Chances are, right now if you step out in the market, you will find a shop offering discounts on all its products. Similarly, you might find a dealer strongly pushing one brand over the other. These are perfect examples of Sales promotions in action.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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”.
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.
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.
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.
Chances are, email marketing bundled with an exciting and irresistible offer can really entice the customer in purchasing your product. As a result, Email marketing is actually widely used, be it online industry or offline.
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.
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.
Demonstrations are an excellent way to create more awareness of the product and to make customers comfortable towards a technical product. Technicality of the product can be a barrier to purchase. By demonstrating the actual working of a product, you are removing a barrier to purchase. Hence demonstration is a type of sales promotion mostly used for technical type of products.
15) Continuity programs
One of the best example of continuity programs is the frequent flyer program introduced by most airlines. These airlines give more “miles” to the customers who are flying more and more with the airline. Because you are awarded gifts the more you fly with one airline, you are likely to continue flying with that airline so that you receive more miles.
Another example of the continuity program is when a super market advertises that customers who buy 5 times in this month from that super market will get a gift. This ways, the customer will not shift anywhere else but will do shopping from that super market. Such continuity programs not only aim at getting new customers, but they also retain old customers effectively.
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.
However, the quantity discount is not applicable only to consumers. It is also applicable in trade where a dealer or distributor might be given a discount of 5-10% if he purchases a higher quantity of product. So, a kitchen appliance distributor might be given a discount if he buys higher number of units in the festive season. The higher he sells and the more aggressive he is, the better he will earn.
Above are all the different types of sales promotions. Each and every business is different and therefore, the type of sales promotion used by each business needs to be different. Being a competitive world, most companies use a combination of various sales promotional methods to defeat competitors, attract and retain customers and most importantly, to increase the sale of their products or services.