There is a huge range of promotional activities that are forms of sales promotion.
Different forms of sales promotion include price reductions (discounts), Buy One Get One Free (BOGOF), free samples, free gifts, money-off coupons, money refunds, loyalty programs, point-of-sale displays, and games and competitions.
Let’s take a look at them in details.
1. Price reductions (discounts)
Price reductions are temporary decreases in the price of a product or service, e.g. 20% off for one week only, 5% off on Mondays, or 50% off during Christmas. Price reductions can be temporary or permanent, and they can be offered for a variety of reasons.
Discounts are mainly aimed at attracting new customers and encouraging existing customers to buy more because the product is now more enticing. While higher sales gained from price reductions will affect Gross Profit Margin (GPM) on each product sold, brand reputation might be negatively impacted from the discounted price.
2. Buy One Get One Free (BOGOF)
When customers purchase one product they can receive another one of the same product for free. This method is used to clear out inventory, attract new customers, or increase sales. Buy One Get One Free (BOGOF) is also often used when consumers consider the original price being too high.
While this method encourages multiple purchases which reduce demand for competitors’ products, it is very expensive and could substantially reduce Gross Profit Margin (GPM). Therefore, businesses must carefully consider the cost of the promotion before implementing it.
Additionally, current sales might increase, but future sales could fall as consumers have already stocked up on the product.
3. Free samples
A free sample is a portion of a product that is given away for free to consumers. Free samples of products include items such as shampoo sachets, pieces of food or fruits offered in the supermarkets, wine taster sessions, small packets of cookies or chips, a free trial of a services, etc.
Free samples are often used by businesses to introduce new products to potential customers or to encourage existing customers to try new products. Sometimes companies require you to purchase a product in order to get the sample while others might have restrictions on how you can use the sample.
4. Free gifts
A free gift is a product or service that is given away for free to consumers who are making the purchase.
Examples of free gifts include spare batteries when buying a digital camera, VR glasses when purchasing a smart TV, an extra set of tires when buying a car, a free gift card when you spend over USD$50, free installation and a period of complimentary viewing when customers subscribe to satellite television, etc.
Free gifts are a great way to add value to your customers’ experience and to encourage them to shop with you again.
5. Money-off coupons
Money-off coupons offer a price discount. The consumer must buy the product to redeem the voucher. They can be used to reduce the price of a product or service in a more versatile and better-focused way. Coupons can appear on the back of receipts, in newspaper adverts or magazines, in stores, on an existing pack of the product, through E-Mail to subscribers, etc.
They are often used by business to attract new customers, to encourage existing customers to buy more products which they would have bought anyway, or to celebrate a special occasion. Retailers must be prepared for the increase in demand and hold enough stocks, otherwise lack of products will lead to consumer disappointment.
On another hand, the proportion of consumers using the coupon might be low, if the reduction it offers is too small.
6. Money refunds
They offer customers a full or partial refund on their purchase, if they are not satisfied with the product or service. Refunds are offered when the product is returned to the manufacturer. It involves delays before a refund is received, so, it may act as a disincentive.
There are many different ways to implement a money refund promotion. Some common methods include:
- Unconditional money refund. This is the most common type of money-refund promotion. Customers can return the product for a full refund, no questions asked.
- Conditional money refund. In this type of promotion, customers can only return the product for a refund, if it is defective, or if they are not satisfied with the product.
- Percentage money refund. In this type of promotion, customers can only return the product for a partial refund, usually a percentage of the purchase price.
Money refunds can be a very effective way to increase customer satisfaction and customer loyalty.
7. Loyalty programs
Loyalty reward schemes give customers points when they spend money in a particular business. Consumers collect those points for purchases which can be redeemed for special discounts, rewards or gifts in the future.
For example, airlines offer air miles in the airline frequent flyer programs, supermarkets offer customer loyalty cards while coffee shops offer loyalty reward points. The main aim of loyalty programs is to reward repeated purchases. They encourage purchasing from the business and discouraging consumers from shopping with competitors.
Additionally, information stored through these loyalty programs provides valuable details about consumers’ buying preferences.
However, the rewards offered by loyalty schemes reduce profitability on each purchase. There are also administration costs to inform consumers of loyalty points earned. Moreover, many consumers have loyalty cards from various retailers, so their loyalty impact is reduced.
All in all, some of the loyalty programs have been so successful that they have become a long-term strategy to promote a firm’s brands.
8. Point-of-sale displays
Point-of-sales promotions are promotional activities directed at customers in shops or other location where the customer buys the product.
Examples of point-of-sale displays include large in-store displays, special displays in retail outlets, aisle interrupters (a sign that juts into the supermarket aisle from a shelf), product tastings, stands and posters demonstrations, a dump bin (a free-standing bin centrally placed full of products thrown inside to attract attention), displays at the checkouts, sales presentations during trade shows, etc. These display points aim to encourage impulse buying by exposing products to customers; including attract customers to buy products that they had not intended to.
The maximum impact on consumer behavior is achieved by attractive, informative and well-positioned displays in stores. However, new products may struggle for best positions in stores unless big discounts are offered to retailers. It is because the best locations are usually offered to the market leaders – products with high market share.
9. Games and competitions
Games, competitions and prize draws give customers the chance to participate in a contest where they can win a prize. They give buyers the chance to win the prize which usually includes cash or other items such as a card or a holiday.
Games and competitions can be a great way to promote sales. They can help to increase brand awareness, generate excitement and engagement, drive traffic to the business website or store to ultimately boost sales. When choosing a game or competition for sales promotion, it is important to consider your target audience and your goals.
For example, if you are targeting a young audience, you might choose a fun and interactive game. If you are targeting a business audience, you might choose a more challenging contest. It is proved by research that people are likely to notice of paper-based advertisements, if they feature various games or contests.
To summarize, these sales incentives are directed either at the distribution channel, e.g. the wholesaler and retailer, to encourage stocking and display of the product (push strategy) or at the final consumers to encourage them to buy products in greater quantities (pull strategy).
