What is Sales Promotion?
Sales promotion is nothing but activities undertaken to induce customers by providing them incentives, offers, deals, and such other things. It consists of advertising, publicity, personal selling, and direct marketing as elements to increase sales and build brand image.
It helps in bringing new customers, retaining existing customers, and fighting competition. Sales promotion is a part of the marketing mix and includes both in-door and out-door efforts. These efforts can be both customer-oriented and business-oriented.
Every sales promotion program aims at increasing the sales of the retailer. It helps in improving customer’s interest in the product, creates awareness about the product, builds the brand, and then eventually converts all this into sales. The retail industry uses several techniques to achieve the same.
How does sales promotion differ from advertising?
Sales promotion is done for a limited timeframe, whereas advertising is a continuous ongoing activity. Sales promotion is a direct means of reaching out to the customers for sale while, on the other hand, advertising involves indirect methods to appeal to prospective customers. Sales promotion gives quick results and aims for short-term benefits, while advertising gives slow results and aims for long-term benefits.
The main objectives of sales promotion are:
1. Encourage Stop and Shop
It aims to attract the passers-by so that they stop, enter the retail store, and take a look at the products.
2. Encourage Shop and Buy
Once the customers enter the store, inducing them to buy products by attracting them with the prevailing deals and appealing displays.
3. Increase the size of the purchase
Sales promotion efforts also aim at luring customers to buy in greater quantities through the existing deals, offers, and discounts and thereby increase sales.
4. Repeat Purchasing
Retailers use sales promotion to make customers buy goods repeatedly.
5. Fight Competitors
Due to the ever-increasing competition, businesses can survive only by being a better choice for customers. Besides, sales promotion efforts speak a lot about your competitive strategy. These are the efforts that help you stand out from your competitors.
6. Inventory Reduction
When the sales promotion is effective, it helps in stock-clearance as customers tend to engage in buying more and repeated buying due to low prices and cost-effective deals.
The various types of sales promotion strategies in the retail industry include:
1. BOGO (Buy One Get One)
Buy One Get One method is used to increase the footfall of customers. It offers two products at the price of one. In some cases, a monetary discount is given on the second product. This method is widely used at the time of stock clearance. It tries to encourage more sales by offering more to customers.
Some examples of BOGO might include providing a complimentary product with the main product, like offering a free face wash with a face scrub. On the contrary, another BOGO example is offering two same products at the price of one. For example, one pair of jeans free with the original purchase of one pair of jeans.
2. Percentage Discount
This is the most used and most effective technique for sales promotion. It attracts new customers without spending much on marketing techniques. It also sometimes helps in converting the existing inactive customers. At times, when the discount offer is for a limited period, it encourages prompt buying among the customers.
For example, 60% off on all items, 50% off on selected items, etc.
These are offers in which one or more items are offered at a special discount, which would not be applicable when they are purchased separately. They attract customers to make additional savings and hence help in sales conversions.
However, the success of these offers depends on the type of product being sold. For example, buy three t-shirts, get one free or buy two t-shirts, get two free, etc.
4. Free Shipping
This is one of the most popular methods used by e-commerce platforms.
They attract customers and encourage them to make more and more sales transactions.
For example, buy worth USD 100 more to avail of free shipping.
Such offers increase sales considerably.
5. Multi save and conditional promotions
They go like “Buy and save off on the entire deal,” “Buy and then save on some items,” “Buy some and get a discount on some,” and such other schemes.
Such promotional strategies encourage customers to check out multiple products and then avail the offers on them. They do not add a loss burden on the seller, either.
For example, buy one product and get 20% off on the second product.
6. Coupons and Gift Cards
It is the technique where the buyers are given a discount in the form of a reduction in price through a coupon with that feature.
A coupon mostly offers any other sales promotion method through it. On the other hand, Gift Cards contain a pre-set amount of money, which can be used by the gift card receiver to buy things from the brand. It is a popular gifting item in today’s times.
7. Try before you buy
Under this, the customers get the product at their place, are allowed to try it, and then they decide if they want to go ahead with the purchase.
It brings the experience of physically checking the product without making a store visit and before paying for it. Trial periods are also provided to give customers the time to decide.
8. Social Media Contests and Giveaways
Brands can organize contests on social media handles and give out products for free to the winners.
This has a two-way impact.
Firstly, the reach of your brand increases. Secondly, the customers get to try the products and may become potential buyers if they have a good experience.
How to decide on the right promotion technique?
1. Trial and Error
By this method, you can experiment and see which technique works out the best for your business. It helps you test the technique that will bring you maximum sales in a practical scenario. However, it is also a time-taking method as the outcomes are to be checked and compared before finalizing on the best technique.
2. Set your objectives
Every technique has its own perks. Before choosing any, you should sit down and decide the bottom line of your sales promotion efforts. ‘What is it that you are aiming to achieve?’ – is a very important question whose answer you should figure out before deciding upon the method you want to follow.
3. Plan the incentive and values
It is also vital that before you settle for any technique, you calculate and plan the monetary aspects of it. It will help you review the cost of your method and contemplate whether you can afford it or not.
Once you decide the technique you wish to follow; the next step is to improvise and ensure its effectiveness. This could be done by taking the following measures
1. Set a timeframe
Define the period for which the ongoing promotions will prevail. This brings in the sense of urgency in the customers and helps in quick sales conversion. Furthermore, limit the availability so that customers make a quick decision on the purchase.
2. Offer various promotions together
It helps to grab shoppers’ attention and promote the products well.
3. Provide multiple payment options
Being flexible with payment options is also a very effective way to increase sales. In this way, customers can purchase through various payment modes, and it does not restrict them.
4. Define the target audience
It is also important to define the market and audience you are targeting to channelize your efforts and increase their feasibility.
5. Keep a check on results
You should also keep a close check on the results of your activities and review them from time to time. This helps you understand places where you are going wrong and improve them to earn greater profits.
Therefore, retailers must put great focus on their sales promotion strategies as these accelerate sales, serve as the base for competitive advantage, build customer loyalty, and increase the frequency and volume of customer purchases.
Ari – Promotions Management
Ari provides practical solutions for implementing sales promotion strategies. Ari retail software automates the business processes and enables businesses to achieve desired results. Our sales promotion strategies help the clients to fight the competition in their industry, attract potential customers to turn into customers, and increase the shopping bag size of existing customers.