What is sales promotion?
Sales promotion is a type of Pull marketing technique. If you have a product which is new in the market or which is not receiving a lot of attention, then you can promote this product to customers via sales promotions. You can use various techniques like giving discounts on the product, offering 1 + 1 free schemes, etc etc.
When a brand wants to increase the sales of its products, it uses Sales promotion. The brand can increase the sales by attracting new customers to their products or by retaining the old customers by various means. The company can also motivate the dealers and distributors of their channel to perform better for their brand, and to get their stock moving.
There are two types of Sales promotions
a) Consumer sales promotions
Any sales promotion activity that you do keeping the end consumer in mind is known as consumer sales promotions. Example – if an E-commerce website gives 10% discount on its products, then it wants the consumers to make the best of this deal. This is a consumer focused promotional activity and hence can be called as consumer sales promotions.
The objective of Consumer sales promotions might be various. A consumer might be asked to test a sample of a completely new perfume in the market and rate it. An existing customer might be asked to use a Scratch card so that he receives a gift.
At the end, the result should be an action from the consumer. Either the consumer should purchase the product right away, or he should come to know about the product so that further awareness is created for the brand.
b) Trade Sales promotions
If your promotional activities are focused on Dealers, distributors or agents, then it is known as trade promotions. There is a lot of competition in any field. And in channelsales, to get the products moving and to motivate the dealer to perform better, trade discounts are given.
Example – You are a dealer for Televisions. Now Sony comes and tells you, you will be given 5% discount if you cross a sale of 100 televisions. Naturally, you will be very motivated because 5% in television sales is huge. Plus selling Sony TV’s is easy because it is already a brand. Thus, you divert all potential customers to Sony Televisions so that you can achieve the target.
Similarly, there are other types of trade sales promotions which can be used to motivate the dealer and distributor. More such techniques of sales promotions are discussed below.
As the noise of competitors rises, you will find more and more companies using sales promotions techniques. The advantage of sales promotion is that they are not too expensive for the company when compared with ATL advertising mediums like Television or newspaper. Hence, even small businesses use it quite effectively.
Types of Sales promotions – Sales promotion techniques.
Below are some of the most common type of sales promotion techniques used across all industries. Some industries, like FMCG, see a lot of these techniques being implemented simultaneously mainly because of the sheer volume of business as well as because of the competition in FMCG. Other businesses, like Consumer durable, furniture etc also use a combination of these sales promotion techniques.
Let us delve deeper into each of these types of sales promotions.
1) Discounts – Trade / consumer
The most common type of sales promotions is consumer discounts or trade discounts. I don’t even need to to explain this to everyone because we are bombarded with discount offers everyday. Be it E-commerce stores, retail stores or anything else. The reason discount is most used is because it actually works!
If there is a 10% discount on the product for the consumer, then it is known as consumer discount. However, if there is a 10% discount to the dealer when he is purchasing from the company, it is known as trade discount.
In trade discounts, the dealer may or may not forward the discount to the customer. It is not necessary that the dealer will give additional 5% discount to customers when he is himself receiving 10% additional discount. However, many dealers know the importance of achieving sales volumes hence they pass on discounts to customers whenever they receive trade discounts.
2) Gifting
One of the most common ways to promote your store during festival time or when there is a huge walk in expected is Gifting. It is also a way to increase the sales of the products because customers have an anticipation that they might win a gift from the store.
Another popular way to use gifting is to advertise “Assured gifts”. Basically, you have different gifts on offer like a mixer grinder or a steam iron. A customer who purchases a set amount of products will get the “Assured gift” from you. This creates excitement in the mind of the customer and he received something for “free”. He might visit again and again.
3) Coupons
Quite commonly used to motivate people to purchase when they think the price is high or it can be incentive to buy your product above the competitors. Domino’s, Pizza hut and McDonalds very prominently use coupons in their marketing. If you have their coupon in hand, you get a discount of X amount on the purchase.
What the coupon does is, it instigates you to take action. If today i get a coupon saying i will get 10% off on whatever i purchase from an XYZ store, then i will surely get off my butt and go purchasing. I will purchase all those products anyways. But the coupon got me purchasing from the XYZ showroom. That’s the objective of the coupon which it has accomplished.
4) Financing
Financing is ingenious amongst the various types of sales promotions. It is a combination of various factors. Companies which have huge resources generally act as Financers. They allow customers to purchase a product on EMI or on different financing options. All this happens for a minor processing fee and less interest.
As a result, the customer, who does not have complete money to buy the product, will likely purchase the product using financing options. Such financing helps the dealer to liquidate the product faster and also helps the customer in making purchasing decisions.
5) Sampling
It is predominantly used in the FMCG industry for perfumes, deodarants, soaps or even eatables. Sampling is an excellent way to introduce your product in the market and at the same time to increase the awareness of the product.
The customers who are being targeted by sampling carry a huge ** lifetime value **. Once they get hooked onto your product, they won’t leave it that early. Hence, Sampling might be of higher cost to the company but it is quite successful in the various types of sales promotions.
6) Bundling
**Bundling** is when you put a combination of products on sale for the same price. So, for example, normally a 100 dollars might buy you just a shirt. However, with product bundling, 100 dollars might buy you a set of shirt and pants. As a result, the consumer is much more likely to buy this bundled offer as compared to a single offer.
We see bundling strongly in retail where a shampoo might be bundled with a soap or we can see a bundled combinations of many different items. The disadvantage of bundling is that customer might think one of the products is of poor quality. However, if the products are bundled together and both products are of an excellent brand, then the bundled product will sell much higher quantities and will defeat competition in numbers. Hence, Bundling is commonly used as a type of sales promotion.
7) Contests
There are different forms of contests which can be run to gather more customer information or to motivate the customer to try the product or to create awareness about the new retail place. Contests can be as simple as winning a gift through a scratch card, or it can be an in house game in a retail showroom or it can be an online contest for which users have to enter their information.
Due to the phenomenal rise of the internet, online contests have become very easy and important. They also penetrate faster and reach a lot of customers.
8) Refunds & Rebates
As the name suggests, refunds are a marketing tactic when you get a partial amount refunded to you based on an action you have taken. For example – if you bring the parking ticket to the showroom, your parking amount will be refunded by the store. Such refunds make the customer excited to visit a store.
9) Exchange offers
Exchange offers are quite commonly used all across the world and used strongly in festive season when sales will be more and people are in a purchasing mood. In exchange offer, you can exchange an old product for a new product. You will receive a discount based on the valuation of your old product.
10) Free trial
Chances are, you have come across several softwares or online programs which offer a free trial to you before you purchase the product. Shareware programs are also a kind of free trial programs where you can use the product for some time but later on have to purchase the product to use it completely.11) Email Marketing
Email marketing was, is and is touted to always be one of the best ways to promote your business. It is one of the most commonly used types of sales promotions across the world because of its ease of implementation and because of its penetration. Each and every one of us has an email account which we access regularly. Thus, an Email is personal to us when received in our phone and we are bound to check it out.
12) Exhibitions
More commonly used in Food, Jewellery, Clothing, Chemicals and similar such industries where sellers want to showcase the products they have to their buyers. These buyers might be consumers or they may be industrial buyers. An exhibition generally consists of one player who is exhibiting his goods. However, it can also be a combination of players who are all there to showcase their wares.
13) Trade Shows
While exhibitions are targeted towards individual buyers, Trade shows are targeted towards resellers, dealers, distributors and bulk buyers. A trade show is typically a display point for all top companies within an industry. These companies are there to compete and grab the maximum eyeballs of retailers, dealers and distributors. While Exhibitions are concentrated mostly on individual buyers, trade shows are concentrated towards bulk buyers.
14) Demonstrations
One of the most popular products to be sold through product demonstrations were vacumm cleaners which used to be sold house to house. However, because of privacy concerns, such type of promotional activities were stopped. Instead, now you will see water purifiers being promoted through demonstrations in malls, showrooms and other places.
16) Quantity Discount
The more quantity of the product you buy, the more is the discount. So for example, a single soap may cost $1 but a combined package of 5 units of soap might cost you $4, giving you a 20% discount on the purchase. Such type of quantity discount is common for customers.
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