Sales promotion: Definition, examples, ideas, and types
Sales promotions allow companies short-term revenue boosts through a wide variety of customer benefits.
Last updated October 13, 2022
No matter how successful a business is, every company is going to find moments where they need a sales boost. It might be towards the beginning to build a customer base, or somewhere down the line when sales are slow.
This is the time for a sales promotion.
In this piece, we’re going to discuss what a sales promotion is, the types of sales promotions, the pros and cons of using them, and the best strategies for your company. We’ll also talk about how a strong CRM program can help you execute your sales promotions for maximum benefits.
Sales promotion definition
A sales promotion is a marketing strategy in which a business uses a temporary campaign or offer to increase interest or demand in its product or service.
There are many reasons why a business may choose to use a sales promotion (or ‘promo’), but the primary reason is to boost sales. Sales boosts may be needed to reach a quota as a deadline approaches, or to raise awareness of a new product.
Let’s take a closer look at different types of sales promotions, as well as the pros and cons of using any type of promotion.
Types of sales promotion
There are 12 main types of sales promotions. Not all of them are suited for every business, product, or service, but each one offers unique ways of boosting sales and connecting with customers through different methods of sales psychology. Each is also an interesting take on spin selling and offers a look into sales methodology comparison.
1. Competitions and challenges: Competitions or challenges usually take place on social media, and serve to increase customer engagement as fans try to win a discounted or free product. They usually also result in a large amount of free publicity if the competition or challenge involves sharing the brand on a customer’s personal social media account.
2. Product bundles: Product bundles offer a collection of products for an overall discounted rate, as opposed to buying the products individually. Product bundles give customers a reason to buy a larger variety of products, which makes it more likely they will find a product they like and want to buy again.
3. Flash sales: Flash sales are extremely short sales that offer extreme discounts for a limited amount of time. These sales work through creating a sense of urgency and need around your sale.
4. Free trials: Free trials or demos are one of the most common sales promotions and one of the most promising strategies to grow a customer base. Businesses can offer either a limited time with the product or a limited quantity of the product to a first-time buyer at no charge to see if they like it.
5. Free shipping and/or transfers: Free shipping promotions attempt to curb the 70% of customers who abandon their carts when they see the shipping costs. The small loss in shipping fees is usually made up for in happy customer purchases.
6. Free products: Free product promotions work by offering a small free product with the purchase of a larger, mainstream product. This boosts mainstream sales without costing the company too much inventory or revenue.
7. Early-bird or first-purchaser specials: These specials offer discounts to first-time purchasers as a way of welcoming them as customers. Customers are more likely to buy at a discount and because the discount only works once, the company doesn’t lose a great deal of revenue.
8. BOGO specials: BOGO, or “buy one, get one free” promotions are primarily used to spread product awareness. Customers can give their extra product to a friend or family member and build a customer base through word of mouth.
9. Coupons and vouchers: Coupons and vouchers reward current customers for their brand loyalty and encourage future purchases. This is especially effective in companies who use punch cards which incentivize customers to make multiple purchases to earn a free product.
10. Upsell specials: Upsell promotions are not as common as the others, but they can still be extremely effective. Upsells give first-time customers a less expensive version of a product to try, and then over time, the sales department works to convince them to purchase the more expensive and more effective option.
11. Subscriptions: Subscriptions are not always considered sales promotion, since they tend to be long-term purchases, but having different amounts of a product available at a different price point is a sales promotion tactic. With a subscription, a customer pays a larger fee upfront for a large amount of product that eventually comes out to less than what they would pay for buying smaller amounts of product individually.
12. Donations: Donations are an excellent way for a company to build credibility and goodwill within the customer base. Most donations work when the company contributes a portion of each sale during a given period to a charitable cause.
Pros of sales promotions
There are many benefits to running a sales promotion in the short term:
- Creating new leads: Sales promotions increase customer acquisition by offering them discounts, free products, free trials, and more. Many potential buyers are willing to try something for a lesser price, and if they like the product they become part of your company’s loyal base.
- Introducing a new product: Even extremely successful companies need a little help launching a new product. New customers may need incentives to buy, and long-term customers may be committed to their usual products. Providing a discount or promotion on a new product is a great way to create product awareness without doing a sales presentation.
- Selling out overstock: No one wants to be in this position, but overstocking happens. When it does, a sales promotion can be a useful tool to get rid of inventory while attracting new customers who may not have the overstocked product yet. It’s worth noting that there is a line in terms of selling overstock and it’s easy to step over into unethical selling.
- Rewarding current customers: Sales success doesn’t stop at the first purchase. Nurturing customers over time is essential to keeping brand credibility and loyalty high. Sales promotions are an easy way to provide loyal customers with a discount, voucher, or free product that will continue to keep them engaged with your brand.
- Increasing last-minute revenue: Many companies use sales promotions towards the end of a month or quarter to meet revenue or inventory goals. While not a bad strategy, it’s best to use this one sparingly so that customers don’t get into the habit of waiting for an expected sale.
Cons of sales promotions
While most sales promotions do successfully increase sales, many also come with a cost. When considering using a sales promotion, it’s important to remember the two main risks of the “sales promotion trap”:
Sales promotions can devalue your brand: While it may not be the case for your company, there is a general assumption in the consumer market that if a brand goes on sale, it’s because they are having trouble selling that product—it’s why we all wait for the day after Valentine’s Day to buy discounted chocolate.
While promoting a single product in your line might not make a lasting impression, a sales promotion that covers your entire brand might lead customers to think your business is on its last legs.
Sales promotions can make it complicated to sell your product back at its original price point: Depending on how long your promotion runs, you may attract customers who never paid full price for your product. These customers may then be turned off when you return to full price at the end of a promotion.
It’s important, therefore, to set strict promotional timelines and leave space in between promotions to make sure your original price is the most consistent one.
The other peril of sales promotions to be on the lookout for is cost. According to Harvard Business Review, the average business spends 66 percent of its advertising budget on sales promotions. This type of spending can seriously hurt a business if the promotions are not bringing in enough revenue to counteract the cost when full-price advertising is not given as wide a budget.
Sales promotion example
Perhaps the most common sales promotion is the Black Friday sale. This is an interesting sales promotion to examine because while thousands of companies participate in Black Friday, few participate in the same way.
Some companies run their Black Friday sales within a strict 24 hours time frame, while some spread it over an entire week. Some have in-person offers, or online offers, or are exclusive to one type of purchase.
The important factor in the Black Friday sale is that companies know customers are going to buy. This makes it crucial to have a strong sales promotion strategy and sales territory plan so that you know what you’re offering, what your price points are, the exact sales windows, and your audience targets.
Sales promotion strategies
As we’ve seen, sales promotions come in a large variety and can be used as a sales strategy at any point during the sales process. It’s important, therefore, to be aware of best practices, activities, and techniques that will ensure your promotions are successful.
There are three primary strategies for sales promotions:
- Pull strategy: The pull strategy tries to get the customer to ‘pull’ the product away from the company, usually in the form of a discount, BOGO, or another special. This is the most commonly used strategy across the board for all businesses.
- Push strategy: The push strategy tries to ‘push’ the products away from the company towards the customer, usually through B2B sales. Parent companies will reward distributors and retailers for taking additional products off their hands and selling them to the consumers.
- Hybrid strategy: As its name suggests, the hybrid strategy is a combination of the push and pull strategy in which the company will use a push strategy to move products, and then a pull strategy to encourage purchasing from retailers.
Let’s dive into a few recommendations for best sales promotion practices that you can use regardless of which strategy you’re trying out.
Sales promotion techniques
- Know your audience: Are you catering to new customers or existing customers? Are you looking to promote a new product or increase sales on an existing product? These questions will help you choose which sales promotion is best for your company at that time.
- Emphasize scarcity and/or urgency: Your sales promotion should always be short-term, but it’s important to emphasize why. Customers will be more motivated to buy if there’s a risk of running out of time or running out of product.
- Align your sales promotion with your company: Consistency is always key in every aspect of sales, and it’s no different with a sales promotion. If you specialize in long-term products, such as electronics, then it doesn’t make sense to offer customers a subscription package when they’re only going to purchase new products every few years.
Sales promotion activities
- Run promotions in alignment with key dates for your market: Use your annual sales analytics to know when your customers are most likely to buy and schedule your promotions around them. Michael’s Craft Store is a great example of this. They excel at marketing holiday sales promotions on themed decorative items towards the beginning and end of each holiday season.
- Reward your customers with a loyalty program: A loyalty program is a simple way to tell your customers you care and it can be formatted in almost any way. Even if you’re not in a position to give discounts, you can use a loyalty program to give customers a heads up regarding sales, new products, and company milestones.
How CRM software can drive your sales promotions
The key to sales promotion success is knowing your customer base and having a reliable handle on your finances, revenue, and team statistics.
Get the tools you need to run top sales promotions by requesting a demo today.