Joshua earned an MBA from USF and he writes mostly about software and technology.
Sales Promotions: Definition and Examples
Businesses need to have a tool to provide incentives to customers, distributors, or sales staff over a predetermined period. This is precisely what a sales promotion is. Sales promotional activities include displays, demonstrations, special offers, loyalty promotions, and a host of selling tactics that are non-recurring to the ordinary routine of a business's sales.
The point of having sales promotions is to add incentives to purchasing products. Promotions can also raise brand awareness by boosting the reputations of products since customers that receive products at competitive prices tend to promote these products on their own.
Businesses use a vast amount of communication tools to promote products. A list of popular communication tools are listed below:
- Direct mail
- Social media
- Text messages
Sales promotions improve product availability with channel partners and increase the demand for products. Additionally, promotions coordinate advertising and public relations concerning products and selling. Sales promotions must be tailored to the needs of specific segments of a market. They are successful whenever an interest in the service or product is gained, consumers try products, when consumers make purchases, and ultimately when consumers become loyal customers.
There are two types of sales promotions that serve as communications tools, trade promotions and consumer promotions, which will be discussed in the following sections.
Trade promotions are catered toward organizational customers such as retailers, sales teams, wholesalers, and groups that have vested interests in selling products and services. Some of the most popular types of trade promotions are highlighted below.
Trade shows are among the most common types of sales promotions. These are events where companies demonstrate and display their offerings with the hope that products or services will be purchased.
Trade shows are set up for different types of industries, geographic locations, particular products, product categories, buyer roles, and many other criteria. For some companies, these shows generate a vast number of new customers at the cost of a membership and costs related to renting space to participate in the event.
Trade allowances occur when distribution channel partners give incentives to each other to push products to the end users faster. An advertising allowance is an example of a trade allowance. Advertising allowances occur when money is paid by a manufacturer or service provider pays to retailers for adverting. Trade allowances can take on many forms, such as cash, a discount, a reduction in merchandising costs, and more.
Sales contests are incentives for sales representatives that can significantly raise their sales. The focal point of these contests is usually to move products that generate higher profits, slower moving products, or overstock. Representatives with the highest sales win prizes like vacations and bonuses and receive recognition for their achievements. This could be a manufacturer's way to award their own salespeople or the salespeople of their distributors.
Product Demonstrations and Training
Product demonstrations and training are other popular sales promotion tools. Demonstrations can be associated with trade shows where businesses do their best to describe their products. Demonstrations can be given in-store business where distributors or manufacturers will come into the store to demonstrate how products work.
Having a specialist in the store can create some hype for a new product or a product that is just new to the store. Product training can also be provided to businesses to inform the sales staff about products and perhaps give them tips on how to close sales with that product.
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If a salesperson is recommending a certain brand with a high degree of confidence, they either have a lot of trust for the brand personally, or they could be receiving push money. Push money is sometimes offered to sales teams in order to push customers to purchase certain products or brands.
The cash incentive comes directly from the manufacturer to increase their sales. This type of promotion would be more practical for expensive competitive products, obsolete products, or products that just don't sell that well.
Whether you want to call it bribery, kickbacks, or rewards, free merchandise is often given to managers from manufacturers to give managers an incentive to push products. The merchandise can be televisions, stereos systems, tools, and plenty of other types of products. So, if the manager at a shoe store sells a certain amount of Nike shoes per month, they may actually receive shoes if a program for that supplier exists.
Consumer sales promotions differ from trade promotions in that they target the end-users of products. End users frequently see promotions as they shop. Let’s look at the common consumer promotions that are found in the supermarket. A loyalty program may have emailed you to let you know about specific deals going on in your local supermarket.
The next time you get to the supermarket, take notice of the point of purchase displays all over the store. These displays are the soda designs and isle end caps that catch all customers’ eyes. Often, someone near the food section offers free samples of a new product. Some products offer a rebate if you send the manufacturer your contact information and proof of purchase.
Finally, as you check out, you will be offered coupons based on your past purchases. Let’s take a better look at these in the following section.
These programs are designed to create a relationship with consumers to increase purchases. These relationships are created when customers sign up to a program, and in return, they receive discounts or coupons as a result of purchases, can accumulate points from purchases that can count toward future discounts, or even are provided special incentives that are only available to rewards members.
Some types of reward programs include grocery store shopping cards, gas station shopping cards, hotel programs, frequent flier miles programs, as well as programs for restaurants and drugstores.
Point systems are becoming a more popular attribute of some loyalty systems where accumulated points can be used for free items or discounts. Many loyalty programs that are part of the service industry (particularly in hotels and airlines) arrange partnerships that allow consumers to enjoy perks from a wide range of companies.
Point of Purchase Displays
Point of purchase displays are used to embolden customers to make purchases spontaneously. Displays are created strategically to gain customer attention by using special signage and proper placement techniques. One great example of a point of purchase display is a coupon machine.
When a consumer receives a coupon for products that they are passing in the grocery aisle, it is the hope of grocery store owners that the customer will make a spontaneous purchase. Even if they don’t, at least they have a coupon that may bring them back into the store. Displaying shelves at the register and creating elaborate displays on aisle end caps are some other popular point of purchase displays.
What customers don’t like free samples? Well, I guess if the samples are sardines, many people may be deterred from trying the product. Excluding sardines, most people enjoy receiving free samples. When samples are given as a sales promotion, a portion or possibly the whole product is distributed at no charge so consumers can try products for themselves. By significantly increasing trials of products, brand awareness can increase.
This promotional strategy proves to be very expensive but effective in the respect that it gets consumers to try other brands or potentially change their tastes completely. It also gives the potential customer a chance to get information about the product from the person giving away the samples.
Rebates are popular with consumers who don’t mind waiting for a refunded discount. A rebate is when the customer interacts directly with the manufacturer of a product to receive a discount. Usually, the consumer must give up some type of information in the process, such as an email address or demographic information, along with proof of purchase. Advertising a product with a rebate can excite customers and proves to sometimes be more beneficial than discounts since often, consumers get lazy and forget to send in their rebates.
Coupons provide a discount to consumers from the distributor of the product. In turn, the distributor gets reimbursed from the manufacturer and may even receive a handler fee. Coupons tend to be more popular when the economy is at its weakest. A trend for obtaining coupons is by finding them online or even using coupons directly from web browsers on cell phones.
Stores also provide coupons through dispensers, on products, and even dispensed from the register as a result of having a loyalty membership. The traditional ways of finding coupons with mail ads and through the Sunday paper are also still around for the time being.
Lumen Learning. (n.d.). Principles of Marketing. Retrieved January 20, 2019, from https://courses.lumenlearning.com/marketing-spring2016/chapter/reading-sales-promotions/
Kenton, W. (2018, December 13). Advertising Allowance. Retrieved January 20, 2019, from https://www.investopedia.com/terms/a/advertising-allowance.asp
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2022 Joshua Crowder