What is a Sales Promotion

Sales promotions can be an effective way to rapidly increase the growth rate or revenue of a business.

Having an understanding of sales promotion techniques is a great way to further boost sales, as their short-term impact can boost sales figures, ensure targets are met and increase morale among your sales team, which will drive higher performance.

No matter how successful a company is, there are always times when we need to inject some life back into sales – the right promotion strategy is key to that.

Promotional sales are also a great way to grow a customer base over the long-term. Often promotions attract loyalty as they are seen as an advantage for customers. To create a successful sales promotion, you need to understand the target audience, finances, revenue streams and team data to ensure your promotion is likely to be beneficial. To achieve this, you must first look at the various sales promotion strategies, which this blog will explore.

What is a sales promotion?

Sales promotions are a type of marketing strategy, used by businesses as short-term impact campaigns. In most situations, a sales promotion is a temporary plan to boost sales – meaning it’s not always the best way to build long-term customer loyalty – though it can help as part of a loyalty strategy.

The main purpose of a sales promotion is to generate demand for specific products, services and any other offers. The rationale behind this is usually centred around meeting a deadline, or raising awareness of a new product. As a result, sales promotions are a major factor in motivating consumer buying behaviour. When done right, they can be a significant contributor to revenue generation.

There are a variety of types of sales promotions, such as…

• A simple way of creating customer loyalty. The majority of those who use coupons are looking to save money when they make a purchase. According to statistics, 80% of first-time customers feel motivated to make an initial purchase when offered a discount of some form. 68% of consumers say that coupons help to generate loyalty.
• Flash sales. Extremely short in length, flash sales are an agile form of sales promotion – creating a sense of urgency for customers to buy products. Stats says flash sales lasting no more than three hours have the highest transaction rates – 14%.
• Loyalty cards. Another customer retention solution, loyalty cards go hand-in-hand with a deeper loyalty strategy. They help build customer loyalty by encouraging repeat purchases, which, through habit, creates a strong connection to the brand and increases the likelihood of retaining their business. Returning customers spend around 67% more than new customers.
• In this instance, it’s why a customer buys a product – they’re in with a chance to win something. Customers are more likely to continue doing with a business they view as offering them the best value for money.
• Free shipping. Data shows 70% of customers will abandon their baskets if they believe shipping costs are too high. Even offering free shipping is an additional cost to a business, in return more sales are made due to customer happiness so overall it can be a real benefit.
• Free trials. One of the most commonly used sales promotions, free trials can cultivate a customer base through limited access of a product at no charge. Based on a study, some companies saw an average of a 66% conversion rate as a result of free trials.

What is the point of a sale promotion?

When successfully implemented, the purpose of a sale promotion includes employing a sales strategy. There are three primary modes of sales strategies:

• Push strategy. In definition, push strategy attempts to move products away from the business towards customer – mainly via sales. It’ll be placed in location aiming to attract the attention of customers, such as at the point of purchase.
• Pull strategy. A reversal of push strategy, pull’s effort is to convince customers to draw products away from companies. Discounts are the usual way this is done – such as buy one get one free sales. This is one of the more commonly used strategies businesses adopt, as it’s all about making a brand name more visible to the consumer.
• Hybrid strategy. The basis of this strategy is a combination of push and pull. The push strategy is used to direct products, whereas the pull strategy encourages consumers to buy said products.

Setting your objectives

Sales promotion objectives typically aim to persuade customers to make a purchase, be that a product or a service. There are some factors to consider when thinking about implementing a sales promotion. We need to think about how much it’ll cost and if the cost/benefit ratio makes it worth it in the long run.

We saw a real life example of this in 2021. Alcoholic beverage firm BrewDog offered customers the chance to win solid gold cans only available in multi-packs – encouraging customers to buy them in place of products sold on an individual basis. The sales promotion was popular at first, boosting the brand’s revenue as customers wanted to win the cans, which the firm claimed were worth £15,000 each.

However, that popularity quickly went into reverse after it came to light that the golden cans weren’t actually made of solid gold, in fact they were gold-plated brass. Customers vented their anger on social media to the point is impacted the profits of the business. In order to remedy the situation, BrewDog CEO James Watt spent £500k of his own money to appease the 50 winners.

There’s also the question of does a sales promotion fits in with a company’s image? For example, a retailer selling luxury goods may find that reputation at risk if they hold too many sales promotions – as it may shift customer perception by making them look cheap.

Another element to consider is whether sales promotions continue to attract customers after they finish. We need to consider whether we are developing short-term loyalty from customers only interested in bargains. If, as soon as the sales promotion is over, their attention is diverted to another business offering them a better deal the value of the promotion needs to be reviewed. Data suggests that customers whose first transaction with a brand involved a discount of some kind are 50% less likely to return for an additional order.

Benefits of sales promotion

Advantages of sales promotions can offer a wealth of prosperity for businesses such as:

• New leads. As well as boosting initial sales, new customers can be attracted by what a sales promotion offers them in terms of a discounted price.
• New product awareness. Raising awareness of a new product perfectly coincides with the launch of a sales promotion, as it’ll expose the product to both new and old customers.
• Selling surplus stock. A multi-buy sales promotion, or a clearance sale, can be used to sell overstock – leaving inventory open for new product launches.
• Current customers are rewarded. To retain pre-existing customers is essential, the key for long-term success for any business, so rewarding them is a sensible strategy.
• Last-minute revenue. If a business is just shy of meeting a target, a sales promotion is a great way to boost profits in a quick manner.

Disadvantages of sales promotion

However, sales promotions can also have a negative impact on businesses:

• Devalued brand. By running sales promotions too often, businesses are at risk of devaluing their brand by appearing to lose any semblance of exclusivity.
• Potential complications post-sales promotion. If customers are used to sales, they’ll become less engaged when products return to full-price.
• Sales promotions lose impact. If they’re being used too often, a sales promotion won’t feel special for customers.
• Reduce customer loyal. Pre-existing customer will feel ignored if sales promotions are only used to target new customers, resulting in the potential of losing their loyalty.
• Conditions customers. Some customers will wait until there’s a sales promotion to buy products, making a smaller overall impact on your revenue.

Flexible promotion solutions

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