0264 · 3.3.4Promotion

Promotion purposes and key terms

0:00A shop has designed a useful backpack, but customers need to hear about it before they can choose it. A poster explains its waterproof design, while a voucher offers money off the next purchase. Both encourage buying, but they work in different ways. By the end of this video, you will understand those differences and how businesses choose suitable methods of promotion. The marketing mix is the combination of product, price, place and promotion that a business uses to sell its goods or services.

0:24Promotion, one of those four parts, is communication with customers to inform and persuade them to buy a product. A target market is the group of customers a business aims to sell its products to. Every promotional message, and the way it is delivered, should suit that group. Advertising is paid-for communication with customers about a product. By contrast, short-term incentives to encourage customers to buy are called sales promotion.

0:47An advertisement can explain why a backpack suits school use. A voucher adds an immediate financial reason to purchase, and an advertisement can tell customers that the offer exists. Businesses promote products to inform customers, persuade them, remind them, improve brand image, respond to competitors, and raise sales and market share. Information matters when a product is new because potential buyers need to understand its benefits and availability. Persuasion gives customers a reason to choose it.

1:13For example, an explanation of waterproof fabric connects a backpack’s feature to protection for schoolbooks. Reminders keep an established product in customers’ minds, so they consider it when they next need to buy. Brand image is the identity and impression that customers associate with a brand. Carefully chosen messages can link a brand with reliability or quality, so customers stay loyal and may accept a higher price. When a rival launches a similar product, promotion lets a business respond by pointing out its own advantages, so it keeps more of its customers.

1:43Market share is a business’s sales revenue as a percentage of the total sales revenue of the whole market. Promotion aims to raise sales by attracting new buyers or encouraging existing customers to purchase again. If its sales grow faster than the market overall, the business gains market share. A promotion succeeds only when enough of the customers who see it go on to buy.

Sales promotion methods

2:02Sales promotion methods include vouchers, reward schemes, competitions, special offers and discounts. Each changes the immediate attraction of buying, but the incentive can take different forms. Customers might receive a price reduction, earn a future benefit, or gain the chance of winning something. The business must choose an incentive that supports its aim at an affordable cost. A voucher is a coupon or code that entitles its holder to a price reduction or another stated benefit.

2:28Cedar Threads sells clothing and gives recent customers money-off codes for their next purchase. Those customers gain a saving, while the business gains a reason for them to return. However, customers who already intended to buy can use the codes, which reduces the amount received from those purchases. Reward schemes give customers benefits for repeated purchases. A car-cleaning service could offer a free wash after several paid visits, so customers have a reason to return.

2:52The business benefits from repeat purchases, and customers gain a reward for loyalty. The drawback for the business is that each free wash costs money, while recording visits creates extra administration. Competitions give customers a chance to win a prize, sometimes linked to making a purchase. A fruit producer could print a competition on its packaging, with a picnic hamper as the prize. The chance of winning attracts attention, so more shoppers notice and pick up its products.

3:16On the other hand, most entrants receive nothing, while the producer must pay for the prize and organise the entries. Special offers provide an extra benefit under stated conditions, often for a limited period. A stationery shop could offer buy one get one free on selected notebooks. Inventory is the goods and materials a business holds, for use in production or for sale. Customers receive more for their money, while the shop encourages larger purchases and can clear unsold inventory.

3:41Each free notebook still has to be bought from a supplier, so giving extra items away raises the shop’s costs. Discounts are reductions in the usual selling price. A cinema could reduce ticket prices for a quiet afternoon, so price-sensitive customers have a stronger reason to attend. The business can increase sales during that period, and customers pay less for admission. However, each discounted ticket brings in less money, and some buyers may move from full-price screenings to the cheaper session.

4:09Revenue is the income a business receives from selling goods or services, and profit is total revenue minus total costs. An offer can increase the number of purchases while reducing the amount received from each one. The business must consider both the extra sales and the cost of the incentive before judging its effect on profit.

Advertising methods and reach

4:27Advertising methods include social media, direct or targeted emails, leaflets and billboards. Their usefulness depends on cost, the number of people reached and how closely that audience matches the target market. Reach means the number of people exposed to a message. A large audience helps only when enough viewers are potential customers. Social media advertising uses paid messages on online platforms where users share content and interact. A sports equipment seller could show a short demonstration to users interested in exercise.

4:56The business benefits from selecting a relevant audience and controlling its spending, while viewers can see the product in use. Its drawbacks are that producing suitable content takes time and money, and viewers can scroll past without paying attention. Direct or targeted emails send promotional messages to selected recipients. A pet-care service could email existing customers about holiday appointments, so the message reaches people already familiar with its work. Sending costs can be low, and recipients receive details they can read later.

5:22However, the business needs a suitable contact list, and messages can remain unopened or enter unwanted-mail folders. Leaflets are printed advertising sheets distributed to potential customers. A dental clinic could deliver them to nearby homes because its customers need convenient access to appointments. The business reaches a local audience, and recipients can keep practical details such as opening hours. Printing and delivery cost the clinic money, though, and some households throw the sheets away unread.

5:49Billboards are large outdoor advertising displays positioned where people pass. A roadside restaurant could advertise near the route used by its potential customers. The business gains visibility among passing travellers, while repeated exposure can help people remember its message. Against this, renting the space can be expensive, and drivers have only a moment to read any detailed information. Choose an advertising method by connecting the audience, message, budget and objective.

6:14A nearby service needs local reach, while a downloadable product can attract customers across a wider area. Detailed information suits a format that customers can read at their own pace. A billboard works better with a short message because viewers often pass quickly.

Choosing promotion methods

6:28Willow Oven sells bread and pastries from a small local bakery. Its target market is nearby commuters, and many new customers have bought only once. The owner has a promotional budget of one hundred and eighty dollars and wants more return visits. Printing vouchers would cost forty dollars and leave one hundred and forty dollars for the cost of redeemed offers. Each method of sales promotion can be judged against the owner’s aim of bringing one-time buyers back.

6:50A competition offers only a chance of a prize, so most entrants receive nothing that brings them back. Cutting today’s prices would reduce the amount received from commuters who were going to buy anyway. Vouchers and a reward scheme both reward a return visit, so the choice lies between those two. I recommend vouchers redeemable on the next purchase. They give nearby commuters who have visited once a financial reason to return for another purchase.

7:12Printing costs forty dollars, so the owner retains one hundred and forty dollars to help cover redeemed offers. A reward scheme is weaker because these occasional buyers must make several visits before receiving a benefit. Vouchers therefore bring more commuters back soon, so the bakery’s sales revenue should rise. The owner should also give each voucher an expiry date and an affordable reduction. An expiry date a few weeks ahead encourages commuters to return quickly.

7:38A small reduction keeps the cost of each redeemed voucher low, so the remaining one hundred and forty dollars covers more return visits. Because these customers pass the bakery regularly, another visit is easy for them. Kestrel Path is a small developer that has made a new study-planning mobile app. Its target market is teenagers who regularly use social media, and its aim is to increase downloads. The business has nine hundred dollars available for advertising and has no customer email list.

8:04A proposed social media campaign costs six hundred dollars and leaves three hundred dollars available. Kestrel Path needs teenagers across a wide area to discover the app and download it. Leaflets and billboards mainly reach people in one area, and a billboard can hold only a short message. Without a customer email list, the developer cannot send targeted emails. A social media advertisement can show a short demonstration of the app organising homework, with a link straight to the download page.

8:29I recommend social media advertising. It can target teenagers who regularly use those platforms, so the campaign reaches potential users of the study-planning app. The six hundred dollar cost fits the budget and leaves three hundred dollars available. Targeted emails are weaker because Kestrel Path has no customer email list. Social media therefore provides a suitable way to reach its intended audience and encourage downloads. Both recommendations depend on the details of the business.

8:54Willow Oven needs another local purchase, so the chosen incentive rewards a return visit. For Kestrel Path, the selected advertising method reaches teenagers where they already spend time, so more of them discover the app. Changing the audience, budget or aim could change the best choice.

Exam technique and recap

9:09Keep advertising and sales promotion distinct by identifying how each works. Advertising communicates a message, while sales promotion offers a short-term incentive to buy. A paid social media message can announce a discount, so the same campaign uses both. Accurate answers name the communication method and explain the incentive separately. Treat low cost, wide reach and accurate targeting as separate considerations. A leaflet may suit a nearby service because its recipients are within travelling distance.

9:36Social media can reach a wider audience, but the business still needs suitable targeting and a useful message. The strongest explanation connects a feature of the method to customers who can realistically buy. In Paper One Short Answer and Data Response and Paper Two Case Study, use the information in the question. Justify means support a case with evidence or argument. When asked to explain, set out purposes or reasons, say why and how, supported with relevant evidence.

10:01For a recommendation, select one method, support it with case details and show why the strongest alternative is weaker. Promotion is communication with customers to inform and persuade them to buy a product. Remember that advertising is paid-for communication with customers about a product. Short-term incentives to encourage customers to buy are called sales promotion. The best choice connects the business’s aim, target market and budget to a method that gives customers a clear reason to act.