3.3.4 Promotion

This section focuses on how businesses use sales promotion to encourage customers to buy their products or services. Sales promotions are short-term incentives to encourage purchase.

Types of Sales Promotion

There are several different types of sales promotion that businesses can use. These include:

• Price Promotions: These involve reducing the price of a product for a limited time. Examples include discounts, sales, and offers like "buy one get one free".
• Non-Price Promotions: These do not involve reducing the price. Examples include competitions, prize promotions, samples, and loyalty schemes.

Price Promotions - Justification

Price promotions are often effective in the short term. They can quickly boost sales volume and attract new customers. However, they can also damage brand image if used too frequently, as customers may become accustomed to discounted prices.

Promotion Type	Advantages	Disadvantages	Suitable for
Discounts	Attracts price-sensitive customers, boosts sales volume.	Can reduce profit margins, may devalue the brand.	Seasonal products, products with high competition.
Sales	Generates excitement, clears out old stock.	Can lead to a perception of low quality if overused.	End-of-season items, products with slow turnover.
Offers (e.g., Buy One Get One Free)	Encourages larger purchases, increases average transaction value.	Can reduce profit margins if not managed carefully.	Products with high demand, products sold in pairs.

Non-Price Promotions - Justification

Non-price promotions are useful for creating excitement and building customer loyalty. They can be particularly effective for products where price is not the primary consideration.

Competitions and Prize Promotions

These generate excitement and media coverage. They can increase brand awareness and customer engagement.

Samples

Allow customers to try a product before they buy it, reducing perceived risk. Effective for new products.

Loyalty Schemes

Encourage repeat purchases by rewarding loyal customers. Build customer retention and provide valuable customer data.

Choosing the Right Promotion

The best type of sales promotion to use depends on a number of factors, including:

• The product: Is it a high-priced or low-priced item? Is it a new product or an established one?
• The target market: What are the needs and preferences of the target market?
• The competition: What promotional activities are competitors using?
• The business's objectives: Is the goal to increase sales volume, build brand awareness, or attract new customers?
• Budget: How much money is available for promotion?

For example, a business launching a new, relatively expensive product might benefit from using samples to reduce customer risk. A business selling seasonal items might use discounts or sales to clear stock. A business aiming to build customer loyalty might implement a loyalty scheme.

Businesses often use a combination of different sales promotions to achieve their objectives. Careful planning and analysis are essential to ensure that the chosen promotions are effective and deliver a good return on investment.