Question

What are the advantages of making sales promotions in industry ?

Answer 1

Sales Promotions are tools to directly boost the demand within a short period of time. There are three broad types of sales promotion tools for customer-oriented promotions – discount coupons, free samples, and contests/ special events. Sales promotions also come under the marketing communication program but are action-focus marketing events. These events directly impact the buying behaviors of the customers and boost sales within a short period of time. Following are some of the advantages of making sales promotions in the industry:

Since the cost of sales promotions is variable in nature i.e. the cost goes with each unit sold, it is perhaps the only key activity a small or medium-sized producer can pursue in order to compete against the big brands. This is so because these firms do not have access to huge capitals that are required for media-based activities. So, sales promotion is the only opportunity for these firms to compete in the market.

When a product is new i.e. it has just been launched in the market, sales portion is perhaps the only key activity that can be conducted to initiate sales. Sales promotions are necessary to attract the initial group of customers to know and buy the product before it enters the growth phase. This becomes more evident for products having very little differentiation or where the customers already know what is going to be the value proposition.

Sales promotions are understood as effective tools in persuading customers to switch their favorite brands. It has been well-tested in many markets that it is just the discounts given to the customers to make them unloyal and switch their existing brand. This becomes more effective when the switching cost is very low.

Sales promotions can be effectively used to level the unevenness or seasonal pattern in sales. All is necessary is to boost the sales by providing discounts at the seasons where the demand is not high. This reduces the variability in demand and reduction of safety stocks (and related costs) across the value chain.

Few other advantages are brand building, awareness creation (regarding new products or packaging method), energizing a mature brand, trail of a new product for a test market, generating repeat purchase and so on.