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Sales Promotion

Updated on March 19, 2024
Article byAnkush Jain
Edited byAnkush Jain
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Sales Promotion?

Sales promotion is a short-term marketing strategy companies use to create interest or demand for a particular product or service. Among many reasons to indulge in a marketing strategy of this nature, driving sales in the short run to achieve a goal or benchmark is the most common objective. Coupon codes, discounts, contests, and rebates are among the most common sales promotion techniques.

Sales Promotion

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A sales promotion campaign might take shape during a particular season to capitalize on consumer spending or to sell off old inventory to make space for newer items on their shelves. Irrespective of why companies initiate this promotion, this marketing tool most often brings in a hike in sales. Sellers can run this limited-period offer through print or non-print mediums.

Key Takeaways

  • Sales promotion is a short-term marketing strategy intended to either widen the company’s customer base or re-engage the existing customers.
  • Promotional activities boost sales and increase customer loyalty. However, it can hinder the organization’s long-term plan in the long run.
  • Even though promotions create awareness and widen the customer base, it is easy for customers to presume the products are of lesser value, tarnishing the brand’s image to a certain extent.
  • Promotional campaigns provide a competitive advantage over competitors, especially in industries where similar products within the same price range are prevalent.

Sales Promotion Explained

Sales promotion is a marketing strategy companies widely use to create brand awareness or promote the outflow of inventories. This strategy is an efficient way of building customer loyalty toward the brand.

Since the brand image is promoted through a sales promotion idea, the information about products and the business spreads faster, helping generate new leads. Moreover, through coupons or discounts, existing customers can also be re-engaged.

Typically, a sales promotion campaign is viewed as a means that save consumers money. Therefore, such a campaign might motivate customers and potential leads to talk about the brand more, as it adds value and saves money.

The sales representatives and managers usually have the highest direct contact with customers. Therefore, considering their input might help the campaign’s results significantly. In addition, discussing with the sales team helps the company or brand set up future campaigns.

Moreover, products or goods with high competition, such as consumer goods and sales promotion tools, help gain a competitive edge over competitors. Since pricing is highly competitive in such industries, it is always advantageous to have additional customer offers and benefits.

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Objectives

Advertising and other forms of marketing are effective in creating the urge to purchase; however, sales promotion techniques are an efficient way of converting the desire to buy into actual purchases through the short-term or immediate incentives the latter provides. A summation of the objectives for carrying out such a promotion is discussed below:

#1 – Product Launch

When companies launch a new product, a discount, coupon, or a free trial will encourage customers to try the product out. It is an excellent way to penetrate the market with similar products.

#2 – Competitive Edge

Analyzing competitors’ products and pricing helps create better marketing campaigns that attract new customers and facilitate repeated purchases from existing customers. Moreover, it gives the company an advantage over its competitors in terms of customer satisfaction.

#3 – New Leads

In a market with existing products of similar nature and pricing, it is always a challenge for businesses to attract new clients. Sales promotion tools help businesses attract new clients through added benefits such as coupons, free trials, and other benefits.

#4 – Customer Re-engagement

A less challenging task than attracting new clients is attracting existing clients to make a purchase. The promotion for existing clients can be in the form of personalized products. These products make them feel more included and thus improve customer loyalty.

#5 – Inventory Clearance

These campaigns are popular, especially when seasonal changes are around the corner, such as winter to summer or vice versa. Businesses look to clear out stock to make way for new inventory relevant to the upcoming season. Otherwise, these clearance sales are run to make way for trendier products.

Types

Below are a few common types of promotions used by businesses to attract the attention of their customers:

#1 – Flash Sales

Flash sales refer to a brief offer that allows customers to purchase at high discounts for limited periods. The idea is to induce a sense of urgency among customers to facilitate more sales.

#2 – BOGO

BOGO or buy one, get one promotion is usually used to create awareness around a new product. The idea is to provide the customer with an extra product for them to use for extended periods or to gift to friends or family, thus increasing the chances of future purchases.

#3 – Product Bundles

A collection of products is put together at a discounted rate instead of purchasing them individually. In addition, product bundles give businesses a higher probability of a re-purchase as customers get a wider variety of products to choose from for future purchases.

#4 – Demos

Demos or free trials are among the most prominent sales promotion tools to attract new customers to grow customer bases. Businesses offer a particular product for a limited period free of cost for them to try and provide feedback.

#5 – Vouchers

Coupons and vouchers aim to increase customer loyalty among existing customers by motivating them to make purchases in the future. This is a perfect solution for businesses that offer reward coupons for purchases that add up to complete free purchases in the future.

#6 – Referral Codes

Referral codes are an excellent way of engaging existing customers and attracting new ones. A code is shared with existing customers to share with their friends and family. In addition, offers and discounts are provided every time someone uses the referral code.

Examples

Let us understand the concept better with the help of the examples below:

Example #1

Jeff runs an e-commerce website called Premiere Homes. They sell home appliances and electronics. To ensure his business makes the most of the holiday season, he and his team of managers decided to have flash sales across different categories. They also agreed to double credit points for all purchases existing customers make.

That season, Premiere Homes made 40% more in revenue than any other quarter that financial year.

Example #2

The fast-food giant McDonald’s planned their sales promotion campaign around the holiday season to increase traffic on their newly introduced mobile app. In addition, they designed a three-week-long campaign to aid their digital growth plan.

The offers included free food from McDonald’s for life, exclusive access to merchandise, and eats like a 50-cent double cheeseburger and more.

As a result, over 25 million customers were active on their mobile app.

Advantages And Disadvantages

Let us discuss the advantages and disadvantages of sales promotion through the points below:

Advantages

#1 – Higher Sales

Short-term marketing plans attract a higher rate of revenue through increased sales by providing incentives and discounts to their customers.

#2 – Customer Loyalty

Through constant re-engagement of existing customers, they are more likely to return and purchase in the future as they get personalized updates, offers, and motivation.

#3 – Consumer Behavior

Through promotional campaigns, businesses get considerable insight into consumer behavior and what could reduce the gap between the urge to buy and the actual purchase.

#4 – Cash Flow

Promotional activities drive sales and increase the cash flow of the business. Even though the prices are usually lower than the actual selling price, the higher sales give them a more significant amount of cash to utilize.

Disadvantages

#1 – Compromise on Price

Even though short-term promotional campaigns bring in extra sales and revenue, they might hurt the business’s long-term objectives. Usually, companies sell products at cost or even losses to increase awareness or create a more extensive customer base.

#2 – Devaluation

When products are offered at lower prices or free of cost, it is easy for customers to presume the products to be of lesser value. This might tamper the image of the product or the brand.

#3 – Long-term Hindrance

Businesses must realize that promotional activities are short-term plans and cannot be utilized across the year as they can significantly put the company behind its long-term goals regarding revenue and profits.

Difference Between Sales Promotion and Advertising

Let us understand the difference between sales promotion and advertising through the table below:

BasisSales PromotionAdvertising
PurposeTo facilitate an increase in sales.Advertising promotes an increase in sales and builds the brand image.
SuitabilitySmall to large organizationsMedium to large companies.
CostsNot too costlyExpensive
PeriodShort-termLong-term
ResultsPromotional strategies show results almost immediately.Advertising is a part of the larger scheme of things and takes slightly longer to show results.

Difference Between Sales Promotion and Personal Selling

Let us discuss the differences between sales promotion and personal selling through the table below:

Basis Sales PromotionPersonal Selling
FunctionSales promotion is a marketing strategy to initiate product sales in the short run.Personal selling is a tool by which a sales representative presents goods to potential customers and convinces them to make a purchase.
Communication ModeIndirect.Direct.
ReachBeyond restrictions relating to the physical limits of the company.Restricted to the areas sales representatives visit.
CostsRelatively lesser costs are incurred.Comparatively costly as sales reps, their conveyance and commissions have to be paid.
Nature of ProductsLow-value productsHigh-value products

Frequently Asked Questions (FAQs)

1. What are the tools of sales promotion?

Discounts, free samples, contests, coupons, and rebates are a few of the most widely used tools for promotional activities in the short run. They aim to attract higher sales to create awareness or re-engage existing customers.

2. Explain how sales promotion campaigns are developed and implemented.

These campaigns are designed depending on the nature of the product, industry, and target audience. Typically, a culmination of advertising, coupons, public relations (PR), and sometimes special events are put together for the campaign.

3. How does apple use sales promotion?

Even though apple uses plenty of advertisement, personal selling, and PR, their sales promotion activities are restricted to apple stores and through their authorized sellers.

4. How much does sales promotion cost?

A promotional campaign’s cost depends on the size of the company, the target audience, and the nature of the industry. However, the companies must ensure that the costs of promotions are, at most, the returns they make from the outputs.

This article has been a guide to what is a Sales Promotion & its definition. We explain its examples, objectives, types, comparison with advertising, advantages, and disadvantages. You may also find some useful articles here –