Advantages and disadvantages of sales promotion
This article aims to explore some of the advantages and disadvantages of sales promotion. There is no doubt that companies use different types of sales promotion very often to increase sales and beat competition. However, like all other marketing techniques, sales promotion has its own disadvantages too. It may turn out to be too costly if done too much without careful planning.
Definition of sales promotion
According to the Institute of Sales Promotion UK as cited in BPP Learning Media (2010), sales promotion refers to a range of tactical marketing techniques, designed within a strategic marketing framework, to add value to a product or service, in order to achieve a specific sales and marketing objective.
Sales promotion is a short-term tactic used by companies to persuade customers to buy their products and services. According to the American Marketing Association (AMA), sales promotion is a marketing pressure used for a limited time frame to stimulate trial, increase consumer demand, or improve product availability. According to Cambridge Dictionary (2021) it is an activity or series of activities done to increase sales of a particular product.
Sales promotion techniques/examples/methods
Companies have a number of sales promotion techniques at their disposal e.g. buy one get one free, free coupons, free shipping and returns, social media competitions and giveaways, prize draw, loyalty card, rebate, bulk discount, free sample, cashback promotions, and display windows. It is worth noting that different sales promotion techniques are likely to be used in different B2C and B2B contexts.
Advantages of sales promotion
Sales promotion is used to entice customers to buy a product/service. It draws their attention to the products/services being offered. In fact, it aims to provide them with reasons to make a purchase. Research in the past suggested that majority of goods sold in the UK were on some kind of promotion with deals such as multi-buys account for approximately 28.6% of sales in Europe overall (Smithers (2015).
As stated above, sales promotion is a short-time tactic. As offered for a limited time frame, it creates a sense of urgency. Customers feel that they must act to get the benefits from it before the expiry of deadlines. Companies often use ‘limited offer’, ‘today’s special offer’, ‘act now’, ‘closing down’ and similar expressions to create a sense of urgency.
Some products have a very limited shelf-life e.g. dairy products. Companies need to clear them out very quickly. One of the ways to do that is by offering sales promotion on those products. Likewise, companies can use sales promotion to reduce inventory rapidly in situations where the replacement of some products and services are necessary.
Sales promotion campaigns can be created and implemented very quickly. For instance, organising a buy one and get one free promotion campaign is not a time-consuming process. Moreover, companies can use sales promotion to support other marketing techniques. For instance, having a buy one and get one free offer helps personal sales force convince customers to make a purchase.
Sales promotion is a key promotional technique used by companies around the world. A total of $86.7 billion were spent on it by the U.S. companies in 2020 (Guttmann, 2021). Certainly, it is an effective persuasive tool; otherwise, companies would not have spent so much on it.
Disadvantages of sales promotion
Sales promotion should not be implemented too regularly. Doing so creates price sensitivity among customers. Some customers may decide to wait simply for the promotions to be offered rather than buying the products/services at the regular retail prices. Therefore, organisations need to identify the best time for their promotional campaigns. Weber and Randall (2018) state that the effectiveness of promotions varies depending on the time of the year, key holidays, and even the day of the week.
When done too much, sales promotion may impact negatively on customer perception. Some customers may start believing that the products/services concerned may not be doing well in the market, hence the sales promotions. Similarly, they may also become suspicious about the quality of the products.
As a short-term tactic, sales promotion generally has short-term impacts, and can indeed have long-time negative implications for providers. Likewise, it is extremely difficult (if not impossible) for a company to achieve sustainable competitive advantages over its competitors through sales promotion.
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Last update: 19 March 2021
BPP Learning Media (2010) Marketing Principles, BPP Learning Media, London
Cambridge Dictionary (2021) Sales promotion, available at: https://dictionary.cambridge.org/dictionary/english/sales-promotion (accessed 18 March 2021)
Guttmann, A. (2021) Marketing services spending in the United States from 2017 to 2021, by category, available at: https://www.statista.com/statistics/987009/marketing-spending-us-category/ (accessed 15 March 2021)
Smithers, R. (2015) Majority of goods sold in UK stores on promotion, finds study, available at: https://www.theguardian.com/business/2015/nov/02/majority-of-goods-sold-in-uk-stores-on-promotion-finds-study-multi-buys (accessed 30 August 2019)
Weber, J. and Randall, C. (2018) For Better Retail Promotions, ask these questions, available at: https://hbr.org/2018/11/for-better-retail-promotions-ask-these-questions (accessed 18 March 2021)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.