Advertising alone does not always encourage certain consumers to take action, such as trying out a new product. Sometimes marketers must also use other promotional methods along with advertising. A sales promotion is a promotional method that uses short-term techniques to build awareness and encourage consumers to purchase a product. Sales promotions are specifically designed to persuade a consumer to act in response. The main factors of sales promotion apart are that it involves a short-term value offer and the consumer must perform some activity in order to be qualified to receive that value offer.
Two Key GroupsAlthough sales promotion classified as business-to-business is used in many industries, these types of promotions are more limited than the consumer and trade sales type promotions. The business-to-business method is used for buyers in larger companies who make the purchasing decisions inside the company. The techniques commonly used in business-to-business sales promotion include price reductions, free products, trade-ins, and trade shows.
Sales promotions can be aimed at various people including the consumer, sales staff, or distribution channel members. According to Know This.com (2008) “Sales promotions targeted at the consumer are called consumer sales promotions. Sales promotions targeted at retailers are called trade sales promotions”. Consumer and trade sales promotions are the two key groups.
Sales Promotion Aimed at ConsumersConsumer sales promotions are the most well-known methods of sales promotion. As discussed in Principles of Marketing, Consumers are exposed to sales promotions almost everyday and many of them are conditioned to look for these types of sales promotions before they make their purchase decisions (Know This.com, 2008). One common technique used is price-based consumer sales promotion. This technique uses temporary price reductions that persuade people to choose a certain product.
Price-based consumer sales promotions include the use of coupons, price deals, refunds, and rebates. Coupons are probably the most common form and can be found everywhere, from the local newspaper to online Web sites. Price deals and refunds are commonly found right on the product package as well as on signs and above store displays. Rebates allow the consumer to get back part of their purchase cost through the mail after purchase. Menards does this by printing off a rebate number on their receipts. After purchasing the product, the consumer finds the corresponding rebate form at a specified location near the checkouts.
Also included are frequency programs and special (or bonus) packs. “Frequency programs, also called loyalty or continuity programs, offer a consumer a discount or a free product for multiple purchases over time”(Solomon, Marshall, & Stuart, 2008). Frequent flyer miles are a perfect example of this. Special/bonus packs provide the consumer with more product instead of lowering the price. This is often seen with beauty products, such as with shampoos where the consumer can get a larger amount for the same price.
Another technique that is used in consumer sales is attention-getting consumer sales promotion. This technique gives the product more publicity and gets the consumer interested through contests and sweepstakes, premiums (items that are free for buying the product…such as a free toy in the cereal box), and sampling (such as trying out food at the grocery store).
Point-of-purchase promotions (such as creative in-store displays), product placements (like when NASCAR drivers drink specific beverages after they win a race to promote that product), and cross-promotions are also techniques used to get the consumers attention.
Sales Promotion Aimed at TradeAccording to Solomon, Marshall, and Stuart (2008) “Trade promotions focus on members of the trade, which include distribution channel members that a firm must work with to sell its products”. They are basically sales tools used to support advertising and personal selling aimed at retailers, wholesalers, and distributors. Trade sales promotions can take one of two forms… discounts and deals and increasing industry visibility.
When offering discounts and deals, trade sales promotion can take the form of price breaks. “A manufacturer can reduce a channel partner’s costs through sales promotions that discount its products” (Know This.com, 2008). Two examples of how this reduction takes place include merchandising allowance and case allowance.
A merchandising allowance reimburses the retailer for in-store support of the product (like when Home Depot displays ceiling fans out of the packaging to promote the products), and a case allowance provides a price cut to the retailer or wholesaler during a specific promotional period. There is also the “free goods” approach to case allowances, meaning the retailers receive a certain amount of the product free based on the amount they ordered. For example, one case free for every five cases ordered.
Increasing industry visibility of a manufacturer’s products to distribution channels within the industry is done through trade shows, promotional products, and incentive programs. When trade sales promotions take this form it is with the intention of keeping the company’s name on top when distributors and retailers make decisions about which products to stock and push.
Trade shows are very important in order for manufacturers to show off their products to wholesalers and retailers. “Many companies set up elaborate exhibits to show their products, give away samples, distribute product literature, and troll for new business contacts”(Solomon, Marshall, & Stuart, 2008). Promotional products are often given to business customers and channel partners to simply build awareness for specific companies and brands(basically, any type of product the company can get its logo on…t-shirts, mugs, pens, etc.).
Incentive programs are designed to be a reward system for more productive distributors (sort of like when you join a fitness club and also get a friend to join as well, you then get a personal trainer session for free).
Companies rarely use sales promotion by itself as the only form of marketing communication. While sales promotion may provide a quick increase in sales, in the long-run, it must be coordinated with other types of promotion.
Know This.Com. (2008). Principles of Marketing: Sales Promotion. Retrieved March 20, 2009, from http://www.knowthis.com/Solomon, M. R., Marshall, G. W., & Stuart, E. W. (2008). Marketing: Real People, Real Choices (5th ed.). Upper Saddle River, NJ: Pearson.