Sales promotions are one of the oldest marketing techniques in commerce, and for good reason: they work. Some 88% of shoppers use a coupon or discount code throughout the year.
A promotion can be used to get rid of inventory to make room for new stuff. It could be a seasonal campaign to capitalize on consumer spending. Or perhaps you're launching a new product line that you are eager to get customers interested in.
Whatever the reason for it, a sales promotion is a great way to boost your retail sales performance. You can use them to attract potential customers, delight existing customers, and encourage purchases.
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What is a sales promotion?
A sales promotion is a marketing activity that is designed to increase sales, encourage customer loyalty, or generate brand awareness. It usually involves offering a discount or some other type of incentive for customers to buy your product or engage with your brand.
A sales promotion is usually a temporary part of a larger marketing plan. You can run a promotion for a variety of reasons, but the end goal is always to increase sales.
Pros and cons of sales promotions
Techniques used in sales promotion can have significant psychological effects that motivate customers to act.
You might have heard about the power of ending prices with a 9. Researchers have found that items priced at $39 sell more than those priced at $34. Retailers often price deals with a 9 at the end to take advantage of this phenomenon.
But promoting sales is more than just a matter of adjusting prices. Here are a few pros and cons.
Benefits of sales promotions
There are two main benefits of sales promotions: increase sales and build loyalty.
Incentives are a classic way to increase demand for your product. It doesn't have to be complicated - give people incentives to buy, like discounts or deals, and they will buy more.
Sales promotions, then, are primarily used to boost sales, whether the goal is Increased sales figures for your entire company, or achieving a target for a certain product line.
In addition to helping the retailer, they are popular with customers.
One study found that recipients who received a $10 voucher experienced a 38% rise in oxytocin levels and were 11% happier than those who didn’t receive one.
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Consumer sales promotions can also encourage loyal customers to come back and buy from you again and again.
Some 68% of consumers believe that coupons generate loyalty.
Customers sometimes need a little push to rekindle their relationship with your brand. A crowded market, coffee, for example, will provide them with plenty of choices.
However, you might be able to convince a customer to buy this week's bag of beans from you instead of a competitor if you run a promotion. They even may switch to you as their regular supplier after remembering how tasty your beans are. In this way, a single promotion can affect multiple transactions down the road.
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Drawbacks of sales promotions
The two primary drawbacks of sales promotions are the potential to devalue your brand and the possibility of generating misleading sales data.
Can devalue your brand
OneThe problem with promotions is that they can make your offering seem cheap.
Too many promotions, or the wrong type of promotions, can hurt your brand's image.
In fact, one study found that new customers whose first transaction involves a price reduction or special offer are 50% less likely to return to make a second purchase.
That same study found that a customer whose first interaction with a retailer doesn't involve a discount is worth at least 2.5x more than a customer who gets a discount or promotion.
So when running promos, ask yourself whether the short-term boost is worth the potential loss in lifetime value (CLV).
Can generate misleading sales data
If your sporting goods store sells twice as many golf clubs in June as it did in May, you'd count that as a success. It must mean the product is in high demand and customers love it. Therefore, it's a good idea to increase your spending and buy more stock. Right?
Not necessarily. Suppose you were running a sales promotion on golf clubs during June, pricing them lower than all your competitors. Sales volume for June should be terrific. But you may not sell the same amount of clubs in July, when you revert to normal pricing.
When you launch a new product on discount, this effect is particularly pronounced. Promotions can boost sales for new items, but the demand needs to be strong enough to last after the promotion ends.
Types of sales promotions
- Free trials and products
- Free shipping
- Charitable donations
- Flash sales
- First-time purchasers
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Let's take a closer looks at these different types of sales promotions.
Giveaways are when you offer a prize in return for participation in a publicity event. This covers everything from sweepstakes to raffles, lotteries and contests, so you have to be mindful of what's legal in your area.
You can give away anything from free items to branded merchandise or something else. They're a great way to generate excitement and create a buzz around your product.
By bundling, you can offer discounts that are only available when two or more items are purchased together. As a result, the order value will increase, while maintaining margins for a profit.
Free trials and products
Free trials and products are a great way to attract new customers and build loyalty, since it allows them to try out your product or service for free without committing to anything. See how ujji uses free products as a way to reward members and make them feel special.
Also known as BOGOF, this refers to a 'buy one, get one free' deal. It's a compelling offer to customers, who can see it as a big saving.
You might think you're losing revenue to the value of one item. Depending on your profit margin per item, however, because of the increase in volume, this can actually work out to be more profitable than selling single items.
For ecommerce and mail-order brands that usually charge for it, free shipping can be an attractive offer. You could offer it for every new order, to entice new customers, or you could offer it for every order above a certain value. There will be some calculations to make when deciding what's financially viable.
Including a charitable donation with each order can be a mutually beneficial agreement. Customers feel good about helping a worthy cause, the charity benefits from increased income, and you benefit from allying yourself with a good cause.
A flash sale is a limited-time sale that offers deep discounts on a particular range of products. Often they're not revealed until the last minute, giving shoppers a sense of urgency and causing them to rush to purchase items before they sell out.
📌 GET STARTED: With Shopify, creating discount codes that work for both online and in-store purchases is simple. To find out how often your returns discount code is used, view the Sales by discount report in Shopify admin.
Subscriptions can cover info products (like publications or digital goods) or physical products (like grocery items). A typical promotion would involve giving the customer a certain percentage discount in return for committing to purchase multiple times.
One of the best-known of these is Amazon's Subscribe & Save offer. For thousands of products you can gain a 5%, 10%, or 15% discount when you choose a recurring purchase.
An upsell is when you offer a customer an additional, upgraded product or service when you're making the sale. For example, a brand may encourage you to upgrade to a better pair of clips for your hair. Upsells are usually much easier to make than regular sales because the customer is already prepared to make a purchase.
💡 PRO TIP: Try using apps to upsell and cross-sell more effectively. Apps like Marsello and Frequently Bought Together integrate with Shopify POS and recommend products to store staff based on what they’ve added to a customer’s cart, making it easier than ever to suggest relevant products, increase basket sizes and order value.
Coupons are physical or digital vouchers that offer a discount on products or services. They can be offered by the retailer themselves, or by third-party sites like Groupon. One survey from RetailMeNot found that four out of five consumers made an unexpected purchase based on finding a coupon or discount.
You can entice new customers by offering them promotions for their first purchase. The promotion can be almost any benefit you can think of: reduced prices, free shipping, additional items or accessories, educational content, or one-on-one calls to show them how to use the product. The benefit: welcoming them to the brand and building loyalty.
💡 PRO TIP: Want to see how effectively you’re attracting and retaining customers over time? View the First-time vs. returning customer sales report in Shopify admin to see how many orders come from new or returning customers, the total value of those sales, and more.
Sales promotion strategies
- Push strategy
- Pull strategy
- Hybrid strategy
There are three main strategies for running sales promotions.
A push strategy involves 'pushing' your product toward your customers. It will be placed in a prominent location that gets the attention of your customers, for example, at a point of purchase.
When your product is immediately available in a situation of need, your customer is more likely to purchase it. Push strategies often involve impulsive decisions. Consider the snacks on display at the grocery store. The products are 'pushed' in front of customers at the checkout stand, where they are most likely to buy.
Pull strategies involve making your customers want to buy your products. Thus they involve constructing an advertising campaign, giving away freebies, and offering seasonal discounts to make your brand more visible.
Once customers believe that your product is the one for them, they will choose it over those of your competitors. As promotions you run will create demand for your products, you don't have to appeal to impulse buying.
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A hybrid strategy combines push and pull tactics. By using both, you can reach customers at each stage of the marketing funnel.
Sales promotion ideas
- Free samples
- Referral bonuses
- Social media giveaways
- Cashback promotions
- Loyalty reward points
- Seasonal promotions
Promotions can take many forms, providing endless opportunities for creativity. Being creative and catering to the needs of your target audience without going over budget is the key.
Here are a few ideas to get you started:
The best way to get your product in the hands of customers is to give it them for free, if you're confident they'll like it (and you're ready to get some feedback).
You can offer bonuses to customers who refer you to other potential customers. This is simple enough on most ecommerce platforms through the use of referral codes.
Social media giveaways
Social media is the perfect place to organize giveaways in return for engagement. You could partner with an influencer or complementary brand to extend the reach of your giveaway.
Cashback promotions reward customers for spending their hard-earned money with you. With a cashback program, customers can easily earn cash back to spend at your store. They can combine the cash they get back with coupons, promo codes, and deals to maximize their savings.
Loyalty reward points
Rewards as part of a loyalty program can work wonders for repeat purchases, like food, drink, household, or cosmetic items. For every five or ten purchases, you can give a free item, for example.
As well as the meteorological seasons, there are cultural and religious holidays, international celebration days, and fun pop-culture events (like May 4th - Star Wars Day). That's a lot of opportunities to run a promotion.
Sales promotion examples
Here are a couple of examples of sales promotions to spark some ideas.
Kombucha brand FIX8 ran a promotion on their Instagram page with a giveaway for followers in return for engagement.
Followers can win a £50 gift card for private chef service Nomad Cooks if they follow both companies, like the post, and tag a friend.
This promotion isn't directly targeting increased sales (although that may well happen as a result). It's about brand awareness: growing the reach of both companies' social accounts, which can later be used as a marketing channel.
During the run-up to US Mother's Day 2022, beauty retailer NuFACE ran a promotion offering 20% off all gift sets.
This is a simple seasonal promotion that aims to lift product sales of a particular range that'll sell best during this time of year. While the primary effect will be to increase product sales, it should also have a secondary effect – bringing in new customers, consisting of both gift givers and their recipients.
Start running your own sales promotions
Sales promotions are a tried and tested way to increase retail performance. By using the right mix of tactics, you can appeal to customers at different stages of the buying journey and maximize the ROI of your efforts.
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