THE BLOG
10/15/2015 11:59 pm ET | Updated Oct 15, 2016

Sales Promotion: An Important Tool in a Marketer's Tool Kit

Sales promotions are incentives aimed at prompting buyers to buy quicker. They often include discounts, rebates, coupons, or free items to incentivize buyers to purchase by a deadline. Technically, sales promotions also include strategies for motivating sales people to sell quicker. The focus on this post will be on buyers since sales promotions aimed at buyers are much more prevalent in most marketplaces.

Types of Sales Promotions.

There are many different kinds of sales promotions. The following is a list of options that are commonly employed:

  1. Discounts. A reduction in price is offered if the prospect orders by a certain date.
  2. Coupons. The face value of the coupon is typically offered as a discount if the buyer purchases by the expiration date listed on the coupon. While some coupons may not have an expiration date, this is not recommended because the incentive to buy quicker is lost, and the company could get in trouble if it is no longer able to offer a redemption value. Coupons are also used to (1) measure the effectiveness of an ad, (2) generate leads, and (3) collect other valuable information for your Marketing Information System.
  3. Rebates. Money is refunded back to the buyer some time after the buyer purchases the product. Typically, the buyer has to complete a rebate form, provide proof of purchase, and mail the package to the manufacturer. Because many buyers are not willing to "jump through the hoops" required to satisfy the requirements of mail in rebates, immediate "point of purchase" rebates are much preferred by buyers.
  4. Premiums or bonuses. Desirable items are given to customers at no charge if they buy a particular product (or group of products) by a deadline.
Sales promotion Do's.

When running sales promotions, there are certain things that good marketers should do. Some of the more important of these are provided below.

  1. Care and Taste. When selling serious products, sales promotions should be conducted with great care and taste. The company should avoid any sales promotions that might appear to be cheap, low-class, or in bad taste. Sales promotions should be in harmony with the company's positioning strategies.
  2. Have a Good Reason For Doing. There should be a good reason for doing a sales promotion, and this reason should be communicated clearly to buyers. Good reasons include: inventory or seasonal clearance, holiday special, seminar or trade show special, new product introduction, discontinued product clearance, end-of-year or end-of-quarter special (to meet sales quotas or lower inventory taxes). The inherent problem with sales promotions is that buyers may think that the product is not in demand. Their rationale is that if it is in demand, why could your company be discounting it or offering special deals?
  3. Assign a Time Limit. To be most effective, sales promotions should have expiration dates. If they don't, the incentive to buy quicker is lost, and the company may not be able to afford the same offer it at a later time. These are a couple of the downsides of sales promotions. If sales promotions prove to be very successful, they can always be extended. The reason for the extension should be clearly communicated to prospects and customers. Good reasons might include...(1) "Due to the heavy demand..."; (2) "Because many customers didn't receive the discount notice..."; (3) "Since we still have a couple of discontinued models remaining...".

Sales promotion Don'ts.

When conducting sales promotions, there are approaches marketers should avoid. Some of the more important ones are provided below.

  1. Don't do anything to cheapen your product or company. A misguided sales promotion can undo a good position and hurt the image of the product and company. Any promotional ideas should be reviewed by several marketing and sales personnel before they are implemented. The problem
  2. Don't insult the intelligence of your publics. Too many promotions are really insulting. They treat intelligent adults as if they were mindless morons. These are often associated with Infomercials that say "If you buy today, we will send you a second one for free. That's not all, if you call to order in the next 5 minutes, we will throw in Product X." This approach won't work with serious products. Sales promotions should be in line with the product's positioning strategy.
  3. Don't make it open ended.Sales promotions should have a time limit clearly stated. This point also has a legal foundation. You don't want a customer calling up a year after the promotion ended and demanding the advertised discount because there was no time limit listed in the ad. Time limits avoid these legal problems.
  4. Don't use bad taste. As with all marketing, good taste should be used in all sales promotions. If mugs, pens, or calendars are given as "freemiums" they should be attractive and not look or feel "cheap." The ads that provide information about them should similarly be done tastefully.

Online sales promotions

Because they are easier to offer and redeem, online sales promotions tend to have higher redemption rates than those provided in more traditional printed coupons. The downside is that marketers have to allocate larger budgets to coupon redemption. In other words they cost more.

Advertising value and redemption rate

Whether redeemed or not, coupons have an advertising value. In the United States, the redemption rate for physical coupons (in non-recession economies) averages about 2.5%. A comparable rate for online coupons would be those delivered by email, which (according to a 2015 report by CodeBroker) averages 2.7%. Once buyers are on sites and ready to buy or are actively looking for a product, these rates could be significantly higher.

Budgeting for coupons

To develop a budget for redemption of coupons and other sales promotions, marketers should check current redemption rates for their industry, distribution method, and product type. While using the redemption rates above is a good starting point, additional factors should be considered if better budget accuracy is required.

Effective sales promotion

If implemented properly, sales promotion can be a very effective tool to achieve sales quotas, clear the shelves of discontinued items, and generally speed up sales. To help insure success, marketers need to...

  • Create effective sales promotion content;
  • Select the right media;
  • Time the sales promotion;
  • Control costs.

Best of luck.