Promotions are a great way to quickly boost sales and gain new customers. However, running a sale isn’t as simple as setting up a random discount and letting it run. Running promotions too often can decrease brand value and not running them often enough can put you on the backfoot of competitors. We turned to national retail expert, the former Head of Digital at companies such as Priceline and Decjuba, Martina Ellis to tell us what role sales and promotions play in driving revenue.
Why Should Your Business Run a Sale?
Research from Big Commerce, found “every single industry [they] looked at saw measurable and impactful conversion rate lifts from running promotions…”. So, running sales should ultimately result in an increase in conversions, regardless of the industry.
One of the main reasons for running a sale is to help drive revenue. According to Martina, the role of a sale in driving revenue depends on two things:
1. The Nature of the Business and Brand and Its Proposition
“Are you a business like Priceline, where one of the key brand propositions is price or value for money? Or are you Mecca, which delivers products you can’t get anywhere else, in a premium brand experience format, where customers are willing to spend more for the ultimate indulgent experience,” she said.
2. The Bottom Line
“Margins are everything! From a fiscal and operational point of view, sales and promotions need to be business-sound and still profitable. As a business, you want to make sure you don’t run yourself to the ground by being too reactive to either your stock levels or external market activity. Consider your future stock position, potential marketing activity and always check the numbers to make sure the margins are healthy. Running a profitable retail business is a marathon, not a sprint.”
Ability to Reach New Customers
Running a promotion, particularly over festive periods, can provide opportunities for you to reach new customers. An appealing sale can put your brand in customers' consideration set and encourage that initial purchase.
Research from Google found that “79% of Aussie shoppers are open to buying from retailers they haven’t before during Christmas, and 55% of holiday shoppers shopped with new retailers in 2019” (Google Retail Academy, 2020).
The key takeaway here is to leverage customer’s openness to new brands over the holiday period with appealing and relevant sales.
How the Role of Sales Has Changed over the Years
Sales have come a long way in recent years. Martina says the advent of digital marketing channels is allowing businesses to be smarter and more efficient with how they market their brand and products and maximise the promotional opportunities. “Most importantly, I think the change is being driven by the customer.
“The customer is at the centre of the marketing matrix, dictating how they engage with your brand”. Your sale needs to reflect this change, with personalised offers to appeal to most of your target audience.
How Often Should You Run a Sale?
This all depends on your industry, goals and product type. Research in the Journal of Marketing Theory and Practice examined this concept, looking at the trade-off between sale frequency and the depth of discount.
They found that “high-priced brands benefit from infrequent large price cuts, whereas low-priced brands benefit more from frequent small price cuts” (K. Sivakumar, 1996).
If you are a lower-priced brand, with price as a differentiating factor between you and your competitors, then running more frequent sales, such as a monthly, or even weekly promotion, is a good idea. Martina says think about Coles & Woolies, they’ve been at it for years and are in constant war over cheaper prices. The products are lower priced fast-moving goods. So more frequent sales work better for this type of industry.
Running Sales Too Frequently – It’s All About Perception
If your products are of higher value, it is better to limit the promotions. Martina says “More traditional retailers will run their major seasonal promotions 2-4 times a year and then sprinkle in smaller ones throughout the year”.
The scarcity of a sale is what makes it so effective. If you run sales too often, this could devalue your brand value, as you train your customers to only purchase from you when you have a sale on.
“It’s all about perception. You want to make sure you don’t undervalue your brand in your customer’s mind and remain in their brand consideration set beyond sales and promotions”.
How Long Should You Run a Sale?
There’s no definitive answer and ultimately it depends on the type of sale you are running.
According to CouponFollow, “the average coupon code run time from start of campaign to expiration is 72 hours (3 days)”. This gives the sale a sense of urgency and provides enough time for customers to act. So if you’re running a flash sale you should run it for 24-72 hours.
Ad Promotion Frequency on Facebook
If you’re running a more general promotion, it may require a longer frequency. Facebook Marketing Science ran an experiment to test the most effective frequency level for ads. The research found that ad recall and purchase intent both increased with the frequency of exposure.
They recommend running your ads for at least 1 week for optimal recall and purchase intent.
Using promotions effectively can be a great strategy to drive revenue and get new customers. Successful campaigns consider all aspects of business & marketing, not just price & promotion. So, remember to be strategic with your campaigns and stay true to your brand.