There was an article on MMOCCForum.com that I really enjoyed. I think it was very well written by Erin Mullin. Great job Erin. 
Sales Promotion is a word often used to generalize marketing materials such as coupons, discounts, member gifts, etc. That being said, coupons are often recognized as the most predominant sales promotion. If you think you're ready to add this successful promotion into your marketing department/program, then make sure you cover the basics!
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Goals
When marketing a product, you should always identify a clear goal. What do you want to achieve by releasing this product, service, promotion, newsletter, brochure, or membership program? So, take a look at the small list of possible goals below and select one that best suits your needs.
- Attract new, regular customers
- Build your market share
- Make a profit
- Introduce a new product/service
- Pull away from competition
Of course, these are only a few common examples. The best goal is one that is custom fit for your company/organization.
Outcomes
If run correctly, your promotion will do one or more of the following.
- Sway competitor's customers
- Sway new customers
- Encourage repeat purchases
- Encourage larger purchases
However, if your promotion is run incorrectly one or more of the following may occur.
- Consumers may ignore your promotion
- Bargain hunters may be the only ones to notice your promotion
- Miss redemptions may occur regularly
- Your current consumers use the promotion for products they would buy regardless
As you can see, your outcome may not always be a positive one. Be sure to analyze your promotion before rushing to the printers!
Annual Promotions
Although annual promotions may seem like a wonderful idea, it isn't always the case. Some consumers may become dependent on the promotion and save their purchases for annual promotion periods. If this occurs, your full-price customers are now sale-price customers. And in the end, you'll lose money!
Be careful: analyze.
Identify The Costs
Let's assume you want to run your sales promotion to increase profits. Before you begin contacting a printer, distributor, or designer, write an analysis.
When writing your analysis, consider the fixed (eg. printing, designing) and varying (depend on the number of coupons or other promotion) costs. Now, consider the number of coupons you'll need, the value of said coupon, design fees, printing fees, distribution fees, miss redemption (redeemed for the wrong reason/product) fees, and processing fees. Fees, fees, and more fees. But hey, noone said this would be a cheap process!
Then you must consider how many of these sales you would have made without the promotion. And finally, consider how much you will actually make per sale!
Distribution
Now that you've analyzed your costs, you can consider how many consumers will actually see your promotion. If noone actually sees the promotion, how can you sell your products to them? You can't. If you don't think too many people will actually see/hear about the promotion, make sure you note that in your analysis. If noone hears/sees your promotion, that will affect the outcome of said promotion! And overall, it will affect the direct sales you make with the help of the promotion.
If possible, consider ways in which you can distribute your coupons at a lower cost and to more consumers. Running the coupons in your own weekly flyer, event brochure, or newsletter would be an easy, cost-effective way to distribute your coupons!
Profit
With all of the above in mind, how much do you make per product/service you sell with the promotion in effect? If you won't stand to make enough per sale, simply go over your numbers again. If you stock your product for $1.45 and sell it for $2.00 then you're making $.55 per sale. So, giving a $.50 coupon out to everyone you pass on the street would be silly.
Test your sales promotion! Don't be afraid to go over those numbers a second time.
Add It All Up
Now, add all of your expenses together and subtract them from the profits you've estimated that you'll earn.
If your number is high then consider whether or not consumers will pay attention to the coupon. Will they even consider using it?
If your number is low then consider whether or not you will make enough profit. Is your sale price too low?
Find the nice number in-between!
Accuracy
One of the most common mistakes that marketers make is estimating the numbers by themselves. Don't be afraid to contact designers, printers, distributors, papers, or processors in the area. They won't mind helping - after all, they want your business!
If worst comes to worst, you may have to estimate some of your figures. Please, don't kid yourself. Keep your numbers accurate! If you overestimate or underestimate by too much you'll end up losing a bit more than your pride.
Experiment
If this is your first promotion, don't go crazy! Experiment first, especially if you're on a low budget. Not every bird learns to fly overnight you know. So, test your options. Try a few promotions and see what works for you and your company.
Remember you want to earn money; don't risk the year's budget on a single promotion.
Learn
If one promotion doesn't work for you, don't let it turn you off sales promotions! Remember, not every promotion works for every company. Try and try again! But before you do, analyze your outcome.
- Were your costs overestimated?
- Were your costs underestimated?
- Did your distribution process effect enough consumers?
- Did you offer more than required to meet your goal?
- Were their too many miss redeemed coupons?
- Did processing/printing/designing cost more than expected?
These are a few questions to consider before beginning your next promotion! Learn from the past to better your future. But please, do not leave this resource sitting in a dusty old corner.
Did It Work?
Look back on your original goal, did you accomplish it? Consider why or why not. How could you improve next time?
That's the beauty of setting goals! When it comes time to measure your success, you can do so with ease.
Creativity Is The Limit
Don't be afraid to step outside the box! Your own creativity is your limit. If you have a great new promotion - go for it. Don't restrict yourself to handing out coupons in a local newspaper - get out there.
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Remember, these are just the basics! There's always more to consider. Do your research and be sure your next sales promotion meets your expectations.
~Erin Mullin
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