Reading: Sales Promotions

Sales promotion helps make personal selling and advertising more effective. Sales promotions are marketing events or sales efforts—not including traditional advertising, personal selling, and public relations—that stimulate buying. Sales promotion can be developed as part of the social media or e-commerce effort just as advertising can, but the methods and tactics are much different. Sales promotion is a $300 billion—and growing— industry. Sales promotion is usually targeted toward either of two distinctly different markets. Consumer sales promotion is targeted to the ultimate consumer market. Trade sales promotion is directed to members of the marketing channel, such as wholesalers and retailers.

The goal of many promotion tactics is immediate purchase. Therefore, it makes sense when planning a sales-promotion campaign to target customers according to their general behavior. For instance, is the consumer loyal to the marketer’s product or to the competitor’s? Does the consumer switch brands readily in favor of the best deal? Does the consumer buy only the least expensive product, no matter what? Does the consumer buy any products in your category at all?

PROCTOR & GAMBLE

Figure 1. Pet lovers want the best for their animals, and choosing a proper diet is an essential part of raising happy, healthy pets. That’s why many dog food providers such as Purina and Blue Buffalo are creating specific size- and age-appropriate diets for dogs. (Credit: Ted Van Pelt/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

Procter & Gamble believes shoppers make up their mind about a product in about the time it takes to read this paragraph.

This “first moment of truth,” as P&G calls it, is the three to seven seconds when someone notices an item on a store shelf. Despite spending billions on traditional advertising, the consumer-products giant thinks this instant is one of its most important marketing opportunities. It recently created a position entitled Director of First Moment of Truth, or Director of FMOT (pronounced “EFF-mott”), to produce sharper, flashier in-store displays. There is a 15-person FMOT department at P&G headquarters in Cincinnati as well as 50 FMOT leaders stationed around the world.^[1]

One of P&G’s most prominent in-store promotions has been for a new line of Pampers. In the United States, P&G came up with what it calls a “shopper concept”—a single promotional theme that allows it to pitch products in a novel way. The theme for Pampers was “Babies First.” In stores, the company handed out information on childhood immunizations, car-seat safety, and healthy diets while promoting its diapers and wipes in other parts of the store. To market Pampers diapers in the United Kingdom, P&G persuaded retailers earlier this year to put fake doorknobs high up on restroom doors, to remind parents how much babies need to stretch.

Figure 2. Free samples of Starbucks Mocha Toffee Latte

Sales Promotion Techniques

Most consumers are familiar with common sales promotion techniques including samples, coupons, point-of-purchase displays, premiums, contents, loyalty programs and rebates.

Do you like free samples? Most people do. A sample is a sales promotion in which a small amount of a product that is for sale is given to consumers to try. Samples encourage trial and an increased awareness of the product. You have probably purchased a product that included a small free sample with it—for example, a small amount of conditioner packaged with your shampoo. Have you ever gone to a store that provided free samples of different food items? The motivation behind giving away samples is to get people to buy a product. Although sampling is an expensive strategy, it is usually very effective for food products. People try the product, the person providing the sample tells consumers about it, and mentions any special pricing or offers for the product.

The objectives of a promotion depend on the general behavior of target consumers, as described in Table 1. For example, marketers who are targeting loyal users of their product don’t want to change behavior. Instead, they want to reinforce existing behavior or increase product usage. Frequent-buyer programs that reward consumers for repeat purchases can be effective in strengthening brand loyalty. Other types of promotions are more effective with customers prone to brand switching or with those who are loyal to a competitor’s product. Cents-off coupons, free samples, or an eye-catching display in a store will often entice shoppers to try a different brand.

The use of sales promotion for services products depends on the type of services. Consumer services, such as hairstyling, rely heavily on sales promotions (such as providing half off the price of a haircut for senior citizens on Mondays). Professional services, however, use very little sales promotion. Doctors, for example, do not often use coupons for performing an appendectomy, for example. In fact, service product companies must be careful not to utilize too many sales-promotion tactics because they can lower the credibility of the firm. Attorneys do not have a sale on providing services for divorce proceedings, for example.

Figure 3. Whether making a cameo appearance or starring in a major role, brands are top talent in the entertainment world. NASCAR drivers, racing cars, and tracks are speckled with corporate brands, and Coca-Cola sits at the judges’ table on American Idol. Does product placement blur the lines between advertising and content, and should viewers be concerned? (Credit: roger blake/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

Two growing areas of sales promotion are couponing and product placement. American consumers receive over $321 billion worth of coupons each year and redeem about $3 billion.^[2] Almost 85 percent of all Americans redeem coupons. Sunday newspaper supplements remain the number one source, but there has been explosive growth of online or consumer-printed coupons. General Mills, Kimberly-Clark, and General Electric like online coupons because they have a higher redemption rate. Coupons are used most often for grocery shopping. Do they save you money? One study found that people using coupons at the grocery store spent eight percent more than those who didn’t.^[3]

Product placement is paid inclusion of brands in mass media programming. This includes movies, TV, books, music videos, and video games. So when you see Ford vehicles in the latest James Bond movie or Tom Hanks putting on a pair on Nikes on-screen, that is product placement. Product placement has become a huge business. For example, companies paid more than $6 billion in a recent year to have their products placed prominently in a film or television program; that figure is expected to reach more than $11 billion by 2019.^[4] It is easy to go overboard with this trend and be portrayed as a parody, however. The 2017 Emoji Movie is an example of failed product placements. The theme of the movie centered on various emojis caught in a smartphone as they are forced to play Candy Crush and say glowing things about such apps as Dropbox and Instagram as they make their way through the phone.^[5] Also, some have suggested that product placement might doom the products and companies. For example, Atari products appeared in the classic 1982 film Blade Runner, but the original company went out of business shortly after the movie was released, while another product, the Cuisinart food processor, had to settle a price-fixing scandal after making an appearance in the film. This has not stopped companies such as Sony, Peugeot, and Coca-Cola from tempting fate by appearing in the recently released Blade Runner 2049.^[6] Many large companies are cutting their advertising budgets to spend more on product placements. One area of product placement that continues to raise ethical issues is so-called “experts” being paid to mention brands on the air.

Contests and sweepstakes are also popular consumer sales promotions. Contests are games of skill offered by a company, that offer consumers the chance to win a prize. Cheerios’ Spoonfuls of Stories contest, for example, invited people to submit an original children’s story and the chance to win money and the opportunity to have their story published.  Sweepstakes are games of chance people enter for the opportunity to win money or prizes. Sweepstakes are often structured as some variation on a random drawing.  The companies and organizations that conduct these activities hope consumers will not only enter their games, but also buy more of their products and ideally share their information for future marketing purposes. As the following video shows, marketers have become increasingly sophisticated in the way they approach this “gaming” aspect of sales promotions.

You can view the transcript for “Gamification” (opens in new window).

WHICH SALES PROMOTIONS WORK BEST, AND WHEN?

Although different types of sales promotions work best for different organizations, rebates are very profitable for companies because, as you have learned, many consumers forget to send in their rebate forms. In a weak economy, consumers tend to use more coupons, but they also buy more store brands. Coupons available online or at the point of purchase are being used more often by consumers. Trade shows can be very successful, although the companies that participate in them need to follow-up on the leads generated at the shows.

Advantages and Disadvantages of Sales Promotions^[7]

In addition to their primary purpose of boosting sales in the near term, companies can use consumer sales promotions to help them understand price sensitivity. Coupons and rebates provide useful information about how pricing influences consumers’ buying behavior. Sales promotions can also be a valuable–and sometimes sneaky–way to acquire contact information for current and prospective customers. Many of these offers require consumers to provide their names and other information in order to participate. Electronically-scanned coupons can be linked to other purchasing data, to inform organizations about buying habits. All this information can be used for future marketing research, campaigns and outreach.

Consumer sales promotions can generate loyalty and enthusiasm for a brand, product, or service. Frequent flyer programs, for example, motivate travelers to fly on a preferred airline even if the ticket prices are somewhat higher. If sales have slowed, a promotion such as a sweepstakes or contest can spur customer excitement and (re)new interest in the company’s offering. Sales promotions are a good way of energizing and inspiring customer action.

Trade promotions offer distribution channel partners financial incentives that encourage them to support and promote a company’s products. Offering incentives like prime shelf space at a retailer’s store in exchange for discounts on products has the potential to build and enhance business relationships with important distributors or businesses. Improving these relationships can lead to higher sales, stocking of other product lines, preferred business terms and other benefits.

Sales promotions can be a two-edged sword: if a company is continually handing out product samples and coupons, it can risk tarnishing the company’s brand. Offering too many freebies can signal to customers that they are not purchasing a prestigious or “limited” product. Another risk with too-frequent promotions is that savvy customers will hold off purchasing until the next promotion, thus depressing sales.

Often businesses rush to grow quickly by offering sales promotions, only to see these promotions fail to reach their sales goals and target customers. The temporary boost in short term sales may be attributed to highly price-sensitive consumers looking for a deal, rather than the long-term loyal customers a company wants to cultivate. Sales promotions need to be thought through, designed and promoted carefully. They also need to align well with the company’s larger business strategy. Failure to do so can be costly in terms of dollars, profitability and reputation.

If businesses become overly reliant on sales growth through promotions, they can get trapped in short-term marketing thinking and forget to focus on long-term goals. If, after each sales dip, a business offers another sales promotion, it can be damaging to the long-term value of its brand.

IMC Support for Sales Promotions

Sales promotions are delivered to targeted groups via marketing campaigns during a pre-set, limited amount of time. In order to broaden awareness, impact and participation, sales promotions are often combined with other marketing communication methods in the promotional mix. Examples of IMC support for sales promotions include:

• Weekly email messages to consumers informing them about the week’s sales, special offers, and coupons
• Promotional information on a Web site informing consumers about the availability of a rebate or other special offer
• Posters and other promotional materials to enhance a point-of-purchase display
• Sweepstakes forms incorporated into a magazine advertisement
• Social media campaigns encouraging people to post about entering a sponsored contest on Twitter, Facebook, and Instagram

These types of activities create synergies between the sales promotions and other marketing activities. IMC activities can amplify the message about the sales promotion and encourage active participation from target customers.

Finally, it is important to recognize that sales promotions cannot compensate for a poor product, a declining sales trend, ineffective advertising, or weak brand loyalty. If these fundamentals are not working, sales promotions can serve only as a temporary solution.

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