What is Promotional Advertising?
As discussed in the article Advertising vs. Promotion, the terms advertising and promotion define different aspects of marketing. Technically, advertising is just part of a larger promotion strategy. Briefly, promotion has two primary functions: 1) Publicizing a product, service, event or person with paid advertising or earned media to gain sales, awareness or participation; and, 2) Special offers and incentives. Promotional advertising falls under the second promotion function.
While all advertising has the goal of encouraging customers to buy (or buy in as in the case of causes), promotional advertising has the goal of encouraging customers to buy NOW!
Promotional Advertising Attributes
Promotional advertising has a number of distinct attributes that differentiate it from standard advertising:
- Incentive. Typically some type of incentive is offered to encourage customers to buy.
- Time Limit. Because offering incentives to purchase is an expensive marketing effort, a time limit is usually placed on these offers. Additionally, marketers want to know how well a particular campaign has performed during a target time period. This assists in planning for future campaigns.
- Reply Mechanism. Usually a special reply card, coupon, website address, phone number, QR code or promotional code is included to facilitate a sale and provide a means for tracking. For example, a special 800 toll-free number might be provided for a campaign. Customers appreciate the instant ordering convenience and the free call which won't run up their phone bill. The volume of calls to a particular phone number, and ultimately the resulting sales, helps marketers determine the success of that campaign.
By contrast, standard advertising would not typically include all of these elements, but is done to build brand, or top of mind, awareness for the advertiser. The hope is that when a buying need arises, potential customers will recall the advertiser. Additionally, standard advertising is a long-term effort with the goal of keeping the advertiser's name in front of its target audience.
For maximum benefit, a marketing action plan should include both standard and promotional advertising efforts.
Promotional Advertising Tools
Promotional advertising tools commonly used include:
- Free gifts
- Promotional products
- Add-on items or services
- Financing options
- Extended warranties
- Loyalty or rewards programs
All of these tools have a cost to the advertiser either in the way of lower profit margins due to discounting or for the cost of products and services offered as incentives.
Key to measuring the success of any promotional advertising is a systematic method of tracking redemption of these offers. This requires coordination of the marketing, sales, accounting, technology and human resource functions.
For retail operations, tracking is usually built into the POS (point of sale) transaction processing system. Self-service websites often employ promotion codes that customers enter during the checkout process. More complex sales often include incentives in contracts for sale. However these sales are tracked, reporting needs to be set up to measure the amount of redeemed offers and compare with sales realized.
Goals and Tactics
The ultimate goal of any promotional advertising effort is to grow and stabilize revenues and profits throughout the year. There are three ways this can be done:
- Promotions are offered during slow times or for slower moving products.
- Deep discounts (also called loss leaders) are placed on a few popular offerings with the hope that customers will also consume higher profit margin goods and services.
- Incentives may be offered for purchases of higher priced or higher profit selections which customers might not normally consider.
In addition to the added cost of providing incentives, one of the challenges of promotional advertising is that it may be difficult to tell if customers are buying because they are genuinely interested in what is being offered or if they are just buying as a result of the incentive.
This very problem has plagued many "daily deals" programs. Customers only show up when a deal is in force and then do not patronize the business again until the next deal comes along. Even worse is that regular customers end up using the deals when the intent is to draw in new customers. In this case, businesses can lose significant revenues, causing them to quickly discontinue these promotions.
This is not to say that promotional advertising tactics cannot be used for existing customers. They can be very successful for building repeat business. However, those incentives would be considered loyalty programs and should be marketed separately from new customer deals. Loyalty programs should also be attractive enough so that regular customers do not feel slighted when new customers are offered huge discounts and perks.
Identifying Promotional Advertising in the Wild
Next time you sit down to watch an hour or two of television, keep a tally of which commercials were standard branding and which ones were promotional (included incentive, time limit and reply mechanism). Now that you know the difference, you'll be able to see how others are using it and apply the principles to your own marketing.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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© 2013 Heidi Thorne