Sales Promotion

Sales promotion, a key ingredient in marketing campaigns, consists of a collection of incentive
tools, mostly short term, designed to stimulate quicker or greater purchase of particular products
or services by consumers or the trade.50
Whereas advertising offers a reason to buy, sales promotion offers an incentive. Sales promotion
includes tools for consumer promotion (samples, coupons, cash refund offers, prices off, premiums,
prizes, patronage rewards, free trials, warranties, tie-in promotions, cross-promotions, point-ofpurchase
displays, and demonstrations), trade promotion (prices off, advertising and display allowances,
and free goods), and business and sales force promotion (trade shows and conventions,
contests for sales reps, and specialty advertising).
Objectives
Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, whereas
a free management-advisory service aims at cementing a long-term relationship with a retailer.
Sellers use incentive-type promotions to attract new triers, to reward loyal customers, and to increase
the repurchase rates of occasional users. Sales promotions often attract brand switchers, who
are primarily looking for low price, good value, or premiums. If some of them would not have otherwise
tried the brand, promotion can yield long-term increases in market share.51
Sales promotions in markets of high brand similarity can produce a high sales response in the
short run but little permanent gain in brand preference over the longer term. In markets of high
brand dissimilarity, they may be able to alter market shares permanently. In addition to brand
switching, consumers may engage in stockpiling—purchasing earlier than usual (purchase acceleration)
or purchasing extra quantities. But sales may then hit a postpromotion dip.52
Advertising versus Promotion
Sales promotion expenditures increased as a percentage of budget expenditure for a number of
years, although its growth has recently slowed. Several factors contributed to this growth, particularly
in consumer markets. Promotion became more accepted by top management as an effective
sales tool, the number of brands increased, competitors used promotions frequently, many brands
were seen as similar, consumers became more price-oriented, the trade demanded more deals from
manufacturers, and advertising efficiency declined.
But the rapid growth of sales promotion created clutter. Consumers began to tune out promotions:
Coupon redemption peaked in 1992 at 7.9 billion coupons redeemed but dropped to 2.6 billion
by 2008. Incessant price reductions, coupons, deals, and premiums can also devalue the product in
buyers’ minds. There is a risk in putting a well-known brand on promotion over 30 percent of the
time. Having turned to 0 percent financing, hefty cash rebates, and special lease programs to ignite
sales in the soft post-9/11 economy, auto manufacturers have found it difficult to wean consumers
from discounts ever since.53
Loyal brand buyers tend not to change their buying patterns as a result of competitive promotions.
Advertising appears to be more effective at deepening brand loyalty, although we can
distinguish added-value promotions from price promotions.54 Gain’s “Love at First Sniff ” campaign
used direct mail and in-store scented tear-pads and ShelfVision TV to entice consumers
to smell the product, resulting in an almost 500 percent increase in shipments over the goal.Price promotions may not build permanent total-category volume. One study of more than
1,000 promotions concluded that only 16 percent paid off.56 Small-share competitors may find it
advantageous to use sales promotion, because they cannot afford to match the market leaders’ large
advertising budgets, nor can they obtain shelf space without offering trade allowances or stimulate
consumer trial without offering incentives. Dominant brands offer deals less frequently, because
most deals subsidize only current users.
The upshot is that many consumer-packaged-goods companies feel forced to use more sales
promotion than they wish. They blame heavy use of sales promotion for decreased brand loyalty,
increased price sensitivity, brand-quality image dilution, and a focus on short-run marketing planning.
One review of promotion effectiveness concluded, “When the strategic disadvantages of promotions
are included, that is, losing control to the trade and training consumers to buy only on
deal, the case is compelling for a reevaluation of current practices and the incentive systems responsible
for this trend.