How to run a successful sales promotion

May 10, 2018

Pricing products is one of the single-most intricate aspects of running a small business. Hopefully, you’ve read about the different pricing models, and perhaps even used those formulas to price your products and services more intelligently.

In the life cycle of most businesses, however, sales promotions frequently come into play. There’s a lot of research out there that says which kinds of sales work and which don’t, but plain observations can also tell you a lot. Bed Bath & Beyond’s famous 20% off coupons hurt their profit margins and brand reputation. But promotional marketing can be periodically effective to increase foot traffic, move product, and expand their customer base.

There’s a lot to be gained by sales and promotions. They are most frequently used to move declining product that is taking up inventory space, but they are also effective at introducing a new product or service. Other side benefits include acquiring new customers and building loyalty with existing ones.

Like any business decision, however, there are also risks. Wise merchants safeguard against out-of-hand promotions by limiting the amount of units or services available for the promotion, and the amount that any individual can take advantage of a special deal. The fine-print rules of your promotion may make or break the campaign. Similarly, expect that you might need to bend the rules at some point. Inevitably, a scenario you hadn’t anticipated will develop, and you need to stay on your toes.

This post examines the threats and opportunities of a number of promotional methods—traditional sales, bundling sales, stepped discounts, and even charitable promotions. Learn more about these different promotional strategies, and think about which might best serve your bottom line while maintaining your brand.

Traditional Sale

What it is: This is the type of promotional marketing we think of first. It can be storewide or select products, but usually there is a general markdown. Think 10% off swimsuits, or 15% off back-to-school supplies. This also includes clearance racks with items physically separated and marked to sell.

Threats: It’s possible that customers will find an item they like in your store and wait for it to go on sale. If you have predictable sales patterns, this risk increases. Shoppers may start to associate the discounted price as the appropriate value for the product, which is no good for your business.

Opportunities: Traditional sales are great for moving declining product out of inventory to make space for new, perhaps trendier items. For best results, schedule promotions around events or holidays to reduce the chances of devaluing your brand. For example, you can offer 10% off selected swimsuits for the summer equinox or 50% off mylar balloons on Valentine’s Day. Vary your promotions from year to year (if possible) and keep promotions feeling special and limited-time-only. Restrict the amount of items included in the sale to maintain the overall perceived value of your brand.

Bundle Sale

What it is: A bundle sale allows customers to add on to their order with a pre-determined discount. This category includes buy one get one offers, buy one get one half off, or special package discounts.

Threats: Like traditional sales, shoppers may begin to rely on these types of discounts and wait for them to occur. Additionally, instead of having customers buy from you regularly, they may use these opportunities to stock up on volume so they do not need to visit you again until the next sale.

Opportunities: Because bundle promotions don’t necessarily affect the base price of an item, they are a stronger choice to maintain value perception much of the time. For example, if you offer a dress shirt at 25% off when one is purchased at full price, shoppers will still remember the base price of the item and not be shocked if they come back without the promotion. And if 25% seems steep, remember that this is essentially a 12.5% discount on two items. Psychologically, shoppers feel that they are getting a better deal because of the higher percentage discount, even though it is only applied to one item. Bundling is particularly effective for introducing new products by bundling them with your best sellers.

SALE by Thomas Leuthard on Flickr

Stepped Discount

What it is: Stepped discounts include percentage off, or specific dollar amounts back, when a customers spend a certain amount. For example, take $5 off orders above $50, or $12 off orders above $100.

Threats: If your stepped discount is too popular, you may move more items than you are intending. Because this is specifically geared to moved larger volumes than average, make sure you’re prepared to do that. Consider capping the total amount for which customers can claim these discounts.

Opportunities: Stepped discounts have become increasingly common in the past few years because they read to customers more like generous offers from the store rather than an expression of desperation. These are best when you aren’t trying to move a single, specific product or product line, but rather increase foot traffic, retain loyal customers, and move product in general in a slow period of the year. Consider offering coupons for stepped discounts to specific factions of your customer base through a free Clover app like Rewards.

Charitable Promotion

What it is: A little outside of the norm, a charitable promotion doesn’t really help your bottom line in the short term, but rather elevates your brand within the community. Instead of garnering benefits of increased sales, you’re giving a certain percentage of product sales to a specific charity your customers feel good about. This can be a highly effective marketing strategy, which you can read more about here.

Threats: Charitable promotions are not terribly effective at generating cash or solving a specific business issue like excess inventory. Think of these as long-range brandbuilding.

Opportunities: If your business is healthy and financially stable, a charitable promotion can serve to elevate your standing in the community, while retaining the value of your offerings. Shoppers feel that they are doing something good for their community by buying your products, but their association of value with your products is unchanged. This can build brand and customer loyalty.

Choose wisely when planning your next sale or promotion. Remember, now matter how much you map out, something will surprise you. Be reasonably flexible so you can keep your customers happy and protect your bottom line. If you make your rules too specific and complicated it won’t inspire engagement. But if you are too lax, you could be left with no inventory and not enough profit. So mix it up! Make your promotion strategy fun but unpredictable so that customers regularly check in on your inventory and offerings.

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