Sales Promotion – How to Use it to Increase Conversions and Build Brand Loyalty

Sales promotion is the use of discounts, coupons, vouchers and other incentives to encourage customer conversion. When done right, this strategy can be highly effective and align with your company’s values and ethics.

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Rewarding existing customers is an excellent way to increase loyalty and attract referral business. Sales promotions like this can also help businesses offload inventory or boost sales during sluggish periods.

Percentage Discounts

Percentage discounts offer a quick way to drive short-term sales. These promotions include monetary incentives such as price reductions, coupons, cents-off offers, refunds and rebates and non-monetary offerings such as sampling, bonus packs, bundling, buy one get one offers, free gifts, etc.

Discounts can influence consumer brand attitude and impact the long-term perceived quality of the product. The amount of the discount influences customer behavior as well as how often the promotion is used. A one-time discount does little to alter the original price-quality inference of a brand (Rothschild and Gaidis, 1981). However, frequent use of a discounted offer may lead consumers to view the original priced product as lower quality, even when the actual price is higher (Yang et al., 2016).

The decision to use a percentage or dollar-off promotion depends on the nature of your products and your profit margins. Using a discount on high-margin items such as a sofa can lead to an increased average basket size. This can increase your sales revenue and help you move excess or outdated inventory.

Coupons & Vouchers

Coupons and vouchers are popular forms of sales promotions that businesses use to encourage customers to purchase their products or services. They can be delivered via email, social media, or physical cards inserted into products or in the mail. Coupons and vouchers can help a company build brand loyalty, nurture customer relationships, and even encourage repeat business by encouraging customers to recommend the product or service to their friends.

This sales promotion technique can also be useful for a business that is trying to introduce a new product. The offer can be offered to new customers as an incentive to try the product, and it can help the business create brand awareness without the expense of a sales presentation.

Another use of this sales promotion strategy is to clear out overstocked inventory. This can help reduce storage costs and free up space for newer product lines. Businesses can even use coupons and vouchers to reward current customers, such as birthday or anniversary campaigns. However, this type of sales promotion can make a business less profitable, so it should be used sparingly.

Free Trials

As a sales promotion strategy, free trials can help businesses attract leads and increase conversions by removing the risk of purchase. They allow potential customers to experience a product or service before they commit to purchasing it, and can be especially helpful for newer companies or products that have yet to establish themselves in the market.

Free trials are often limited to a certain period of time, such as a week or a month. However, some companies offer longer trial periods to give users the opportunity to gauge their level of satisfaction with the product or service before making a decision to continue with a subscription.

In addition, companies can also use free trials to gather feedback from their customers and improve their product or service. In-app messaging and no-code webhooks are two of the most effective tools for gathering user feedback during a free trial. The feedback collected can be used to inform future product improvements and to encourage user retention after the free trial has ended.

Giveaways

A giveaway is a great way to build brand awareness without spending much money at all. Offering key rings, thumb drives or coffee mugs with purchases makes people feel good about themselves while reminding them of your business whenever they use the gift. The party bike company Nashville Pedal Tavern created an innovative sales promotion campaign that earned them $2300 in two weeks by only showing it to visitors who had been on their site for more than 30 seconds.

A buy one, get one free promotion is a simple and efficient way to clear out excess inventory or slow-moving products. You may also offer a discount to reward loyalty or encourage referrals. A recent study found that consumers trust word-of-mouth recommendations from friends and family more than any other form of advertising.

Sales promotions should be aligned with your marketing goals and supported by a comprehensive customer experience plan. Discount-based promotions can boost short-term sales but undermine your brand value over the long term. Creating urgency and scarcity is an effective technique for increasing conversions, so try using time-limited offers with a countdown or a popup on your product pages.

Manufacturers

Manufacturers often offer sales promotions in the form of discounts, coupons, rebates or other giveaways. The main goal of such promotions is to stimulate demand in the short term, although they may also build brand awareness or encourage consumers to try new products.

However, even though sales promotions can produce measurable volume effects for both the retailer and the manufacturer, many are still not profitable. For example, Supermarket News reported that only 10-20% of grocery sales promotions are profitable for manufacturers.

This suboptimality comes from the fact that channel parties (manufacturer and retailer) independently maximize their own profit when making sales promotion decisions, which leads to a lack of channel coordination. It is therefore not surprising that the overall performance of sales promotions is low. This paper extends the theory of channel coordination to the case of sales promotions and empirically demonstrates that cooperation can significantly improve their profitability. In particular, the authors demonstrate that a manufacturer can restore profits through a proportional discount sharing agreement with the retailer. This is a relatively simple solution that can be easily implemented by the parties involved.