Sales promotion describes incentives and rewards to get customers to buy now rather than later. Whereas advertising is a long-run tool for shaping the market’s attitude toward a brand, sales promotion is a short-term tool to trigger buyer action. No wonder brand managers increasingly rely on sales promotion, especially when falling behind in achieving sales quotas. Sales promotions work! Sales promotions yield faster and more measurable responses in sales than advertising does. Today the split between advertising and sales promotion may be 30–70, the reverse of what it used to be.
The growth of sales promotion reflects the higher priority companies are attaching to current sales than to long-term brand building. It is a return to transaction marketing (TM) rather than relationship marketing (RM).
Sales promotion can be directed at retailers, consumers, and the sales force. Retailers will work harder if offered price-offs, advertising and display allowances, and free goods. Consumers are more likely to buy in response to coupons, rebates, price packs, premiums, patronage awards, contests, product demonstrations, and warranties. The sales force operates more vigorously in response to contests with prizes for superior performance.
Because of the variety of sales promotion tools, marketers need experience in knowing which to use. Some large companies have a sales promotion specialist who can advise brand managers. Or the company can engage the services of a specialist sales promotion agency. The main need is to not only use promotions but to review and record results so that the company can improve its sales promotion efficiency over time.
Although most sales promotions increase sales, most lose money. One analyst estimated that only 17% of a given set of sales promotion campaigns were profitable. These are the cases where the sales promotion brings in new customers to sample the product and where they like the new product better than their previous brand. But many sales promotions only attract brand switchers looking for a lower price, who naturally abandon the brand when another brand goes on sale. Sales promotions are less likely to entice away loyal users of other brands.
Thus sales promotions work poorest in product markets of high brand similarity. They tend to attract brand switchers who are looking for low price or premiums and who won’t be loyal to a brand. It is better to use sales promotions in product markets of high dissimilarity where new customers may find that they like your product and its features better than their previous choice.
Sales promotions tend to be used more by weaker and smaller brands than stronger brands. Smaller brands have fewer funds to spend on advertising, and for a small cost they can get people to at least try their product.
Sales promotions in general should be used sparingly. Incessant price-offs, coupons, deals, and premiums can devalue the brand in the consumers’ minds. They can lead customers to wait for the next promotion instead of buying now. Companies are forced to use more sales promotion than they want by the trade. The trade demands discounts and allowances as a condition for putting the product on the shelf. The trade may demand consumer promotions also. So many companies have little choice but to comply.
Prefer sales promotions that agree or enhance your brand image and add value. Try to use sales promotions with advertising. Advertising explains why the customer should buy the product, and sales promotion provides the incentive to buy. When used together, ads and sales promotions make a powerful combination.
Copyright © 2003 by Philip Kotler. All rights reserved. Published by John Wiley & Sons., Hoboken, New Jersey