Could a well-chosen sales promotion help you boost sales?

Whether you're trying to mitigate the effects of the recession or simply grow your market share, sales promotions can help to achieve a range of business objectives:

successfully launching a new product
motivating a sales force and giving them something to ‘rally around'
encouraging dealers to increase stock levels
influencing customers to buy during seasonally quiet periods
creating cross-selling opportunities – encouraging existing customers to buy additional products

However, devoting time to devising a promotion that suits your products and your market can improve the effectiveness of your campaign. There are many types of promotion – from discounts, to free gifts, sample giveaways or competitions. Whichever you choose, it pays to ensure that other marketing activities – such as advertising, direct mail, telemarketing and e-marketing – tie-in with your promotion. It's also vital that your sales team is briefed – so they can ‘promote the promotion'.

Simple… but risky

Money off discounts are, perhaps, the simplest type of promotion. However, discounts can be very risky – reducing the value of sales that you were about to secure at full price and possibly devaluing your brand image. Following a period of discounting, customers may be reluctant to revert to paying full price – and could begin to regard the undiscounted price as poor value.

Careful discounting can work in some circumstances. However, you need to ensure that customers understand the real value of your offering. Your product also has to be impressive enough to ensure customers come back for more when the promotion is over.

‘Elasticity of Demand' and ‘Economies of Scale' are also worth considering. For example, if a promotional price enables you to quadruple your sales, that could help to reduce your production or purchasing costs – so your profit margin increases, despite the lower price. However, if demand for your product is relatively ‘inelastic', reducing prices will not generate significant additional sales – with no effect on production costs. In such cases, the additional sales may not offset the revenue lost as a result of the discount.

Not all sales promotions have to be self-funding in the short-term. If a promotion helps you to win new customers that could stay with you for several years, you may decide it's wor th making an initial loss. It's a question of assessing your position in your particular market.

Don't alienate your existing customers

If your promotion offers customers a free gift, it's worth considering using a sample of another of your products as the free gift. This can be useful in encouraging existing customers – that already buy product A – to try your product B. If the customer later places repeat orders for both A and B, you've succeeded in increasing the value of that customer relationship.

When planning promotions, too many businesses focus on how the activity will be received by potential new customers and fail to consider how it could affect their relationships with existing clients. If a promotion is only available to new customers, existing clients may feel their loyalty is being taken for granted. If they move to one of your competitors, it could be difficult to win them back.

Having decided on your sales promotion, you'll need to devote effort to raising awareness within your target market. Advertising can be effective, but is rarely inexpensive. Direct mail, email-shots and also advertising on the home page of your own website can be more cost-effective. Point of sale posters or pop-up stands can also be useful. You might even consider having staff wear T-shirts or badges with details of the promotion. If you're a retailer, you could put a leaflet about the promotion in every bag when a sale is made. For other businesses, particularly those with a product targeted at domestic customers, door-to-door leaflet drops can produce great returns.