Sales promotions make up one of the seven parts of the promotional mix. Marketers use these for a pre-determined time in order to increase demand, introduce a new product, or to increase sales in general. There are two types: trade sales promotions and consumer promotions. Trade sales are for people in the distribution channels (giving bonuses to retailers who sell the most of the product, incentives for a retailer to stock the product, etc), while consumer promotions are for the consumers themselves (coupons, rebates, point of sale displays, etc)
The most common sales promotion is couponing. In order to get consumers to try new products or to increase market share for existing ones, retailers can offer an instant discount on a product. For example, since Microsoft announced the new Xbox One, they’ve offered a deal on their older model, the Xbox 360. Consumers can purchase an Xbox 360 at a much lower price than usual, and if they like it, they may be incentivized to purchase more Microsoft products.
Thus, many companies use coupons and other sales promotions to increase brand loyalty. For example, if you sign up for makeup retailer Sephora’s “Beauty Insider” Card, you get regular emails with coupon codes and free samples to try new products. Additionally, you get points for purchasing items, and once you accumulate enough points, Sephora has a selection of rewards to choose from. If consumers like the free samples, they will purchase the full version, which means even more sales for the retailer. Sephora also relies heavily on point-of-sale promotions. At all their stores, when you move through the store to check out, you have to wind through an aisle of tiny, sample-size products. Consumers often fall prey to these impulse buys, and may be motivated to purchase the full size (as with the free sample giveaways)
Sales promotions are generally good for increasing brand loyalty and revenue, but marketers must be careful to not overdo it, because consumers can be skeptical of retailers giving products away for free.