The pros and cons of sales promotions
Some of the benefits to running a sales promo include:
- Creating loyalty and enthusiasm for your brand
- Increasing sales and revenue
- Gaining valuable insights into customer behavior and price sensitivity
Strategically using sales promotions help support a variety of business interests and keep your existing audience engaged with your offers.
The downside of sales promotions is that some businesses suffer from becoming overly dependent on them in an effort to boost sales. As a result, they enter a precarious short-term marketing cycle and struggle to plan for long-term goals and growth.
Take the “sales promotion trap” as an example. If you consistently run promotions, your consumers may come to expect them and only buy products or services when they’re on promotion. This can work to:
- Devalue your brand
- Make it difficult to sell products or services at your standard price point.
Howard Freidman, former CEO of Aptela (Now Vonage Business) speaks to this pain point:
“The trap is running constant promotions to spike sales. As a result, [owners and manufacturers] condition consumers to wait for them and erode their price integrity.”
Further, if your competitors also run tons of sales promotions, the market itself may be negatively affected. Bidyut Bikash Das, former Demand Manager at OYO, notes that, “...when a number of competitors extensively use promotions to differentiate products or services, and other competitors copy the strategy, [it can result in] no differential advantage and a loss of profit margins to all.”
Therefore, the definition of a good sales promotion is one that’s run strategically to work in conjunction with your sales cycle.
In addition, too many promotions can damage your business reputation because the offers no longer seem exclusive or valuable and clients begin to see your product or service as worth less than what you typically sell it for.
Overall, sales promotions are a powerful tool to rapidly inject sales, attention and demand into your business. To ensure they remain effective, they should be used strategically and with a specific goal in mind.
Although the main driver of running a sales promotion is to increase demand for a particular offer, sales promotions can help you to achieve multiple outcomes, depending on your end-goals.
Generate new leads
In the short-term, sales promotions can help you attract new leads or customers. However, this should also be seen as one piece in a long-term strategy, since you’ll need to continue to nurture these leads to move them along the sales pipeline or turn them into loyal customers that don’t churn.
An example of using a sales promotion to generate new leads is to offer a free trial for a SaaS tool so that potential customers can see if your product is the solution they’ve been looking for.
Or, if you’re selling a digital template at a reduced price, people may share it with others who could benefit from the discount as well. In this way, sales promotions are a great way to attract qualified leads for your sales team.
Introduce a new product, service or feature
Sales promotions are a great way to grab attention and increase demand when introducing a new product, service or feature that doesn’t yet have social proof within your market.
For example, pairing the announcement of your new SaaS feature with a limited-time discount might be enough to turn long-time lurking leads into paying customers. Alternatively, if you’re revealing a new product, you could share an introductory price that will expire after the first “X” number of purchases.
Sell out extra inventory
Sales promotions are an efficient way to clear out extra inventory at the end of a sales period. If there’s a particular product taking up too much space, going out of production or becoming redundant, retailers can run a sales promotion such as ‘buy one get one free’ to help clear it out. You’ve probably seen this kind of promotion in stores marketed as the acronym: BOGO.
Gain valuable insights
Sales promotions work to generate valuable insights into what your customers desire, how they make purchasing decisions and what kinds of promotions they value the most—useful information for both your sales and marketing teams.
When designing your sales promotion campaign, you’ll need to conduct research into your customers' interests, as well as what your competitors offer. Taking time to do this research can help you and your team learn how to attract new clients, improve customer service and create compelling offers that resonate with your target audience. Just imagine, you wouldn’t want to run a campaign for 15% off the same week when your competitor is running a promo for 20% off.
Encourage existing customers to buy more
A great sales promotion idea could focus specifically on repeat customers. Encouraging repeat business is easier and more cost-effective than attracting new clients. In fact, a 5% increase in customer retention generates more than a 25% increase in profit, on average.
By providing existing customers with exclusive incentives, you can increase loyalty, generate repeat purchases and hopefully draw high-quality referrals. You can also attract long-term and repeat customers. This practice is a good one for any sales pipeline, as repeat clients move through the funnel quickly, since they already know what to expect.
Sell during off-season or slow periods
Similar to selling out extra inventory, if your business is seasonal or has slower periods, well-timed sales promotions can help inject purchases and galvanize interest during a time where sales are often slow or stagnant.
Short burst of revenue increase
Sales promotions can help companies increase the number of products or services sold. Although the sale often occurs at a reduced price, the increased quantity sold helps counteract the difference.
Send sales promotions to your existing audience
Once a person makes a purchase, they’re often subscribed to your email list. By sending them a mix of helpful content as well as sales promotions, you can continue to keep them engaged.
Email is a great vehicle for this communication, as research shows that 49% of people would like to receive weekly email blast campaigns from their favorite brands. By segmenting your list, you can ensure that you’re sending them only the most relevant offers.