Sales Promotion Basics

Marketing 101: Plan Promotions to Promote Sales

Since today is Black Friday, it seems only appropriate to write about promotions. Today is the day, at least in the U.S., when droves of shoppers hit the malls in search of outrageous bargains and, in some cases, poorly-planned promotions. But I’m not just singling out brick-and-mortar retailers, Cyber Monday will bring its share of underperforming efforts.

Specials and promotionsToday, it seems that even some of the most experienced retailers in the world are content to offer promotions that simply do not serve the logical purpose of sales and special offers. How many times do we see a major retailer announce reorganizations shortly after running ridiculous holiday offers? Just in case the business world has lost its mind, allow me to remind everyone of the primary purpose of sales and promotions. The main reason to run discounts and give special offers is to increase sales. And while that may seem an elementary concept to be touting, for many businesses this appears to be an alien concept.

Even the marketing term encompassing the concept tries to communicate the purpose: promotions should be designed to promote further sales. And while the idea of a loss leader is still valid in the retail space, a promotion without the goal of greater overall sales is simply a loss. If you are discounting a product or service that is already selling well without a strategy for how that will increase your overall sales, then you are simply establishing a mechanism that challenges your profitability.

Many of the offers being advertised today are more likely to displace sales than to increase them. What that means is that retailers encourage a purchase the consumer had already planned to make, only now they do it at a lower price. Yes, the sale was made but without ideas and actions to grow the overall ticket, the retailer has left money on the table. An effective promotion may in fact offer a popular product at a remarkably low price, but the strategy includes hooks that will bundle other products into the final purchase. The offer may also provide compelling reasons for additional, future sales.

So, as the holiday shopping season gets into high gear, consider these suggestions for a more profitable selling season:

    • Target your promotions toward behaviors you want to change. If someone visits your website or your store without making a purchase, offer them a discount to turn that around. If you’re offering legendary customer service and exceptional products, sometimes discounting that first sale is the catalyst for a long-term, mutually-beneficial relationship.
    • Convert your customers into a sales force. Reward customer purchases with discounts on their next visit and a discount to share. While this is easiest to manage when you have a loyalty program in place, a future discount and a coupon-to-share help boost future sales and will involve the customer in telling your story.
    • Consider offering upgrades rather than discounts – think, “large for the price of a medium.” Often these free upgrades represent very small hits to your margin but present compelling benefits to the consumer. For a service-based business, the biggest challenge can be just getting someone in the door. If a discounted manicure is a consumer “want,” turn it into a “need” by offering a regular-price manicure upgraded with a free pedicure. Make sure you use language that conveys “more for less.”
    • Involve your suppliers in the promotional planning. Your suppliers are as interested in your sales as you are. Manufacturers and distributors often carve out a portion of their marketing budgets to help their customers promote products. Talk with your sales rep early and see what co-op opportunities exist. Free samples and free refreshments are cost-effective ways to pull customers into your store.

Promotions and sales are the lifeblood of a successful retail strategy and a well-planned promotion will result in increased sales without eroding margins. Retailers and online shopkeepers need to factor promotions into their annual sales plans. When promotions are used to react to poor sales, the discount often compounds (rather than resolves) the problem. Retailers need to be nimble enough to adjust to market conditions, but the adjustments need to be made in measured response to the business environment, not in desperation.

Planning Image

The five P’s apply to retail sales in much the same ways as they apply to virtually every other aspect of business: prior preparation prevents poor performance. Plan your promotions to produce stellar performance for both sales and margins.