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.
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.
Types of Sales Promotion
There are two types of Sales promotions
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.
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 channel sales, 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.
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.
(i) Discounts – Trade / consumer
The most common type of sales promotions is consumer discounts or trade discounts. 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.
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.
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.
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.
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.
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.
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.
(viii) 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.
Similarly, rebate is a type of partial refund which is most popular in the United states, though not much popular in other countries. In rebates, you fill forms while checking out of stores. And if you have won the rebate, you will have to mail your details to the company and the company will refund you the rebate amount in your bank or via a paypal account.
(ix) 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.
So, if you had an old washing machine at home and there was an Exchange offer in the market, then you will receive an X amount for the washing machine which is decided by the parent company or the retailer. This X amount will be deducted from your final payable amount and will be reduced under the header of “Exchange offer reimbursed”.
(x) Free trial
We 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.
This is done so that the customer gets a chance to trial run the product before he pays for the product in full. Programs like Adobe Photoshop, Microsoft office 365 and others are known to give free trial programs of upto a month so that the customer can know more about the product, he can try it and then purchase.