how sales promotion can work for and against you

How It works FOR

1. Target your effort
Promotions can spur purchases by established customers, reel in new customers, draw customers from competitors, get current customers to buy differently, and stimulate business during slow periods. But rarely can one promotion accomplish all of those objectives at once. As a result, you must decide which of the following is most important so that you can target your effort:

• Do you want customers to purchase more frequently, buy in greater volume, or be attracted to new or different offerings?
• Do you want to lure new customers into your business?
• Do you want lapsed customers to give your business another try?
• Do you want to boost business during slow hours, weekdays or particular seasons?

After carefully and thoughtfully defining the audience and the change you want your promotion to inspire, ask yourself this question: If you offer a time-limited incentive, is it likely that the customers you've targeted will respond? If so, continue to the next step.

2. Plan your incentive
A well-thought-out, properly targeted promotion prompts customers to take action by offering one of these incentives:

• Price savings, including discounts, coupons or added value offers
• Samples or trial offers to provide a low-risk way to try new products or services
• Events or experiences to generate crowds, enthusiasm, sales, publicity

As you decide on your incentive, keep these facts in mind:

Price offers must be strong enough to compel, but reasonable enough to keep your business out of red ink. Avoid uninspiring 10 to 20 percent discounts, but also avoid very deep discounts unless they promote a loss leader to generate other higher-margin sales, or unless they'll attract valuable new customers into your business.

Coupons always make a comeback in penny-pincher markets, which means they're hugely popular these days. Even young consumers and affluent shoppers--groups that traditionally shun coupons--are using them, boosting the typical 1 to 2 percent redemption rate by nearly 20 percent. Printed coupons are still the most widely circulated, but printable coupons, distributed on web sites and via e-mail, provide a terrific way to test price offers with business friends and fans before incurring costs to promote the offer more widely via other media.

Samples work in all lines of business to let customers try before buying. The key is to sample products that are so great they'll win raves and repeat business.

• Online-based businesses need to promote free samples prominently in an effort to attract links, visitors, site registrations and publicity. They can be the start of a prosperous relationship with new customers.
• Retailers can turn sampling into promotional events. Think of Costco on weekends. Another great example: Estée Lauder works with retailers to offer women free mini-makeovers that end with customer photos (against an Estée Lauder backdrop). These are then e-mailed to participants for use on their social networking pages.
• Service businesses would do well to give away mini versions of their offerings. For example, five-minute shoulder massages or one-hour home decorating consultations. Or, for higher-ticket service businesses, samples can take the form of affordable introductory packages that allow prospective customers to wade into the business relationship, gaining trust for the business while also receiving a valuable service.

Events and experiences draw customers for celebrations, product launches, special appearances or presentations, and other activities that combine entertainment with brand and product presentations. When hosting an event, make sure to go all out. A half-hearted, poorly attended event is worse than no event at all, so plan, decorate, train your staff and publicize accordingly.

3. Know what you want to achieve
Promotions work especially well when consumers are in need of a jolt to take buying action. Just be clear about what you want to achieve. Set the number of sales you want to ring up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve. Then determine what your desired change will mean financially to your business.

By knowing the potential bottom-line impact of your promotion, you'll have the information you need to allocate a promotion budget, dedicate staff time and invest the energy necessary to host a strong promotion that will deliver business-boosting results over the time period it covers.