To e-commerce businesses, promotions and discounts play a crucial role in fostering revenue growth. By planning a proper sales promotion, a business can create new demands for current products and maximize customer retention rate. This article covers everything you need to know about Sales Promotion, including definition, benefits, disadvantages and how to implement the marketing strategy effectively.
1. Sales Promotions – definition and types
Promotion is a marketing strategy used to increase interest or demand for products. Oftentimes, the sole purpose of these Sales Promotions is to drive revenue. Still, it can deliver other marketing objectives, such as reducing customer churn, cutting customer acquisition costs, or improving brand loyalty.
In ecommerce, Sales Promotions are a magnet which attracts new leads and increases the customer retention rate. So, what are the benefits when a business implements Sales Promotions? Let’s take a closer look in the next section!
2. The benefits of Sales Promotions
Sales Promotions bring various benefits to ecommerce businesses as long as it is adequately planned on a budget and with clear goals. Here are some key benefits of Sales Promotions that a brand can expect from its campaigns:
- Encourage any behavior – Sale Promotions encourage potential customers to perform a specific action, from buying your products to following the brand on Instagram.
- Stay competitive – with economic uncertainty, customers tend to look for cheaper alternatives. Sales Promotions is a significant strategy to help ecommerce businesses stay competitive while increasing impulse purchasing.
- Inventory clearance – ecommerce businesses usually use Sales Promotions as an effective way to introduce a new product or clear out inventory.
3. The disadvantages of Sales Promotions
Sales Promotions are very beneficial to increase revenue, but the other side of the coin is that it also carries some risks:
- Brand devaluation – if a brand offers Sales Promotions with a deep discount, the customer might consider its products poor quality. To prevent this, the business should find another approach, like free shipping, applying sales on selected products or collections, and targeting the offer at specific customer segments.
- More one-time buyers – when running promotions non-stop, the customers will have a lower chance to purchase products at the original price. This leads to a significant disadvantage in building a long-lasting relationship with them. (if not impossible)
- Negative ROI – budget burnout is a common mistake in Sales Promotions. However, with the right tool and strategy, your business should be able to manage those risks.
4. Top popular types of Sales Promotions for ecommerce businesses
a. Coupons and discounts
Coupons are a common strategy in ecommerce. With a well-planned campaign, this Sales Promotion could offer the following:
- Attracting new customers and expanding to new markets
- Enhancing brand loyalty and building a loyal customer base
- Tracking customer behavior and ROI
b. Gift cards
Gift cards are another excellent idea for Sales Promotions. This strategy attracts potential customers and brings profit even when unused. Moreover, according to research, over 50% of customers who own gift cards spend more than the value, which increases revenue significantly.
c. Auto discount
This strategy is one of the classic marketing moves for ecommerce stores. Additionally, the discount is automatically applied to the customer’s cart to encourage impulse buying, which drives them to make decisions spontaneously. As a result, customers tend to purchase more products to get discount deals and increase the average order value (AOV).
d. Free gifts
Another effective Sales Promotion is to offer free products or services with purchase. If the brand sells digital products, providing a trial version is a smart way to increase its chances of conversion. The strategy also allows the business to capture emails for email marketing campaigns.
e. Flash Sale
A flash sale is a Sales Promotion offered for a limited period. The strategy creates the fear of missing out (FOMO) to trigger customer urgency and instantly convert leads into buyers.
Research shows that limited time offers more influence on customers’ shopping behavior. Taking advantage of this psychological marketing, ecommerce businesses always set a countdown timer on their promotional page. Furthermore, it’s best to include necessary information in Terms & Conditions to avoid customer complaints.
f. Happy Hour
Happy Hour is well-known as a popular Sales Promotion in F&B businesses. This type of promotion is usually applied to wine, beer, meals or a complete special menu, offering exclusive discounts at certain hours.
For instance, a restaurant implements Happy Hour with a 40% discount on all drinks from 5:00 pm to 6:00 pm from Monday to Tuesday with a discount code “HAPPYHOUR”. It may seem to be similar to Flash Sale. However, Happy Hour needs to be held regularly to impact the overall profit and to build customer loyalty.
g. Buy 1 Get 1 – BOGO
BOGO is a popular promotion which allows a brand to raise awareness, introduce a new product or clear out inventory at the end of the season. Customers generally overvalue the benefits of “free” even when compared to high-quality items at a discounted price.
With a limited-time offer, ecommerce businesses can increase their traffic hits in the low sales season or days. Hence, the promotion is an excellent opportunity to upsell, cross-sell, or clear out low-demand products.
h. Product-based Sales Promotions
By centering communications around items purchased, this Sales Promotion allows ecommerce businesses to drive more revenue with cross-selling and upselling. It also helps when getting stuck with obsolete inventory or introducing new products. Here are some examples of product-based promotions:
- When a customer purchases an item for the first time, a promotion code of 10% off on the next purchase is sent out if they leave a review.
- Provide a $10 code when the customer buys at least three products.
- If a customer buys a product from one category, email them a 20% off code for another one.
- Offer a gift code if one customer buys at least two items within a month (minimum spending of $50).
i. Free Shipping
This strategy is applied to orders over a specific spending amount. The ecommerce business can also offer it on short-period events—for instance, free shipping on all orders that are checked out within the next 6 hours. There are two types of free shipping: conditional and unconditional. Both can be costly, but they won’t hurt the bottom-line.
j. Birthday and anniversary promotions
Birthday and anniversary campaigns aim to build and maintain customer loyalty. The strategy is personalized specifically to each customer to make them feel valued. With that in mind, the message can include a promotional sale with limited availability and dates to improve customer retention.
k. Referral programs and word-of-mouth promotions
What determines the success of a referral program? Rewards. For the maximum word-of-mouth impact, bonuses play a vital role in encouraging consumer-to-consumer communications. If a business doesn’t know what reward to choose, it’s necessary to experiment and launch a referral program with a multi-level reward schema to:
- Giving rewards based on their engagement
- Testing which rewards are suitable for different customer segments
l. Loyalty programs
Loyalty programs are an effective marketing strategy for fostering revenue growth. Research shows that acquiring a new customer is seven times more expensive than convincing an existing client to re-purchase. A well-planned loyalty program is a long-term investment with 0% risk.
Multi-tier loyalty programs (silver, gold, platinum) have a greater chance of stimulating customer engagement than a standard program. Furthermore, it enables a business to divide its consumers into groups based on loyalty levels, making this strategy a powerful tool for customer segmentation.
m. Re-engagement promotions
Re-engagement is a marketing strategy to reconnect with customers who reached a level of inactivity. And the most effective tool to send the message automatically at the right time is email marketing. Moreover, ecommerce businesses should consider offering an attractive incentive and putting it in the email subject, like free shipping, 10% off, gifts, etc.
There are several reasons why customers may wait to use the offer. And it doesn’t mean the incentives are unattractive or the customers should be clear from the email list. On the contrary, it is still beneficial in re-grabbing their attention in the long run.
n. Purchase frequency promotions
Ecommerce businesses can launch a purchase frequency promotion campaign for customers who have purchased a certain number of times to turn them into loyal ones. When customers buy repeatedly, a brand can easily create personalized experiences, increase revenue substantially and build a strong connection with its buyers. Here are some examples of how to implement purchase frequency promotions:
- 10% discount code if customers place 2 orders within one month.
- 25% discount code if customers place 4 orders within one month.
- $30 gift card if customers ordered at least 6 times
o. Free samples
Giving out free samples to the target market is a way to quickly gain more profit because the brand effectively gets its product or service into the hands of potential customers. Research shows that the psychology of giveaways includes the obligation consumers feel when given something. And usually, they would shop more than they intended. It’s called the reciprocity effect in marketing.
p. Purchase history-based coupon campaigns
Purchase history-based coupon campaigns are a Sales Promotion to offer coupons exclusively for returning customers, thus ensuring customer retention. As a result, this strategy motivates customers to buy more based on their past purchase history. Ecommerce can leverage the strategy for customer segmentation and create exclusive offers for those who bring the highest revenue. For instance, “For our VIP customers only”.
q. Abandoned cart promotions
With more than 60% of carts abandoned, discounts have become the best strategy to turn those into purchases. Numerous studies showed that it recovers between 3% to 11% of orders. And often, a 5% or 10% discount is enough to reclaim some of the lost sales.
r. Sign-up promotions
This type of Sales Promotion offers potential customers to leave their information for a first-order discount. It’s a prevalent and effective strategy to enlarge the number of new acquisitions and subscriber lists. If a brand has never implemented sign-up promotion, it’s recommended to start by checking the performance of different discount variants before setting up.
s. Seasonal promotions
In ecommerce, special occasions like Women’s International Day, Valentine’s Day or Black Friday are the perfect opportunities for fostering revenue growth. Seasonal promotions usually offer exclusive discounts as the avenue to build a relationship, drive sales and enhance customer loyalty—for instance, 20% off on Black Friday and Cyber Monday.
These are the top popular types of Sales Promotions for ecommerce businesses. Successful cases are a combination of good ideas, endless testing, metrics tracking, and target adjustments. Hence, remember to consider all the aspects to find the Sales Promotions that suit the most!
Contact IMP now for more promotion tactics and how to use email marketing to boost sales sustainably.