Theories in Sales Promotion

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Sales promotions can be a great way to increase short term revenue.
Sales promotions can be a great way to increase short term revenue. (Image: Sale image by Marco from Fotolia.com)

Sales Promotion Theory is the study of increasing short-term sales revenue. This study can be conducted readily and effectively as the results can be measured quickly and, because of the narrow focus of the promotion, other factors can be tightly controlled for. Sales promotions are a source of some debate, as some argue that increasing short-term sales does not lead to long-term profitability. Others argue that the benefits of creating more income for the company in the short term allows that company to more rapidly grow to gain a larger market share. While promotions come in many different forms, most fall into three categories: Push, Pull, and Combination.

Push Promotions

Using the Push Theory, you can increase sales by creating incentives to wholesalers or retailers to sell more of your product. In this method you would offer discounts to wholesalers or retailers who buy your product in bulk. This leaves them with more of your merchandise on hand and drives them to sell more of your product. Giving them the discount “pushes” them to buy more of your product at a lower price to increase the amount of money they make. In turn they must “push” your products to customers because they will make a better return on them than on similar products supplied to them by your competitors.

Pull Theory

The Pull Theory is about trying to market directly to customers to increase their demand for your product. Advertising and tie-ins with other products or services is the key to this strategy. The theory goes that if you increase the demand for your product by consumers, they will in turn demand the product from retailers, retailers will demand more of your product from wholesalers and wholesalers will demand more products from you. This is a way to increase your sales without decreasing the sale value of your merchandise. Most of the costs are in advertising, so using a tie-in with a related product or service can disperse this cost across both companies.

Combination Theory

This theory requires both of the above theories working together. The "push" is used to get more product into the hands of retailers and wholesalers while advertising and product tie-ins with other products are used as a "pull" to get more people to want to buy the product. Grocery stores often use this tactic. They fill stores with products they have a high profit margin on (the push) and run comercials that advertise the store ("A great place to shop" or "Your hometown grocery") rather than a specific product (the pull).

The car industry provides an excellent example of combination sales promotion theory. Manufacturers advertise and tie-in with television shows to market directly to customers (pull) and offer deals to dealerships to move more products (push). This leads to "dealer overstocks" and special "factory deals" while the commercials generate more interest in the car brand.

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