‘Free t-shirts for first 500 customers’
‘Get 10% off if you shop above $1000!’
‘Sign up for your free trial today’
How often have we seen such sales promotions while indulging in our shopping sprees – offline and online?
Sales promotions are a set of marketing activities that businesses of all kinds – from B2B (business to business), B2C (business to customer), and now D2C (direct to customer) – undertake to stimulate sales, increase brand awareness of the product or service and boost revenue.
Six advantages of sales promotions
1. Attract more customers
It is no secret that tactics like free trials or discounts incentivize new customers to try your product or service. Free trials give potential buyers an insight into what the brand can offer during a limited period. This helps companies build a relationship with their leads, understand their requirements and eventually turn them into consumers by meeting their expectations.
Streaming services like Netflix and Amazon Prime offer a 30-day free trial to leads before encouraging them to sign up as a member. Similarly, B2B companies offer customers a chance to test their software for free for a few weeks before signing up for a paid subscription.
2. Move stock off the shelves
Most B2C businesses often face the ‘problem of plenty’ in their stock, especially towards the end of the season or during rebranding. Sales promotions like combo offers, rebates, and free samples can help businesses move existing stock out and bring fresh products.
For instance, apparel brands often move stock off their shelves by having End of Season Sales (EOSS), where prices are sometimes slashed by almost 60 to 70 percent.
3. Boost brand presence
By employing tactics like limited editions or flash sales, sales promotion can boost brand presence and create brand recall among customers. Brand recall can be achieved through social media marketing or a simple word-of-mouth campaign. Latching onto the latest trend while employing sales promotions is a great way to carve a niche for your brand.
The fast-food chain McDonalds is an excellent example of achieving brand recall and loyalty. The brand pays close attention to changing demographics, listens to its customers, and keeps an eye on trends in the country it operates in. Often, whenever a menu upgrade is introduced, the brand opts for topical limited edition offers or combos tailored for the host country. Who can forget the BTS meal, which saw McDonalds collaborating with the popular South Korean pop band (K-Pop) BTS?
The BTS meal which saw McDonalds collaborating with South Korean pop band BTS.
4. Retain loyalty among existing customers
Sales promotion tactics can also be a great way to reward your customers. Rewards in the form of loyalty points programs or membership discounts can ensure continued loyalty to your business in the face of competition. Further, rewards can create a lasting impression on customers, who are likely to feel that they made the right decision in purchasing from your business.
In the B2B sales model, free trial extensions and reminder emails for extending subscriptions can ensure brand loyalty. Combine it with an early bird subscription discount, and you’ve hit the jackpot. By slashing the price on a year-long subscription, you can ensure that your business has gained one new customer while also ensuring that they reap the benefits of the subscription.
A perfect example of loyalty point programs in the B2C model is those run in the aviation sector. Airlines often offer frequent flyers points and air miles, which customers can redeem against a future flight ticket. This fosters loyalty and encourages customers to choose the airline for which they hold a membership or a card.
5. Get insights into customer behavior
Understanding customer behavior and consumption trends are critical for a business to succeed. Sales promotion tactics often offer great insight into customer behavior, such as:
- Customer preferences – What customers want
- Changes in consumption patterns
- What products are working or not working
6. Enable cross-selling and upselling
Customers often seek the maximum utility and satisfaction from a product or service. With cross-selling and upselling, you can boost your revenue by capitalizing on your customers’ interest in your business.
You can enable cross-selling and upselling using sales promotions.
An excellent example of cross-selling in B2B is the freemium model. In this model, users can access limited features when they subscribe to the free version of a given application or software. Users can later opt for a paid subscription, where they get access to more features and integrations.
For example, the travel and expense management app Expensify upsells and cross-sells through its Freemium model. The app levies charges based on the number of active users. Based on the subscription, customers have access to more features and integrations.
Fast food chain Wendy’s provides exclusive offers in the B2C model once you download their mobile app for your orders. What’s neat is that you can get free chicken nuggets and bonus points when you create an account on their app. By convincing customers to download the app and create an account, Wendy’s upgrades their meals and delights their customers.
While sales promotion can serve as an adrenaline rush to businesses and provide a much-needed boost, it cannot always be the solution to your problems. Here are some pitfalls to watch out for.
Three disadvantages of sales promotion activities
1. Lower business reputation/brand image
While offering sales promotions can be a great tactic to position your business in the market, offering multiple sales promotions can also lower your reputation. How? By providing sales promotions often, customers may think that your business is running into a loss or unable to keep up with the competition. Keep your sales promotions short and sweet enough to give customers a taste of what you can offer and keep them coming back for more.
2. Slow sales on regular days
When your business offers sales promotions periodically, customers will start to look forward to them. They will stop purchasing from you during regular business days, i.e., the sales promotion trap. This can create a dip in the original value of your products or services and make it difficult for you to sell them at a profit. So don’t give regular discounts but only seasonal or tactical ones.
3. Unable to plan for long-term growth
Sales promotion tactics are an excellent way for businesses to boost revenue in the short run. However, relying only on sales promotion to make revenue can be detrimental. Depending only on sales promotions will make it difficult for you to budget and plan for long-term marketing tactics. Failure to create long-term marketing plans will make it hard for your business to hold its own against competitors.
Including sales promotions as part of your overall strategy is a safe bet as you think of short-term profits and long-term sustainable growth for your business. Balance sales promotion tactics along with a solid long-term vision to boost revenue and profitability for your business.
