Visualizing Marketing by S. Umit Kucuk

Author:S. Umit Kucuk
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Sales Promotion

Sales promotion’s main goal is to create short-term behavioral changes in both consumers and distribution channel members. The most frequently used sales promotion tools are temporary price reduction, couponing or gift-giving activities that add more value to the product with the aim of changing consumers’ behaviors and decisions at the point of sale. Although some sales promotions are aimed at distribution channel members such as retailers and wholesalers (these are also known as trade promotions), the ultimate goal is to pass trade promotion on to the consumer. In other words the objective of advertising is to create demand before consumers get to the store while sales promotions aims at changing their preferences at the point of sale in the store.

Because sales promotion uses many price-related tools, strategies can be quickly modified. Advertising does not affect sales immediately the way sales promotions do; rather it focuses on building long-term relationships with consumers to generate positive attitudes and loyalty. On the other hand, the effects of sales promotion are easy to see in sales, as many sales promotion tactics, especially temporary price reductions, can easily create brand switchers. However, these increased sales do not produce long-term effects, and sales drop sharply immediately after the promotion period. This, in turn, creates sales spikes rather than slowly increasing trends. Thus, the results of sales promotion can be seen within days or even hours, as opposed to advertising where the response is measured in months and years, and sometimes there is no response at all. In other words, sales promotions can be used more like a tactical tool to create short-term brand-switching behaviors rather than a long-term strategic tool like an advertisement.

When trade deals initiated by manufacturers are passed on to retailers and their consumption spaces, high sales volumes and initially sharp spikes in sales are expected as most consumers try to get the maximum value for their money. Although sales go down at the end of the promotion period, there can be some small aftershock sales increases as the initial excitement created by the sales promotion lasts for a little while (see Fig. 6.5). This over-consumption or sales spike eventually leads to inventory shortages and stock-out problems, and the resultant sharp drop in sales is shown as “inventory effects” in Fig. 6.5. The stock-out situation is a natural result of sales promotions. Companies, especially retailers, should carefully plan for inventory problems after sales promotion, as stock-out situations make for unhappy consumers. Sales will not return to baseline levels until the retailer refills the empty shelf spaces at the end of the sales promotion period.

Fig. 6.5General sales promotion curve

Source: Blattberg and Levin (1987)

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