Sales Promotion

Sales promotion is one level or type of marketing aimed either at the consumer or at the distribution channel (in the form of sales-incentives). It is used to introduce new product, clear out inventories, attract traffic, and to lift sales temporarily.

Sales promotion is one level or type of marketing aimed either at the consumer or at the distribution channel (in the form of sales-incentives). It is used to introduce new product, clear out inventories, attract traffic, and to lift sales temporarily. It is more closely associated with the marketing of products than of services. The American Marketing Association (AMA), in its Web-based "Dictionary of Marketing Terms," defines sales promotion as "media and nonmedia marketing pressure applied for a predetermined, limited period of time in order to stimulate trial, increase consumer demand, or improve product availability." Business pundits and academic students of business have developed almost fancifully sophisticated views of sales promotion. In down-to-earth terms it is a way of lifting sales temporarily by appealing to economic motives and impulse-buying behavior. The chief tools of sales promotion are discounts ("sales"), distribution of samples and coupons, the holding of sweepstakes and contests, special store displays, and offering premiums and rebates. All of these techniques require some kind of communication. Thus sales promotion and advertising are difficult to distinguish.

The need for promotion arises from the intensity of competition. Sellers must somehow attract customers' attention. In the open markets of old (and farmers markets of today), sellers did and do this by shouting, joking with customers, and sometimes by holding up a squealing piglet for everyone to see. Priya Raghubir and his coauthors, writing in California Management Review, identify "three faces" of consumer promotions: these are information, economic incentive, and emotional appeal. Information may take the form of advertising the availability of something, incentives are offered in the form of discounts, and emotional appeals are made by displays and, of course, by the low price itself.

Precisely because sales promotions must provide incentives—whether to the distribution channel, the company's own sales people, or to the consumer—they cost money by definition and must produce additional volume to pay for the expenditures. A grand sale that clears out the inventory but, with added advertising costs factored in, reduces margin too is—a failure. Sales promotions therefore must be carefully calibrated to achieve the purpose. Holding promotions too frequently will habituate customers to buy only when promotions are in effect. Avoiding promotions altogether will let competitors draw customers away. Alas, business never fails but to challenge the participant'�.

GROWTH OF SALES PROMOTION

Craig Endicott and Kenneth Wylie, writing for Advertising Age in the magazine's 62nd annual Agency Report, indicate a continued shift of revenues in advertising from traditional to new forms of media. They label the new forms as "marketing services" and comment as follows: "Marketing services—identified as all forms of interactive, sales promotion and direct marketing in this report—grew 11.3% to $7.66 billion in revenue in the U.S. [in 2005]; traditional advertising and its media component advanced to $12.02 billion, a 5.1% advance that was slightly stronger than last year." The growth of sales promotion, a significant portion of total marketing services expenditures, is no doubt in part due to the proliferation of media channels by cable, the availability of the Internet to channel direct marketing messages, and simply the fact that advertising has become so ubiquitous it has become less effective: people tune (or mute) it out.

CONSUMER PROMOTIONS

Consumer sales promotions are steered toward the ultimate product users—typically individual shoppers in the local market—but the same techniques can be used to promote products sold by one business to another, such as computer systems, cleaning supplies, and machinery. In contrast, trade sales promotions target resellers—wholesalers and retailers—who carry the marketer's product. Following are some of the key techniques used in consumer-oriented sales promotions.

Price Deals

A consumer price deal saves the buyer money when a product is purchased. The main types of price deals include discounts, bonus pack deals, refunds or rebates, and coupons. Price deals are usually intended to encourage trial use of a new product or line extension, to recruit new buyers for a mature product, or to convince existing customers to increase their purchases, accelerate their use, or purchase multiple units. Price deals work most effectively when price is the consumer's foremost criterion or when brand loyalty is low.

Buyers may learn about price discounts either at the point of sale or through advertising. At the point of sale, price reductions may be posted on the package, on signs near the product, or in storefront windows. Many types of advertisements can be used to notify consumers of upcoming discounts, including fliers and newspaper and television ads. Price discounts are especially common in the food industry, where local supermarkets run weekly specials. Price discounts may be initiated by the manufacturer, the retailer, or the distributor. For instance, a manufacturer may "pre-price" a product and then convince the retailer to participate in this short-term discount through extra incentives. For price reduction strategies to be effective, they must have the support of all distributors in the channel. Existing customers perceive discounts as rewards and often respond by buying in larger quantities. Price discounts alone, however, usually do not induce first-time buyers.

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