The methods or techniques for creating public acceptance of or interest in a product, usually in addition to standard merchandising techniques, as advertising or personal selling, and generally consisting of the offer of free samples, gifts made to a purchaser, or the like.
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 Cosmo? Then you’ve already bought into the fast-moving world of sales promotion as a consumer.
Sales promotion can be broken down into the general areas of:
- Gift With Purchase e.g. free Amelie DVD with the Guardian
- Percent Extra Free e.g. 20% more Head and Shoulders
- Sampling e.g. that fragrance sample that made your fashion magazine smell like a tart’s boudoir
- Money-off offers on-pack e.g. normally £2.50, this week £1
- Coupons against future redemptions e.g. 10% off your first purchase of Gillette’s new wonder razor
- Sales promotion touches many other areas of marketing. For examples, samples are often sent out by direct mail, gifts with purchases needs to be 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 (very much 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 one of a company’s key metrics: sales.
Sales promotion is unashamedly about making sales go up very quickly at minimum cost. Which 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 there 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 9 times out of 10 sales promotion does bugger all for brand equity. It frequently damages 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 rarely pay out in profit terms. We have personal experience at utalk of over 50 sales promotion exercises, and we can only think of two that were definately profitable. Sales promotion disguise an underlying problem: you’re not selling as many as you want to. They don’t 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 very rarely happens.
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, sampling, free gifts and money off tactics are legitimate ways of persuading 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 maximising 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. The trick here is 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 particularly important 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 is good, as is Extra. Long-winded explanations are bad. Certain colour combinations work best, with white out of red (think New Year sales) being the punchiest and most attention grabbing. Fluorescent is also good, 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 any way – another reason why SP is most profitable for launches, as no one was buying the product before.
This means you need to achieve a substantial incremental up-lift in sale. As long as the costs of sales promoting all sales are justified by the size of the incremental sales value, you’re doing the right thing.
So make sure you measure your 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.
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