12.8 Sales Promotion

Sales promotions are powerful tools to boost revenue and engage customers. From limited-time offers to loyalty programs, these strategies target consumers, retailers, and businesses alike. Understanding consumer behavior is key to crafting effective promotions that resonate with target audiences.

Coupons and product placement are two popular promotional tactics with distinct advantages. Coupons drive immediate sales but may erode brand loyalty if overused. Product placement offers subtle exposure but can be costly. Measuring effectiveness through metrics like redemption rates and brand recall helps optimize promotional strategies.

Sales Promotion Strategies and Effectiveness

Goals and types of sales promotion

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• Stimulate short-term sales boosts revenue quickly (limited-time offers)
• Encourage trial of new products attracts potential customers (free samples)
• Increase brand awareness expands market reach (sponsorships)
• Reinforce brand loyalty retains existing customers (rewards programs)
• Clear out excess inventory makes room for new products (end-of-season sales)
• Consumer promotions target end-users
  • Coupons provide discounts to incentivize purchases (buy-one-get-one-free)
  • Samples allow customers to try products before buying (cosmetics)
  • Price discounts temporarily reduce prices (50% off sales)
  • Loyalty programs reward frequent purchases (punch cards)
  • Contests and sweepstakes create excitement and engagement (giveaways)
• Trade promotions target retailers and distributors
  • Allowances and discounts incentivize retailers to stock and promote products (volume discounts)
  • Cooperative advertising shares advertising costs between manufacturers and retailers (in-store displays)
  • Point-of-purchase displays attract attention and encourage impulse buying (end-cap displays)
  • Trade shows showcase products to potential buyers (industry-specific events)
• Business promotions target other businesses
  • Conventions and meetings provide networking and educational opportunities (conferences)
  • Promotional products feature company branding (pens, t-shirts)

Consumer behavior in promotion strategies

• Problem recognition identifies a need or want (low on shampoo)
• Information search gathers data about potential solutions (researching shampoo brands)
• Evaluation of alternatives compares options based on criteria (price, ingredients)
• Purchase decision selects the best option (choosing a specific shampoo)
• Post-purchase behavior reflects on the purchase experience (satisfaction or regret)
• Psychological factors influence internal thought processes
  • Motivation drives behavior to satisfy needs (desire for clean hair)
  • Perception interprets information from the environment (viewing a shampoo ad)
  • Learning acquires knowledge and experience (trying a new shampoo)
  • Beliefs and attitudes shape opinions and preferences (trusting a specific brand)
• Personal factors relate to individual characteristics
  • Age and life-cycle stage affect needs and priorities (baby shampoo for new parents)
  • Occupation influences income and lifestyle (construction workers prefer durable shampoo)
  • Economic situation determines purchasing power (budget-friendly options)
  • Lifestyle reflects activities, interests, and opinions (eco-conscious consumers prefer natural shampoo)
  • Personality and self-concept shape identity and choices (adventurous types try new shampoo brands)
• Social factors involve external influences
  • Reference groups provide standards for comparison (friends recommending shampoo)
  • Family members share resources and decision-making (household shampoo purchases)
  • Roles and status define position and expectations (breadwinners may prioritize cost-effective shampoo)
• Considering demographic and psychographic characteristics ensures relevance (age, gender, values)
• Aligning promotions with consumer needs and preferences increases effectiveness (addressing specific hair concerns)

Marketing Strategy and Consumer Engagement

• Market segmentation divides consumers into groups with similar characteristics and needs
• Brand awareness builds recognition and familiarity among target audiences
• Promotional mix combines various marketing tools to achieve communication objectives
• Customer lifetime value estimates the total worth of a customer over their relationship with a brand

Effectiveness of coupons vs product placement

• Couponing benefits
  • Encourages trial of new products reduces risk for consumers (first-time purchase discounts)
  • Stimulates short-term sales drives immediate revenue (limited-time offers)
  • Attracts price-sensitive consumers expands customer base (bargain hunters)
• Couponing limitations
  • May erode brand loyalty if overused (consumers switch brands for deals)
  • Can lead to price wars with competitors (matching or exceeding discounts)
  • Requires careful planning and execution to avoid losses (setting expiration dates)
• Measuring coupon effectiveness
  • Redemption rates track usage and popularity (percentage of coupons used)
  • Incremental sales calculate additional revenue generated (sales lift)
  • Return on investment $ROI = (Incremental Sales - Promotion Costs) / Promotion Costs$
• Product placement benefits
  • Increases brand exposure in relevant contexts (beverages in movies)
  • Reaches target audiences through media consumption (gamers seeing brands in video games)
  • Enhances brand image and credibility through association (luxury cars in high-end TV shows)
• Product placement limitations
  • Can be expensive for prominent placements (blockbuster movies)
  • Requires careful integration with content to avoid disruption (seamless incorporation)
  • May face regulatory restrictions in certain media (disclosures in influencer posts)
• Measuring product placement effectiveness
  • Audience reach and frequency quantify exposure (impressions)
  • Brand recall and recognition assess memorability (surveys)
  • Sales impact and ROI link placements to revenue (tracking codes)