methods of sales promotion, e.g. vouchers, reward schemes, competitions, special offers /discounts

3.3.4 Promotion

Objective (AO1‑AO4): Define promotion, describe the four main forms of promotion, explain the key sales‑promotion methods (vouchers, reward schemes, competitions, special offers/discounts), evaluate their suitability for a business and assess the legal/ethical issues involved.

What is Promotion?

Promotion is one of the four elements of the marketing mix (Product, Price, Place, Promotion). It comprises all the activities a business uses to communicate with customers and persuade them to buy. Promotion works in tandem with the other Ps – for example, a discount (promotion) changes the perceived price, while a competition can support a new product launch.

Four Main Forms of Promotion

• Advertising – paid, non‑personal communication that reaches a large audience. Typical media include TV, radio, newspapers/magazines, outdoor billboards, online display ads, social‑media sponsored posts and search‑engine advertising. Advertising is useful for building brand awareness and reaching new markets (AO1, AO2).
• Personal Selling – face‑to‑face or direct interaction between a sales representative and a potential buyer. Techniques include consultative selling, upselling, cross‑selling and relationship selling. Personal selling is effective for complex or high‑value products where the buyer needs detailed information (AO1, AO2).
• Public Relations (PR) – activities that create a favourable public image without direct payment for space or time. Examples are press releases, sponsorship of events, community projects and influencer collaborations. PR helps build credibility and can generate earned media coverage (AO1, AO2).
• Sales Promotion – short‑term incentives that encourage an immediate purchase or specific consumer action. The main methods are vouchers, reward schemes, competitions and special offers/discounts (AO1, AO2).

Why Use Sales Promotion?

• Stimulates immediate buying activity.
• Helps clear excess stock or introduce a new product.
• Provides a way to differentiate a brand from competitors.
• Encourages repeat purchases and builds customer loyalty.

Methods of Sales Promotion

1. Vouchers

A voucher is a paper or electronic document that gives the holder a discount, a free product or a special deal when presented at the point of sale.

• Typical use: Newspaper inserts, online coupon codes, mail‑out promotions.
• Key advantages:
  • Easy to distribute and to track redemption rates.
  • Can be targeted to specific groups (e.g., “students only”).
  • Encourages trial of a new product.
  • Low‑to‑medium cost compared with larger campaigns.
• Key disadvantages:
  • May attract mainly price‑sensitive shoppers.
  • Risk of fraud or misuse (e.g., counterfeit coupons, multiple redemptions).
  • Over‑use can erode perceived brand value.
  • Legal/ethical: terms must be clear, not misleading, and expiry dates must comply with consumer‑rights legislation.
• Typical business situation: A supermarket wants to boost sales of a newly launched organic range and issues a 10 % off voucher to loyalty‑card holders.

2. Reward Schemes (Loyalty Programmes)

Reward schemes allocate points, stamps or credits for each purchase; accumulated points can later be exchanged for goods, services or discounts.

• Typical use: Supermarket loyalty cards, airline frequent‑flyer miles, credit‑card reward points.
• Key advantages:
  • Encourages repeat business and long‑term loyalty.
  • Provides valuable data on buying habits for targeted offers.
  • Can be tiered to reward higher‑spending customers.
  • Supports cross‑selling and up‑selling.
• Key disadvantages:
  • Administration costs (cards, software, reward fulfilment).
  • If rewards seem unattainable, customers may disengage.
  • Complex schemes can confuse customers.
  • Legal/ethical: personal data must be handled in line with GDPR (or relevant data‑protection law) and customers must be informed how their data will be used.
• Typical business situation: A coffee chain introduces a “Buy 9 coffees, get the 10th free” stamp card to increase the frequency of visits among regular customers.

3. Competitions

Competitions invite customers to enter a contest, usually by purchasing a product, answering a question, or submitting a creative entry (photo, video, etc.).

• Typical use: “Buy a ticket for a chance to win a holiday,” “Submit a photo with our product,” “Quiz contests on social media.”
• Key advantages:
  • Generates excitement and buzz around the brand.
  • Can increase footfall, website traffic or social‑media engagement.
  • Provides market‑research opportunities (e.g., preferences revealed in entries).
  • Often creates free publicity through word‑of‑mouth.
• Key disadvantages:
  • Legal regulations may restrict prize values, entry methods and advertising (e.g., UK Gambling Act 2005 limits prize‑value for sweep‑stakes).
  • Costs of prizes and promotion can be high.
  • May attract participants only interested in the prize, not the product.
  • Ethical: competitions must be fair, transparent and not misleading.
• Typical business situation: A soft‑drink brand runs a summer “Design your own label” competition on Instagram to increase brand interaction among teenagers.

4. Special Offers / Discounts

Special offers include temporary price reductions, “buy one get one free” (BOGOF), bundled deals or limited‑time promotions.

• Typical use: Seasonal sales, clearance of old stock, introductory pricing for a new product.
• Key advantages:
  • Quickly boosts sales volume.
  • Helps move excess inventory.
  • Attracts price‑sensitive new customers.
  • Low‑to‑medium cost to implement.
• Key disadvantages:
  • May erode profit margins if discounts are deep.
  • Risk of customers delaying purchases in expectation of the next discount (price‑sensitivity).
  • Frequent discounts can damage brand image and suggest low quality.
  • Legal/ethical: discount claims must be accurate (no “false‑discount” advertising) and must comply with consumer‑price‑labelling regulations.
• Typical business situation: An electronics retailer offers a “Buy a laptop, get a free mouse” deal for two weeks to clear stock before a new model arrives.

Legal & Ethical Issues (All Promotion Methods)

Comparison of Sales‑Promotion Methods

How to Choose the Right Promotion (Decision‑Making Process)

1. Identify the marketing objective (e.g., launch a new product, clear stock, increase loyalty) – AO1.
2. Analyse the target market’s preferences and buying behaviour – AO2.
3. Assess the financial impact – compare the cost of the promotion with the expected increase in sales, market share or data value – AO3.
4. Check legal and ethical requirements** for the chosen method** – AO4.
5. Plan timing and duration** to maximise impact and avoid overlap with other promotions** – AO3.

Planning, Implementing and Evaluating a Sales Promotion

Evaluation Checklist (AO3/AO4)

• Analyse the data (AO3): sales lift, redemption rates, new‑customer acquisition, changes in market share, customer‑feedback.
• Evaluate the impact (AO4): Was the cost justified by the increase in revenue or the value of data collected?
• Assess stakeholder response: Did target customers react positively, negatively or indifferently? What was the reaction of competitors?
• Identify unintended consequences: brand damage, stock shortages, legal complaints, or negative publicity.
• Derive lessons for future promotions: adjustments to cost, timing, target audience or choice of method.

Linking Promotion to the Other Ps

• Product: A competition can highlight a new product’s features and encourage trial.
• Price: Vouchers or discounts directly alter the price perception for the consumer.
• Place: Special offers may be limited to specific retail locations or online channels, influencing distribution decisions (e.g., “In‑store BOGOF only at Branch A”).
• Promotion: The chosen promotional tool must complement the overall marketing mix and reinforce the brand’s positioning.