Sales promotion definition
/What is a Sales Promotion?
A sales promotion is an action taken to temporarily increase sales or eliminate excess inventory. Such promotions are a standard part of many organizational sales plans, and are needed to achieve or expand profits. Sales promotions are more common in a highly competitive market, where companies must fight for every incremental customer, as well as to retain those customers they already have.
Examples of Sales Promotions
Examples of sales promotion activities are as follows:
Contests. These activities involve customers in the use of company products, possibly resulting in the give-away of products.
Coupons. This is the distribution of a discount offer, either in the form of a reduction from the list price, or as a volume discount where additional units purchased are less expensive or free.
Demonstrations. On-site demonstrations can be used to show the features of a product to potential customers.
Finance deals. Customers can be offered low-cost or free loans if they buy now, thereby deferring payment.
Free samples. Small samples of company products can be given away, under the expectation that customers will like the goods enough to come back and buy from the company at full price.
Merchandising. Display racks and similar contrivances can be used to present products more effectively to customers.
Trade shows. A company can rent booth space at a trade show, from which it displays and demonstrates its wares.
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Advantages of Sales Promotions
Sales promotions are useful for attracting sales from customers who might not otherwise make a purchase. They can also be used to sell off excess or obsolete goods at discounted prices, thereby keeping inventories down to a manageable level.
Disadvantages of Sales Promotions
Caution must be used when engaged in sales promotions, since excessively favorable deals can be so expensive that the net effect of a promotion is a decline in profits. Also, promotions should be held at relatively long intervals, to avoid having customers become habituated to special deals. When they become habituated to these deals, they are less likely to make purchases in the absence of a deal. A further concern is that sales promotions only attract the least loyal customers, who are the ones most likely to leave in the absence of a deal.