7 Types of Sales Promotion That Work for Small Businesses
Yesterday was Presidents’ Day, and with it came the myriad of sales promotions ranging from bargains on new cars, to free shipping for online bikini purchases, to deep discounts on washing machines–some of which are still going strong. Now, conventional wisdom is that in order for your discounts to appear attractive rather than an attempt to dump sub-par merchandise, or a desperate measure to book appointments during a slump, you need to provide a viable reason for your promotion. Apparently any excuse, however tenuous, will work—as Presidents’ Day is hardly a gift-giving occasion (the associated birthdays not withstanding), though it ranks as one of the top shopping holidays of the year.
What automobile sales have to do with George Washington and Abraham Lincoln is beyond me (though I guess Washington helped drive out the British in the Revolutionary War, and Lincoln lead a similar drive against the Confederates in the Civil War), but the shopping public seems to buy it as evidenced by their willingness to buy.
How can your small business get in on the holiday promotional sale bandwagon? The Small Business Guide to Holiday Sales and Promotions, a post I wrote prior to last year’s Christmas shopping season, provides a number of useful strategies and tactics you can employ.
But, why limit yourself to holiday sales? Holidays are the easy, and generally generic, rationale for a discount or other promotion. Crafting a sale that speaks to a specific customer need, or triggers a strong psychological “buy” response, can be successful at any time of year, can help set your small business apart from the competition, and can help promote customer loyalty that drives repeat full-price sales throughout the year for years to come.
The following are 7 proven promotion types that your small business should try:
1. Promotions Playing on the Desire for Discounts
Everyone likes to save money, and everyone likes to think they are getting a bargain. So, as long as you have established a baseline value for your products and services, you can use a discount—whether a sale price, a percentage off, or a set-dollar amount off—to lead a customer to believe that they are scooping up a great deal. Of course, when you do that you are sacrificing profit margin. The very best sale is one in which your customer perceives value in a way that does not significantly affect your bottom line. Here are a few ways to make that happen:
- Going Out for Business Sale
Nothing brings in the customers like a “Going Out of Business” sale. Just ask any poor small business owner who has had to run one, and they’ll tell you that if they had pulled in that many customers prior to the sale, they probably wouldn’t have had to hold it in the first place. A classic twist, typically used by a retail outlet, is to plaster “Going Out for Business” signs all over a store front, where the “for” is in very tiny letters. This little trick can draw in bargain-hungry shoppers, who may just perceive regularly priced merchandise as deeply discounted. However, some may feel betrayed by this tactic—so use it with caution, and be certain that if you do use it your offerings are attractive enough to overcome the potential negative of feeling of being duped.
- Two-fer Sale
My very first job out of college was working at a New Jersey advertising agency whose then 85 year old owner claimed to have invented the “Two-fer” sale for men’s suits. The concept was simple—people hear or see “two-fer” and think “two for one” thus believing that they are actually getting a buy-one-get-one-free offer. However, the offer is actually just selling two things for one price, which may or may not be discounted.
- Bundle Sale
Similar to the Two-fer sale, a bundle sale enables you to package multiple products together for a single price, thereby creating the appearance of value. Typically a bundle is sold for less than it would cost to purchase the individual parts. But, strategically formulated bundles can be used to move expensive less popular products at full price by packaging them with discounted versions of popular products. Bundles can also be used to sell complimentary services to customers who wouldn’t think to purchase them separately, such as packaging outside window cleaning with standard maid service.
2. Promotions Fulfilling the Fondness for Free
Everyone loves free. Whether it’s free gifts, free refills, or free service segments, free sells. One of the most powerful free offers is free shipping for online orders, as evidenced by multiple studies where respondents highlight it as the most important factor in making a purchase decision. Other ways to utilize “free” in your promotions include:
- Buy-One-Get-One Free
or variations of the same. For example, my local supermarket often runs a buy-three-get-two-free offer on 12-packs of soda. I rarely NEED to purchase five 12-packs at a time, but they don’t go bad, and it is hard to rationalize paying almost as much for two 12-packs as I would for five. That scenario illustrates how this type of sale can be used to your advantage– you can raise the price of purchasing a single item to such an extent that purchasing multiples is a no-brainer for your customers. This enables you to offer discounted pricing on the multiple purchases (as long as you are still profitable at the sale price point), because you are making up in volume what you are losing in margin.
- Free Gift
It almost doesn’t matter what it is, offering a free gift is often all it takes to move a wavering prospect to a paying customer. If the gift is something that is both attractive to your customer and helps promote your brand, it is an even bigger win. A perfect example of this is giving away a free t-shirt, with your logo and web address on it, with any purchase. Just make sure the “free gift” however small is of high quality—a flimsy trinket, malfunctioning tech-item, or t-shirt that disintegrates after the first wash is likely to destroy any good will created by the gift, and to discourage rather than foster repeat business.
3. Promotions Capitalizing on Coupon Fervor
According to a Forrester research study on coupons, 60% of respondents agreed that they “Love to Receive Digital Coupons” and 50% report being more likely to visit a store if they receive a coupon. Another study from PwC found that 46% of all respondents, 49% of women, and a whopping 61% of millennials (age 18-34) report being “happy” to receive coupons and other holiday offers on their mobile phones. Whether your coupon offers something free, or some type of discount, here are some ways to disseminate the offer:
- Email Coupons
The Forrester study referenced above found that email was by far the most popular way for people to receive coupons. Once they get them, they are used both online, over the phone, or in stores. So make sure that your offers are shopping-method neutral and that it is as easy for a customer to type a code into an online shopping cart as it is for them to redeem the coupon by presenting an email on their phone to a cashier.
- Coupon Codes
Post them on your website, on your social media sites, on coupon code sites, and in emails, and encourage those who find them to share. Or, make them exclusive one-time use codes assigned to particular customers after they “like” you on Facebook or who “re-tweet” a post you want to promote. With the former approach you’ll want to limit unrestricted discounts, and with the latter you can afford to offer significant one-time use discounts with the goal of converting a prospect on the fence to a loyal repeat customer.
- Exclusive Invitations
In general, paper is a dirty marketing word in today’s digital world. However, there are times when a sophisticated, exclusive offer is the ideal way to make an impression. This approach can be particularly effective for service businesses looking to get a foot in the door with potential customers, or for retailers of luxury items attempting to bring new customers into a retail store. To do it right, you’ll want expensive-feeling paper, an elegant font, and an offer that appears to be limited to a carefully culled group of prospects. For example, a jeweler might offer an invitation to a private showing with a gemstone wholesaler along with a coupon for 10% off a custom piece utilizing the purchased stones; or a caterer might offer a free lunch at which potential clients could sample her cooking along with a coupon for a free appetizer course as part of a 50-person dinner engagement.
4. Promotions Staging Simulated Scarcity
The perception of scarcity increases the perception of value. A classic experiment asked people to rate the value of 12 identical cookies where ten were placed in one jar and two in another. The subjects rated the cookies in the “two” jar more highly than the ones in the “10” jar. While there is no definitive explanation for why this occurs, researchers theorize that it may be related to shoppers having incomplete information and thinking that if supply of something is limited it is because other shoppers with more information snapped it up first. Whatever the actual reason, with a little creative product and service positioning, you can use this mental tick to your advantage.
- Shelve Strategically
Instead of placing your entire stock on the shelf, hold a majority of it back and display only two or three of an item. As you sell out, replenish stock so that there is always enough to meet customer demand, but never so much as to exceed it. Use this strategy for sale items to encourage people to snatch-up discounts before they disappear, or use it to drive customers to full price items that appear to be in high demand instead of loss-leader sale items.
- Display Full Schedules
When selecting a service provider, customers always want your “best” one. Certainly you should strategically assign your staff to the customers they are best suited to serve. However, if you use an online appointment service, you can configure it to show availability in any way you choose. For example, if there are two possible providers for a single service, you can make it appear as if one person is largely booked-up while the other is wide open. As limited slots for the “full-up” provider are taken, you can free up more. Additionally, showing limited availability can help nudge hesitant customers into a commitment where a wide open schedule can provide a rationale for procrastination.
- Advertise Limited Availability
Warning of limited availability is a great way to spur immediate action. For example, you might limit a coupon code to the first 50 attempts to use it, offer a free gift to the first 100 customers to walk in the store, or provide a free month of service with a one-year service agreement to the first 25 respondents. It is up to you to decide whether you are really going to limit the promotion, or whether you will extend it to everyone who responds to the offer. The customer-perception of limited availability is what is important to spurring action.
5. Promotions Conditioned by Time Constraints
Just as people respond to scarcity, they respond to time constraints. And, if you combine time constraints with exclusivity you can create an even more compelling offer. So, it goes without saying that you should use expiration dates on coupon or discount offers, and that sales should have defined start and end dates. (Just ask JC Penney about the wisdom of an everyday low price strategy.) Here are two more ways to capitalize on very limited-time promotions:
- Flash Sales
Typically low cost leaders designed to get customers into stores or onto e-commerce sites, flash sales offer a single item or small group of items at steep discounts, often to a select group of customers. Think Amazon Lightening Deals, and typical black-Friday bargains that are only available for a few hours of the shopping day. Often, Flash Sales are not only time-limited but stock limited, and once the small stock of sale item is extinguished customers are lead to more profitable alternatives. One warning—if you try this promotion, be sure that you have enough of the promoted product that customers will not feel duped, or you may find yourself with an Amazon Prime Day backfire.
- Daily Deals
Companies like Groupon have built a business around offering limited time deals. You can use the same strategy for your small business. Base it around an email mailing list to which you offer one-day deals once a week, or once a month. Or, advertise a one-day discount for customers who sign new one-year service agreements or renew existing ones. Just make sure to get the word out ahead of sale day, to ensure that when the day arrives your customers are ready to take advantage of the offer and buy.
6. Promotions Leveraging Illusions of Luck
People like to feel lucky, like to feel like winners, and like to feel like they got something special that the next person did not. Crafting a promotion that creates that “lucky feeling” for your customer can turn into a win for you both. Some things to try:
- Mystery Discounts
This promotion can be accomplished with a code that reveals a discount on a landing page, a code that reveals a discount at checkout, a digital or paper scratch card, or even a fish-bowl at the cash register. The key is to tell your customer in advance the possible discount amounts, and to ensure that the customer gets one on the high end. For example, you could offer a code that provides a 10%, 20%, 40%, or 50% discount off a single item and seed the results so that all of your customers get the 40% or 50% discount. That will make them feel like winners, and hopefully encourage them to use (a soon to expire) discount, even if they are getting the same offer everyone else gets.
- Surprise Discounts or Gifts
A surprise discount or gift presented to a wavering customer can make the difference between completing and abandoning a sale. This tactic works best for online stores where a discount code is presented when a customer attempts to abandon a shopping cart. It is also widely successful when such an offer is emailed to a known customer who abandons an online shopping cart, as an incentive to complete the purchase. However, surprise gifts are also effective when presented after the sale as a mechanism to promote repeat business. A common use-case is to provide a discount coupon on the sales receipt or in a confirmation email. Another is to encourage extending a subscription order by an additional year or two after an initial sign-up, or to offer an additional product (usually at a discount) with free shipping as part of a just completed order. However, don’t discount the good will you will generate simply by presenting a small unexpected gift, such as a free sample of a new product, in a shipped package or at the register.
7. Promotions That Do Well by Doing Good
A 2013 study found that 90 percent of those asked said they would be more likely to trust and be loyal to a company that supported a cause. Additionally, people feel good when they buy something they want (but not necessarily need) and can rationalize the purchase with the knowledge that they are also supporting a worthy cause. To ensure that you are supporting a reputable organization, to help identify causes you want to champion, and to get in touch with charities with which you would like to partner, check out Charity Navigator and the Better Business Bureau’s (BBB) Wise Giving Alliance. Ideas for this type of promotion include:
- Purchase-based Donations
You can choose to donate a percentage of all sales, a specific amount for each order, or base the donation on the purchase of a particular product or service. While the donation can be completely based on sales generated, you might want to set limits for a maximum donation per year.
- Customer-directed Donations
To really get your customers involved, use a survey to collect their favorite causes and select two or three that your company will support, and then let your customers designate which one will benefit from their purchases. Amazon has turned this concept into a major charitable giving engine via their Amazon Smile program.
- Promotional Partnerships
While any charity will gladly accept your donations, many will also help you promote your small business donation program. For example, the charity might publicize your promotion on their website, let you send a promotional email to their donor list, or include your company as a sponsor at one of their upcoming events.
Which of these is right for your small business? The perfect sale is as unique as your customer base and your business. So, the first step is to really get to know your customers. You could do this through surveys, through casual (though strategically planned) conversations between your staff and customers during service appointments, or through studying customer behavior. Getting To Know Your Customers Through Search, a Tip post from last year, is one place to start. Using a business intelligence application is another (see Free Business Intelligence Application Designed for SMBs for more on that). Turning to the studies can be helpful too; this study from Forrester highlights what customers want in self-service environment, another examines What Customers Want from Service Companies, and an old Tip post from 2013 New Study Helps You Figure Out Exactly What Your Customers REALLY Want breaks down top online shopping concerns.
Understanding what worked for other companies similar to yours, or companies serving a customer base similar to yours (even if they provide a completely different product or service) is also useful. A whitepaper from Sparkpay, Ten Of The Best Sales Promotions Of All Time, provides 10 cases studies that span a variety of business and promotion types. It is sure to give you some great ideas.
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