotion or deal.
- 88 percent said that finding one would spur them to make their first purchase from a business.
- 81 percent said that a promotion or discount remains top-of-mind throughout their purchase journey.
- 67 percent said that a discount or promotion persuaded them to make a purchase they had not planned to make.
That hurry-up-and-buy feeling doesn't come out of thin air.
Many sales promotions are tied to an expiration date, which is why they so often stimulate a quick burst of sales activity.
Still, small-business owners are wise to take a step back and carefully assess the pros and cons of sales promotions and their possible implications to their companies.
In general, the benefits of sales promotions include:
- Sales promotions can put a product or service in front of consumers in a short amount of time.
- They are usually less expensive than advertising, especially traditional TV and print advertising.
- Assuming that sales promotions are planned in advance, they are relatively simple to implement.
- They make it inherently easy to track the success of a promotional campaign.
- Sales promotions can reinforce other marketing messages, such as those featured on the company website, in other marketing pieces and in the words that company representatives use to describe a product or service.
Despite the benefits, sales promotions can stir the skeptical side of any discerning small-business owner, particularly those who fret about the subliminal messages a promotion may convey to consumers: Why is this sales promotion being offered? How good can this product or service be? Is the business owner desperate to make sales?
Even when companies use sales promotions in a smart, restrained way, some consumers will associate cost with status and a reduction in cost with lower status.
This is why sales promotions should not be viewed as a substitute for advertising, personal selling and other marketing initiatives but as a way to supplement these activities. You could make the case that with a pool of potentially skeptical consumers out there, you may need these activities to counteract any suspicions.
It's not easy to reconcile the desire to give consumers what they say they want – a good deal – while pacifying their doubts. Go the distance on your assessment of sales promotions by considering some other potential disadvantages of sales promotions:
- Just as the results can be quick, they can also be short-lived.
- The costs need to be carefully planned and monitored, or a sales promotion can end up costing a small fortune.
- Sales promotions that last too long can trigger promotion fatigue or damage a brand's good name.
- Businesses in the same industry tend to use the same type of sales promotion at the same time of year, thereby diluting the effectiveness of a campaign.
- Sales promotions can flop if a careful rationale isn't supplied for using a specific type of promotion at different junctures of the marketing funnel (exposure, discovery, consideration, conversion, customer relationship and retention).
Sales promotions come with their fair share of pros and cons – and exceptions. There are exceptions to every rule. Fortunately, as a small-business owner, you have plenty of sales promotions to choose from.
The top 10 sales promotion strategies may be worth investigating for your business:
- Bundled promotions in which two products are offered for a reduced price. "Buy one, get one 50 percent off" promotions and bundled products – such as a bottle of shampoo and conditioner – are examples of bundled promotions.
- Contests that require a test of skill, luck, perseverance or a combination of all three. One prize may not be enough to sustain interest unless it is significant. However, an ongoing social media campaign can remedy this problem.
- Coupons, which have enjoyed something of a resurgence since they went online, spare consumers the hassle of keeping track of pieces of paper. Scanning them also makes it a cinch for business owners to track their origin.
- Demonstrations, which are a great way to pique customer interest, especially for technical devices or those that induce change (think in terms of beauty products).
- Discounts, which are probably the most popular form of sales promotion. Most businesses offer discounts at some point in their history and for some reason, whether it's tied to a season or holiday, the fact that a product has been discontinued or a customer is being rewarded for making a bulk purchase.
- Flash sales in which products are offered at discounted prices for a limited amount of time. Sometimes referred to as doorbusters, these promotions may or may not be announced ahead of time.
- Free shipping or free returns, which small-business owners are being forced to consider thanks to the influence of some well-known, global and online retailers.
- Giveaways, premiums and samples are "the free stuff" that allow consumers to test a product and (with any luck) spread the word about it.
- Loyalty programs, which marketers have noticed have grown in popularity right along with business owners' interest in engendering customer loyalty.
- Point-of-purchase displays, which offer customers an incentive right in the store.