Selling

A Strategic Perspective on Sales Promotions

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While most managers would think long and hard before bringing to market a product that lacked patent protection and could be easily imitated, many invest in sales promotions — sweepstakes, coupons, time-limited price discounts, free gifts or samples, special events, displays, membership rewards, consumer- directed promotions and so on — that are easier to imitate than the simplest new product. Others sign off on plans so generic that they seem unrelated to the brand or company offering them, despite the fact that sales promotions may absorb a significant portion of a company’s promotional dollars — currently a reported 31% of marketing budgets.

By contrast, a strategic focus — considering how customers and competitors will react to any promotional effort, as well as the message delivered and the stature in the marketplace of the brand delivering it — leads to promotions that defy or delay imitation and yield disproportionate benefit for companies that have already developed a strong competitive position. The authors suggest that when all these strategic factors are aligned, the result is a successful promotion, and they illustrate that with successful promotions conducted by General Motors, Home Depot and Procter & Gamble, among others.

However, the authors caution, such promotional strategies require inventiveness, originality and swift action — qualities neither present nor encouraged in many corporate cultures in which familiarity and predictability are prized. Managers in such organizations, then, not only must tailor a promotion successfully to its intended market, they must also skillfully shepherd it through internal barriers. Knowing why, how and for whom sales promotions will most likely be profitable surely will help in that regard.

Betsy Gelb is the Larry J. Sachnowitz Professor of Marketing and Entrepreneurship and director of Ph.D. Programs, Bauer College of Business, University of Houston, where Demetra Andrews and Son K. Lam are doctoral candidates in marketing and entrepreneurship. Comment on this article or contact the authors through smrfeedback@mit.edu.

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