Question

What do we mean by sales promotion? Does this add value or take it away?

Answer 1

Sales promotion is the process of persuading a potential customer to buy the product. Sales promotion is designed to be used as a short-term tactic to boost sales – it is rarely suitable as a method of building long-term customer loyalty.

Some sales promotions are aimed at consumers. Others are targeted at intermediaries and at the firm's sales force.

When undertaking a sales promotion, there are several factors that a business must take into account:

• What does the promotion cost – will the resulting sales boost justify the investment?
• Is the sales promotion consistent with the brand image? A promotion that heavily discounts a product with a premium price might do some long-term damage to a brand
• Will the sales promotion attract customers who will continue to buy the product once the promotion ends, or will it simply attract those customers who are always on the look-out for a bargain?

There are many methods of sales promotion, including:

Money off coupons – customers receive coupons, or cut coupons out of newspapers or a products packaging that enables them to buy the product next time at a reduced price

Competitions – buying the product will allow the customer to take part in a chance to win a prize

Discount vouchers – a voucher (like a money off coupon)

Free gifts – a free product when buy another product

Point of sale materials – e.g. posters, display stands – ways of presenting the product in its best way or show the customer that the product is there.

Loyalty cards – e.g. Nectar and Air Miles; where customers earn points for buying certain goods or shopping at certain retailers – that can later be exchanged for money, goods or other offers

Loyalty cards have recently become an important form of sales promotion. They encourage the customer to return to the retailer by giving them discounts based on the spending from a previous visit. Loyalty cards can offset the discounts they offer by making more sales and persuading the customer to come back. They also provide information about the shopping habits of customers – where do they shop, when and what do they buy? This is very valuable marketing research and can be used in the planning process for new and existing products.

The main advantages and disadvantages of sales promotion are: