Advantages & disadvantages of sales promotions
Sales promotions are vital for businesses who desire to increase sales and interest in the company. When used moderately with careful planning, sales promotions increase sales even after the promotions are finished. When they are used too regularly, the excitement or urgency around them wears off.
Sales promotions draw attention to a particular product or service being offered. They distinguish a business from competitors through pricing. Dryden Sales, explains that when sales promotions are offered for a limited time, it creates urgency among the customers because they have to act before the promotion expires. As a result, the limited offer reduces the time customers have to think about the product. In most cases, they will stop comparing the alternatives and buy the featured item or service.
Advantage--Keep Trade Flowing
Keeping stock flowing between distributors and retailers is an advantage of sales promotions. This pertains to commodities that have a certain shelf life, as well as items that don´t. For the business it means that stocks are replenished regularly with items that have recently been made. It also encourages distributors to buy more of the items and ensure that they always have adequate supplies, states Dryden Sales. Quite often, suppliers/distributors buy items according to how often they sell out of a commodity. Therefore, if sales of an item are particularly slow, than distributors/suppliers are less likely to buy that item regularly, meaning the potential to run out of it is greater.
As with most sales promotions, either the distributor or the business offering the product are not profiting as much as previously. It is a calculated risk, but one that needs to be planned and handled carefully to be truly effective. Sales promotions are usually advertised to inform customers of the special offer. If there is a discrepancy between what's published and the real offer, than it will be viewed negatively by the public, states HKTDC. Retailers and distributors must ensure that whatever promotion is being published is honoured or the special offer will work against the company, possibly tarnishing its reputation.
Promotions in sales are a disadvantage when they are offered too regularly. The key to making them successful is offering them irregularly, catching the customer off guard and unprepared. If they are provided too regularly then they create price sensitivity among customers. Dryden outlines price sensitivity as intentional waiting by customers to purchase items only when they are promoted in a sale, rather than buying them at the regular retail price. Profits decrease.