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Getting More Out of Consumer Promotions By Jim Pyles, SCORE Volunteer, SCORE Board Chair, 2004-2006 Consumer promotions can provide your business with a short-term boost in product sales or services requested. However, promotions should be thought of as an “add-on” to your existing brand advertising and marketing strategies. If you are considering running special consumer promotions, there is good rationale for incorporating them into your marketing mix. Reasons to Promote: Create a general hype in sales Launch a new product or service, generating initial trial Announce news about an existing product or service, e.g., a new form, package size, product use, bonus offer, extended service, location, etc. Offset new competition or other competitive threat Induce repeat purchases, product upgrades or services used Announce a tie-in product or service, e.g., free suntan product with the purchase of sunglasses Capitalize on holiday or seasonal occasions, e.g., Valentine’s Day, President Day Sales, Back-to- School Sales, Holiday Sales Enhance product or service awareness Who Is Your Primary Target For the Promotion? When planning a promotion, it is important to know which customers you are trying to reach. Will your promotion target new users or current customers? Deciding on a target audience will depend on factors such as current sales trends, competitive activity, seasonality or a combination of factors. Targeting your customers is key to a promotion’s success. You also need to know your customers’ behavior, reading or listening habits or use of the Internet. Once you have determined which customers to target and how to reach them, you can decide how to best use your available funds. What Is Your Promotion Budget? Your marketing budget should include an allocation for promotions, both planned and contingency (i.e., for unexpected events). How you create awareness of the promotion will depend on how much money you have to spend. Think about hidden promotional costs, which can reduce the cost efficiency of the promotion if overlooked. Luckily, there are many forms of media available at all different price ranges. Just be sure that the cost of your promotion will not outweigh the benefit. What Type of Promotion Works Best? Promotions come in different forms, with different budgets, and can yield very different results. Sometimes it is a good idea to conduct a test promotion before launching a large-scale effort. This can help you to stay within your promotion budget and ensure that your promotion tactics are sound. As a starting point in figuring out what promotion will work best for your business, research common promotion techniques in your industry and review the effectiveness of competitors’ promotions. Examples of common, effective promotions include: Short-term price reductions such as coupons, rebates or bonus offers On-pack premiums or cross/companion product promotions, like a free toothbrush with toothpaste One free month of service for new customers Free services for referring a new customer, for example a Laundromat offering free wash and dry Analyze the benefits and drawbacks of each promotion type before you launch your promotion. For example, will offering bonus packs or extended discounts postpone future purchases which potentially could impact profits? Could frequent cost reductions negatively impact your brand image? How much will deep promotional price reductions affect profits? Some other factors to consider include ease of implementation (which you want) and ease of duplication by competition (which you don’t want). What Are the “Econometrics” of the Promotion? In simpler terms, did your promotion pay off? Did it generate sufficient incremental sales or in-store traffic to justify the additional costs? Did your customer “load-up” or buy-in heavily, delaying future purchases? Will there be repeat purchases sufficient enough to pay for the promotion? These are important questions to answer when planning your promotion, as well as when evaluating it after the fact. In many cases a promotion will only generate a short-term switch in customer choice, but this can still be important for product or service growth. Promotion Evaluation Evaluation is the most critical, yet the most overlooked, step in any promotion. Most promotion planners fail to incorporate measurement devices to assess whether the promotion worked or not. Consequently, except for a “gut feeling,” they never really know if their promotion was successful. To measure the success or failure of a promotion, you must set specific, measurable, realistic objectives prior to launching the promotion. Post-promotion, evaluate your success by comparing original objectives and criteria to actual outcomes. This overview on creating your promotion can give you a good starting point, but sometimes it is best to consult with a promotion professional. If you’re planning to promote, seek help from your nearest SCORE office or online counselor. James W. Pyles of Elkhart, Indiana, spent his 34-year career with Bayer Corporation in sales, market research and marketing. After retiring, he started his own business. Jim served three years on the national board of directors for the Promotion Marketing Association of America. He has been a SCORE counselor for 11 years and served on SCORE’s board of directors for six years. Brought to you by SCORE, America's small business mentors, at www.score.org. Ask SCORE.
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