The methods for creating public acceptance of, or interest in a product. This is usually in addition to standard merchandising techniques, such as advertising or personal selling, and normally consisting of an offer of free samples, gifts made to a purchaser, and so on.
Meaning?
Got a living room full of free DVD's in cheap cardboard sleeves? Ever go crazy at Clinique Bonus Time? Own 17 pairs of cheap flip flops from Marie Claire and Cosmopolitan? Then as a consumer, you've already bought into the fast-moving world of sales promotion.
Sales promotion can be broken down into the general areas of:
Gift With Purchase (GWP)
Percent Extra Free
Sampling e.g. that fragrance sample that made your fashion magazine smell like a tart's boudoir
Money-off offers
Coupons against future redemptions
Sales promotion comes into contact with many other areas of marketing. For example, samples are often sent out by direct mail and gifts with purchases are frequently heavily promoted at point of sale. Sales promotions are rarely successful on their own without assistance from other elements of the marketing mix.
When and why you should use a sales promotion?
Sales promotion is incredibly controversial. Estimates of what percentage of marketing spend goes on sales promotion vary (especially by industry sector) but one thing everyone agrees on is that it has spiraled massively in the last 20 years.
The reason is that sales promotion brings instant benefits to a company is sales. Sales promotion is unashamedly about making sales go up very quickly at minimal cost. That is why CEO's of public companies like it and can sometimes use it to prop up stock prices. For example, because of the downward pressure on sales of print media such as newspapers and magazines caused by the internet, marketers have had to resort to switching almost all marketing funds to short-term sales promotion to preserve circulation figures, and therefore future advertising revenue.
What marketers don't like is that nearly a 100% of the time sales promotion does nothing for brand equity. It can in fact, damage it. Heavy promotion looks desperate and erodes the perceived value of a product. It is possible to create brand building sales promotions - Clinique Bonus Time is one of them - but they're as rare as hen's teeth.
Not only that, but sales promotions very hardly ever pay out in profit terms. We have personal experience at utalkmarketing.com of over 50 sales promotion exercises, and we can only think of two that were absolutely profitable. Sales promotion disguise an underlying problem: you're not selling as many as you want to. They don't actually solve it.
Some people will justify the cost by saying that they can sample products and it gains new buyers for the future. Our experience (and that of most marketers) is that this only happens once in a blue moon.
The only time that sales promotion can be a legitimate long-term way of building a products sales is for a launch, or perhaps a relaunch. If trial is one of your marketing objectives, then sampling, free gifts and money off tactics are legitimate ways of influencing people give you a go. However, these are unlikely to work without other elements of the marketing mix.
How to make the most of your sales promotion
The keys to maximizing your sale promotion come two areas:
1. The creation of perceived value
2. The strength of the communication
Perceived value is the value that the consumer places on what you are offering. It is key to offer something which consumers think is worth a lot, but which costs you a little. Before the great DVD avalanche of 2006, DVD's had a perceived value of around a tenner. So if you had put a DVD on a magazine, newspaper or other product selling for a pound or less, that looks would look like a fantastic deal to the consumer.
Now the perceived value of free DVD's is much lower, because they are so commonly given away and people may have poor experiences with them.
The strength of the communication is especially significant at how effective you are at combining the sales promotion with other parts of the marketing mix. For example, if your sales promotion is at point of purchase, certain words are most effective at triggering a response. Free is best. Bonus or extra is good. Long-winded explanations are bad, so just get straight to the point.
Certain color combinations work best, with white out of red (think New Year sales) being the punchiest and most attention grabbing. Fluorescent is also fine, but think about the image of your brand!
Costs and benefits of sales promotion
The costs of sales promotion depend on what the upside for an increased sale is to you. The cost of the discount or gift should be in proportion to the margin you earn from each incremental sale. One big cost of promoting at point of sale, is that of rewarding everyone who buys your product, not just the incremental customers you were aiming for. So you will effectively be paying the people who would have bought your product anyway - another reason why sales promotion is most profitable for launches, as no one was purchasing the product before.
This means you need to achieve a substantial incremental up-lift in sale. Make sure you measure you’re up-lift. As a benchmark, if your sales promotion breaks even you're doing pretty well. If you work in a sector where high loyalty exists, with few people likely to switch, a high incremental volume is unlikely. You will lose your shirt.
