1. What can sales promotion do for a small business?
John Leppard, Leppard Development Services
Sales promotions are designed, among other things, to help you to:
- Shift slow moving products faster.
- Clear out old stock to make way for new.
- Level out cyclic patterns of demand.
- Develop customer loyalty.
- Motivate your sales staff or intermediaries.
- Counter another marketing ploy by a competitor.
These are useful activities for companies of all sizes.
Dave Patten, Merry Marketing
Sales promotion is a method of increasing sales over the short term, to win business from competitors in a well-developed sector, where ‘me-too’ products abound and differences between perceived benefits are slight or non-existent. Sales promotion is a powerful weapon in areas like newspapers, supermarkets and petrol.
To many observers, sales promotion as practised by the big players produces dubious long-term effects. If you are always giving 50 per cent off your new kitchen installation or double glazing then even the most gullible person will realise it is fictitious. But used with care, sales promotion can turn dead stock into cash, draw new customers into your premises and raise your profile.
2. What types of sales promotions are there?
John Leppard, Leppard Development Services
A sales promotion is a special offer (different from your normal conditions of sale) which is available for a limited period only. There are three types of offer involving concessions in the form of:
- Money — reduced price, interest-free credit, money off next purchase, vouchers, coupons, and so on
- Goods — two for the price of one, free samples, prizes, and so on
- Services — free trial, guarantees, free training, competitions, free advertising, personalised packaging, and so on
The beneficiaries of these special offers can be:
- Your customers
- Your intermediaries
- Your staff
The best one for you will be the one which addresses your main problem.
For example, suppose your peak sales are in spring and autumn and it is very quiet outside those months. Promotions aimed at providing greater incentives for your sales force to sell out of season might stimulate demand. Equally promotions aimed at customers or intermediaries at those times could also stimulate demand.
The nature of the promotions would have to be attractive to the target audiences, but much of the cost will be met by having better filled capacity and not having to hold stock for long periods.
Dave Patten, Merry Marketing
Sales promotion is a virile and inventive sector of marketing with innovation (and gimmicks) the most prized. Amongst the wealth of ideas used are:
- Price reductions (to get a new product quickly out on the market; or to clear stock before the sell by date has passed or before a new range is launched).
- Buy One Get One Free (though often the price for one has been inched up).
- Loyalty schemes to encourage repeat purchases.
- Dealer incentives to encourage the dealer to stock more lines to meet expected response from an advertising campaign. There is no point in advertising if there is no stock in the shops.
- Draws and competitions, particularly for high value items, but remember that they are governed by the Lotteries and Amusements Act. While interpretation of the law will always be difficult and expensive, look on the helpful website of the Institute of Sales Promotion www.isp.org.uk to read their code of practice that covers pretty well all eventualities.
- Coupons to encourage new customers and repeat purchases by existing customers.
- Self-liquidating promotions, which should repay the cost of promotion by one purchase (ie without requiring individual customers to buy large volumes). This is usually achieved by obtaining a better deal for the product you are pushing, or by reducing your normal margin.
- Gifts, vouchers, calendars, pens, Wimbledon tickets, hampers and so on, traditionally given at Christmas to important customers or prospects. This is more commonly used when selling to businesses rather than the public.
Choosing which medium to employ will depend on your objectives, budget, sector and timescale. A panic sale to generate cash before the bailiffs arrive will need different measures from wooing the chief buyer who is top of your hot prospects list.
3. Can I use sales promotion techniques in a service industry?
John Leppard, Leppard Development Services
Certainly, though it may take a little imagination to think of attractive ideas. For example, a newly set up testing laboratory offered a reduced price service, as well as free collection of test samples, to all first time customers who approached them by a certain date.
This added incentive enabled the company to attract more customers than it might otherwise have done. However, it had to provide an absolutely first class service in order to keep those customers when the terms of business returned to normal.
Dave Patten, Merry Marketing
Certainly. Dry cleaners use money off coupons to encourage repeat visits. Motor factors offer free oil filters if you buy a can of oil while travel companies may offer discounted trips if you book another the same year.
4. Is sales promotion expensive?
Dave Patten, Merry Marketing
A 20 per cent money off coupon for entrance to a visitor attraction can cost very little. If the visitor has to produce the leaflet/coupon to gain a reduction, the response can be directly measured. The effectiveness of business gifts (calendars, diaries) is much harder to quantify.
Sales promotions such as sales or money off promotions should be capable of comparison with the same period last year or month. However, you need to take a broader view to gauge the effect on profitability — your sale may just have stocked up the buyer’s larder in advance for goods they would have bought anyway. On the other hand, customers brought to your premises by a promotion for one product may have bought something else as well.
John Leppard, Leppard Development Services
It will cost you more than doing nothing but by doing nothing you may go out of business.
You can only measure the effectiveness of a sales promotion if you are clear from the outset why you are doing it. A successful promotion needs to be carefully thought out, well in advance. An unthinking reaction to competitive pressures is no answer at all.
5. How do I plan sales promotion campaigns?
John Leppard, Leppard Development Services
The main factors you need to consider are:
- Objective Why are you doing this? What is the background that justifies your action?
- Action What is it you propose to do? Be precise and quite unambiguous.
- Eligibility Who is it aimed at? How do they qualify?
- Timing When do you propose to make the offer? Again, be precise in terms of when it starts and finishes.
- Responsibility Who is responsible for seeing the promotion through to its end?
- Support What sort of back-up is required? Think in terms of advertising, administration, sales visits, stockholding, cashflow, and so on.
- Assessment What data will you need to collect to measure the success of the promotion?
The same principles apply to planning a series of campaigns.
Dave Patten, Merry Marketing
Think what you are trying to achieve:
- Raise quick cash by liquidating stock.
- Attract new purchasers.
- Add new product lines.
- Remind prospects of your offering.
- Encourage stockists to order more in advance.
- Raise your profile; create a bit of fun.
You need to match the promotion to the profile of your target segment taking into account seasonality, frequency of purchase, sensitivity to different price points, perceived benefits and value, novelty and acceptability.
As sales promotion tends to be a transient activity it is important to plan well ahead with essentials of printing and booking advert space. If possible try a small sample before ordering large numbers.
Keep a close eye on the competition to avoid clashing or duplicating what others are doing. Always try to be a little different.
6. How should I integrate sales promotion activity with the rest of my marketing?
Dave Patten, Merry Marketing
To be effective, you need to understand your target market and the competitive environment, and design your sales promotion efforts to help you achieve your overall marketing objectives. How sales promotion fits in will depend on your circumstances. For example, you can use sales promotion to:
- Make advertising or direct mail more effective.
- Generate press coverage.
- Reward existing customers and build loyalty.
- Help you understand your customers’ price sensitivity.
Sales promotion can be particularly useful as a way of providing a short-term boost to sales during slow periods.
John Leppard, Leppard Development Services
Sales promotion ought to be part and parcel of your total marketing strategy. This means that like your other strategies regarding advertising, sales, distribution, pricing, PR, and customer service, it ought to seen as part of the total entity. Use sales promotion when it is the most effective way of achieving your objectives.
If you plan all your marketing activities as part of an integrated strategy, the end effect becomes greater than the sum of the individual parts.
7. When is the best time to run a sales promotion scheme?
Dave Patten, Merry Marketing
The marketing plan should highlight expected peaks and troughs of sales activity — pre-Christmas rush or January slump. Sales promotion used intelligently should be used to iron out these distortions to make best use of management and staff time, plant and resources, and to even out cashflow.
If sales are meeting expectations, then sales promotion may just waste your time and money. But when a new rival appears on the scene or a new product is launched, you need to promote to avoid losing sales and market share.
Some shops are always having sales, which rather tends to negate the meaning of the word. Others always hold a pre-season sale to generate cash to stock up for the summer. It depends on what sector you are in, what your demands are, and what competitive pressures you are under.
Successful sales promotion tends to be short and sharp. Generate plenty of activity and hype if you can, then return to normal trading once the effect starts to wear off.
John Leppard, Leppard Development Services
It may sound trite, but the best time to run a sales promotion is when it will have maximum impact. Only you will know the dynamics of your market and the particular problems that may beset your company. This is the time when you must trust your own judgement; nobody else can honestly step into your shoes.
8. Does giving away calendars, diaries, mouse mats and pens really make a difference?
John Leppard, Leppard Development Services
Giving away nominal gifts indiscriminately is unlikely to be a make or break issue for any organisation. In fact, it could be seen as a non-controversial stance in a world where accepting even a lunch, whoever pays for it, may be seen as bribery and corruption.
Be that as it may, the 80:20 rule suggests that 80 per cent of your clients account for only 20 per cent of your sales. Let them have the ‘Christmas Cracker’ gifts. For the rest, your most important customers, be more imaginative and personalise what you give them.
Dave Patten, Merry Marketing
This sort of activity should be treated cautiously as part of your overall marketing spend. A hundred pounds spent on diaries and calendars to your important clients may serve to remind them of your existence, all year round. Disappointment may arise if a rival produces a better or more exotic item and passes yours along the line. Look at what everyone else is giving away and look for something novel or different — there is plenty of choice. While most firms give away expensive coloured calendars, one firm we know gives away a cheap single colour variety — but it has room to take notes beside each day, so it has another use. Most diaries and calendars naturally last for a year, but a few cover longer periods, which makes them more useful and novel.
While all items of this nature must bear the corporate name of the giver (personalisation), it is almost impossible to directly measure increased business from this exercise.
9. Where can I find the best sources for gifts and promotional merchandise?
Dave Patten, Merry Marketing
Look at the trade magazine Incentive Today (020 7610 3001 or www.incentivetoday.com). An annual buyer’s guide is also available. Also try the trade association British Promotional Merchandise Association (01932 355660 or www.bpma.co.uk). There are also trade shows (contact the BPMA for dates).
John Leppard, Leppard Development Services
From time to time, there are exhibitions about sales promotion incentives. Any of these could be a good starting point for you.
However, working on the basis that it is useful to have somebody close at hand that you can rely on, you will find several sales promotion consultants listed in your local Yellow Pages. It will be up to you to decide whose advice is best value.
10. How do I run a successful competition?
Dave Patten, Merry Marketing
Be careful: the law may take an interest. The simplest way is to look at the website of the Institute of Sales Promotion (www.isp.org.uk) and measure your actions against the Codes of Conduct. In essence, competitions require ‘skill and judgement’; otherwise you run up against the Lotteries Act.
Carefully think through what you are trying to do and what response you may get.
John Leppard, Leppard Development Services
The same principles apply to running a successful competition as to any other form of sales promotion. You need to be sure that a competition is the most effective way of achieving your objectives, and plan how you will carry it out.
However, there are also laws which apply to competitions. As this is a specialist area, you should take advice before running one.
Disclaimer
Although we have made every effort to ensure that the information contained in these FAQs is accurate, Business Hotline Publications and the named experts disclaim all liability for any errors or omissions.
© Business Hotline Publications Ltd 2003
Last checked 01.03.03
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