Sales promotion techniques

Sales promotion means short-term incentives that give customers a reason to buy now. Sales promotion techniques are used to attract new customers and to retain existing customers, and those two aims often need different offers. Because every offer costs money and cuts into profit margins, a business should decide what it wants the offer to achieve before choosing one.

Objectives a business might set

• Attracting new customers — giving people who have never bought from you a reason to switch.
• Clearing stock — shifting old or seasonal items to free up cash and space.
• Launching a product — getting a new item noticed in a crowded market.
• Raising awareness — putting the business name in front of people who have not heard of it.
• Encouraging trial — removing the risk of trying something new, so a triallist can become a regular buyer.
• Building loyalty — giving existing customers a reason to come back rather than switch.

Matching the technique to the objective

The technique should suit the objective, the target audience and the budget. A clumsy match wastes money: sponsorship does nothing to clear a warehouse of unsold stock, and a loyalty card means little to someone who has never bought from you.

For example, a bicycle repair shop by the sea wants more repeat business, so it gives every customer a card that earns a free service after four paid ones. Its objective is retention, so a loyalty scheme fits; a half-price service would pull in one-off visitors but give nobody a reason to come back.

A discount is a temporary reduction in the price of a product or service, given as a percentage or a fixed amount. It is a sales promotion used to encourage customers to buy.

Businesses can offer discounts through coupons, which are money-off vouchers; promotional codes, which customers enter online or at the checkout; or sale periods, such as an end-of-season sale. For example, a local bike shop might offer 15% off children's helmets during a cycling safety week using a code on its website. The offer is temporary, so it counts as a sales promotion. A permanent price cut is a pricing strategy, not a discount.

Benefits of discounts

• Increasing sales quickly: a lower price can persuade customers to buy now rather than wait, bringing in revenue fast.
• Attracting attention: a clear money-off offer can make customers notice a product they might otherwise ignore.
• Selling old or excess stock: discounts help a business clear stock so cash is not tied up in storage.

Limitations of discounts

• Reducing profit: a discount lowers the selling price, so each item sold has a smaller profit margin, and the business needs enough extra sales to make up for it.
• Damaging a premium brand image: a brand that relies on being exclusive may look less special if it discounts often, making customers less willing to pay high prices.
• Short-term effect: once the offer ends, sales may return to normal, and some customers may wait for the next discount instead of paying full price.

A competition asks customers to do something to take part, such as answer a question, guess a number or design a label, for the chance to win a prize. Businesses publicise competitions on packaging, like a code printed inside a wrapper, or through advertising such as posters and social media posts. Entering usually means buying the product first, so the promotion is tied to a sale.

How competitions help a business

• Product awareness – eye-catching competition details on a pack or poster get shoppers talking about a product they might have walked past.
• More sales – if you need a code from the pack, you have to buy the product, and some customers buy several.
• Launching a new product – a prize gives shoppers a reason to try something unfamiliar.
• Contest entry data – entry forms can collect names, emails and phone numbers, building a list for future offers with entrants' consent.

Board Room, a skate shop, prints a code inside every box of its new helmets. Customers enter it online for a chance to win a £250 shopping spree. Shoppers notice the helmets, more boxes sell, and each code gives the shop a contact for its next promotion.

The drawbacks

A competition only attracts entries if the prize is worth having. A sticker pack will not persuade many people, so businesses offer something big – a holiday, a games console or a year's supply of the product – and that prize is a real cost. Running it also takes time: staff must write terms and conditions, pick the winner and contact them.

Staying within the law

Competitions must not break gambling law. If the winner depends purely on chance and customers pay to enter, it can count as a lottery and may need a licence, so businesses usually make the result depend on skill, such as answering a question correctly, or allow free entry. Prizes must be given out exactly as promised, with clear closing dates, and entry data must be stored and used lawfully. Ethically, a business should be honest about the odds and avoid pressuring children to enter.

Buy one get one free (BOGOF) is a sales promotion where a customer who buys a specified item receives a second one at no extra cost. For example, a bath bomb shop might run BOGOF on its space-themed bath bombs.

Why businesses use BOGOF

A free item makes the deal look better value, so BOGOF can encourage sales. It can also increase habitual use: customers buy more of the product, get used to using it and are more likely to buy it again. It helps a business sell selected stock quickly, such as a range that is being replaced. BOGOF can also encourage new customers to try a product and attract customers away from competitors, which can increase market share.

Drawbacks of BOGOF

BOGOF reduces the profit margin on the selected items because two items are sold for the price of one. It can increase wastage if customers stockpile items and do not use them all, especially with perishable goods. Frequent offers can cheapen the product or brand image, making it seem less special. Customers may also take the free offer without coming back, so the promotion may bring in less revenue or profit than the business hoped.

Worked example: a stationery shop sells a notebook for £4. With BOGOF, a customer gets two notebooks for £4, so the shop receives an effective price of £2 per notebook. It must sell many more to cover its costs and make the same profit. If the offer clears old designs and brings in students who return, it can still be worthwhile.

Point-of-sale advertising means putting promotional displays and adverts right where a customer pays, around the till or checkout area. The customer has usually already decided to buy something from the shop, so a display at the last moment can persuade them to add one more item to their basket.

Displays usually hold small, low-priced add-on items, such as a phone case beside the till in a phone accessories shop, or they hold stock a retailer wants to clear at a reduced price. Customers standing still in a queue have time to look at what is in front of them.

Why it works

• It grabs attention while people queue: waiting customers have little else to do, so they read the display.
• It increases sales of selected items: a product moved to the till can sell far more than it did on a shelf, with no change to its price.
• It helps a retailer display and sell products: a small counter stand can promote lines that would otherwise be overlooked.

For example, a garden centre with a stand of seed packets and small trowels next to its till might add a few pounds to hundreds of baskets each week.

Limitations

• Unnecessary purchases: customers may buy on impulse and later regret it, which can give them a negative feeling about the shop, and a counter crowded with displays looks cluttered.
• Cost: stands, printed signs and shelving must be designed and bought, and staff must spend time restocking them.
• Limited space: there is only so much room around a till, so just a few products can be promoted, and packing in too much slows the queue down.

Online checkouts

Online shops use similar techniques just before checkout. A basket page might show a row of suggested add-ons — a cycling shop offering lights or an inner tube — or a message saying delivery is free once you spend a little more. This reaches every customer rather than those in one store, although it is easy to scroll past.

A free gift is an item given at no extra cost, often when a customer takes out a subscription or makes a larger purchase. For example, a bakery could give every child a free iced biscuit when they visit with a paying adult on a Saturday morning. A product trial, also called a consumer trial, lets customers try a product or service free, or for a trial period, before deciding whether to buy. A leisure centre could offer a free week of junior climbing sessions to tempt families to join.

A product trial is a sales promotion technique used to attract customers. It is not only market research to test or improve a product or service.

Benefits

Both techniques can raise awareness of a new product and create a positive business image because the customer receives something free. A trial removes the initial financial barrier, which can increase the customer base, and a good trial can turn a trial user into a paying customer. Users may recommend the business to friends, and their comments give feedback and qualitative information about what they liked or disliked.

Limitations

Free gifts are expensive to provide and distribute. There is no guarantee that customers will use a free gift or trial, and trial users bring in no revenue while they try the product. Some may take advantage of the free offer without buying. Customers can become annoyed if a free trial leads to charges they did not expect. Feedback may be dishonest or negative, information can leak to competitors, and the data collected can be difficult to analyse. Running a trial also takes time.

A loyalty scheme is a sales promotion technique that rewards customers for buying again and again. It usually works through a card, an app or an account: the more a customer spends or the more visits they make, the more rewards they unlock, such as points, discounts or free items.

For example, a pet supplies shop called Paws & Claws could give a stamp card where every tenth purchase earns a free bag of dog treats. The rewards grow with each visit, so regulars feel they are getting steadily better value.

Why loyalty schemes help a business

• Loyalty schemes can act as a form of personal selling, because the shop can give each cardholder targeted promotions and discounts. It knows what they buy, so it can send an offer for the exact product they like, such as money off cat food to a customer who buys it every month. The offer feels personal rather than generic.
• Buying habit data is collected with every scan, showing what sells, how often and alongside what. The business can use this to plan stock and aim promotions at groups of similar customers.
• Repeat purchase is encouraged, because customers return to build up rewards rather than switching to a competitor. This supports customer retention.

Drawbacks to weigh up

• The rewards have to be paid for, and so does the administration — cards, apps, staff time and the system that records points.
• Rewards and discounts cut the price the business actually receives, which reduces profit margins on those sales.
• Customer details must be collected and protected lawfully, following data protection rules: customers must know what is held and why, and the business must keep that data secure. Getting this wrong damages trust and can lead to penalties.

Loyalty schemes are therefore more than just discounts: they are a way of gathering information and keeping customers, which is only worth the cost if the extra repeat sales outweigh the rewards and running costs.

Sponsorship is a sales promotion technique: a business pays towards supporting an event, a person or a team in return for having its name promoted. The business does not give the money away as a gift: it pays because it expects something back, such as its logo on a banner, on a shirt or on a livestream, and mentions in the organiser's posts and announcements. Because the business pays for this promotion, sponsorship is a paid arrangement, not free publicity.

For example, a mobile phone repair shop pays £2,000 to sponsor a local gaming tournament. Its name appears on the stage backdrop and on the livestream, and the organisers thank the shop every time they advertise the event.

Benefits of sponsorship

• Brand exposure to a large audience. Many people see the business name at the same time, often again and again over the event, for one fee, which raises awareness quickly.
• Targeting. A business can choose an event that its target market already attends or watches, so the people who notice the name are the ones most likely to buy. In the example, the shop's likely customers are teenage gamers, and those are exactly the people watching the tournament stream.

Limitations of sponsorship

• Bad publicity at the event. If the event is badly run, overcrowded or surrounded by a scandal, some of that negative feeling rubs off on the sponsor's name.
• Poor performance. When a sponsored team keeps losing, or a sponsored person behaves badly, customers link the brand with losing or with the wrong behaviour, and the brand image suffers.
• High cost. Popular events know businesses want the exposure, so they charge high fees. The fee is usually paid whatever happens, and there is no guarantee that people who saw the name will actually buy.

When choosing a sales promotion technique, a business checks that it suits its target audience, is cost-effective and fits the other elements of the marketing mix — price, place and product.

Suitable for the target audience

Different groups respond to different offers. A loyalty scheme suits customers who buy regularly, such as weekly shoppers at a farm shop, because repeat visits build up the reward. A competition promoted on social media may reach teenagers who spend hours online. An offer that feels gimmicky, or needs an app the customer will not download, can put people off rather than attract them.

Cost-effective

Every technique costs money: prize funds, free stock, display materials or a sponsorship fee. The business compares that cost with the extra sales and profit it expects, so a small shop with a tight budget may choose a modest discount over an expensive sponsorship deal.

Consistent with the marketing mix

A premium-priced product can be damaged by heavy discounting, because customers may begin to doubt the quality and wait for the next sale. Place matters too: an offer only works if it reaches customers where they already are, so a money-off voucher printed on the back of a local takeaway's menu is seen by people already deciding what to eat, while a code sent to an email inbox may never be opened. The offer should also match the product — a free gift works best when it is something the customer will actually use alongside it.

For example, a family-run farm shop whose regulars call in every Saturday uses a stamp card that gives a free loaf after ten visits. It suits its audience, costs little to run and fits its everyday in-store mix, unlike a large sponsorship that would spend money on people who never shop there.

Sales promotion means short-term incentives to encourage a purchase. Because the offer is temporary, it often lifts sales for a short time only and can reduce the profit margin on each sale. Judge a promotion against its cost and the objective: did it create enough extra sales, new customers or awareness to be worth the money and effort?

Match the technique to the objective

Which technique helps most depends on what the business wants to achieve. If the aim is a quick sales boost, a discount or BOGOF can work because the better value encourages immediate buying. To raise awareness, a competition or sponsorship can put the brand in front of more people. A product trial lets customers test something before buying, while a loyalty scheme rewards repeat purchase and helps keep existing customers.

For example, a garden centre runs a buy one get one free on bedding plants at the end of the season. It sells twice as many plants, but each pair brings in the price of only one, so the offer pays off only if the cleared stock and extra customers are worth the lost revenue.

Limitations to weigh up

Every promotion has a cost: prizes, free items, displays or sponsorship fees. A discount or BOGOF reduces the money received per sale, so extra sales may not mean extra profit. A poorly chosen offer can damage brand image, especially if customers start to see the product as cheap. Promotions are also limited in duration, and some customers take the offer and do not return afterwards. A pricing strategy such as psychological pricing is not a sales promotion.