Sales Promotion

SALES PROMOTION

Sales promotion is one of the five aspects of the promotional mix along with advertising, personal selling, direct marketing and publicity/public relations. These types of media and non-media marketing communication methods are employed for a limited period of time to increase consumer demand, stimulate market demand and improve product availability.

It comprises of several communication activities that attempt to provide added value or incentives to consumers, wholesalers, retailers or other organizational customers to stimulate immediate sales, these efforts help in stimulating product interest, trial, or purchase. Examples of such media include contests, coupons, freebies, loss leaders, point of purchase displays, premiums, prizes, product samples, and rebates.

 For instance, Groupon’s original foundation was the daily deal whereby it offered discounted deals for various products and services on its website. The offer remains only for a certain time. Consumers can join the site for free and once registered, receive an email about the daily deals provided by the site. Groupon has created a win-win situation in the mind of the customers so that they want to invest their time and money in Groupon. Groupon is very user friendly website too which further makes it easier for customers to use the website and spend money on it.

Sales promotions can be directed at the customer, sales staff or distribution channel members such as retailers. Promotions targeted at the consumer are called consumer sales promotions while those targeted towards retailers and wholesalers are called trade sales promotions.

Trade Promotion is basically a marketing technique aimed at increasing demand for products in retail stores based on special pricing, display fixtures, demonstrations, value-added bonuses, no-obligation gifts, etc. and can offer several benefits to businesses when new products are launched as retail stores operate in an extremely competitive environment; trade promotions can help companies differentiate their products from their competitors and can utilize these techniques to increase product visibility and brand awareness within consumers.

Effective trade Promotions can also increase a product’s consumption rate or the average quantity of a product used by consumers in a given time period, strengthen relationship with retailers and enlarge a product’s market segment penetration or the product’s total sales in proportion to the competition.

There are several types of trade promotions:

1. Contests and Incentives: companies develop special incentive programs targeted towards employees to encourage greater selling and motivate them to meet target sales by offering rewards such as bonuses, trips, etc. However, such an incentives can spark conflicts between employees and employers and also employees could concentrate all their effort into winning the prizes instead of actually selling the products. Axe launched its new product line “Apollo” and is offering few lucky winners a trip to space. This contest will capture the attention and interest of consumers and the work force working within the company which will further motivate them to work and win.

1. Trade allowances: Such allowances comprise of buying allowance which is a discount or price reduction on merchandise offered to retailers, promotional or display allowance where discounts are given for carrying out promotional activities for the brand and slotting allowances where retailers are offered a discount when they accommodate the companies new product. Buying allowances are easy to implement and an effective way to encourage retailers to purchase their products, however, discounts lead to lesser prices that are not always beneficial while slotting allowances lead to higher retail prices.
2. Displays and Point-of-Purchase Materials: These make an important part of promotional efforts to develop innovative displays to promote their products effectively. However, sometimes retailers fail to comply with the company’s requests for displays that make it difficult to market the product and increase the chance of misunderstandings to occur.

1. Sales Training Programs: companies sponsor classes and training sessions to retailer’s staff to inform them about the products so that they can further assist customers and answer questions.

1. Trade Shows: this is a platform where companies display their products to prospective buyers. This can be beneficial as the company can provide information about the products to the prospective buyers, take orders and also develop relationships.

1. Cooperative advertising: here the costs of advertising are shared amongst two or more groups. Horizontal cooperative advertising is when a group of retailers sponsor the advertisement. Ingredient-sponsored cooperative advertising is when raw material manufacturers help establish final products that include the company’s materials/ingredients. Vertical cooperative advertising is when manufacturers share the cost of advertising run by the retailer for oneself promotion.

Sales promotions are always beneficial for companies as they help in attracting customers and establishing itself in the market. However sometimes companies spiral into a sales promotion trap when they use promotional techniques extensively. When companies compete against in the market, they tend to copy each other’s promotional strategy that not only lowers the profit margins but also makes it difficult to climb out of the trap. Fast food giants such as McDonalds, Wendy’s and Burger King all offer its customers a special $1 menu for its budget conscious customers. Marketers must try to promote up-to a certain level and stay away from a promotional war that which could ruin the brands profit margins in the long term. When considering promotion tactics, marketers should pay attention to consumer promotions, which include economic, informative and affective effects. These comprise of consumers feelings, emotions by being exposed to a promotional activity.