Promotions — One of the best drivers of your business

What is a Promotion?

As the name sounds and we all understand, promotion is a set of marketing activities and strategies to generate curiosity, interest, and hunger to purchase among customers with the ultimate goal of increasing sales and making more money.

History of Promotions

Before we understand different types of promotions and how you can benefit from them, it is also important to understand the history and how successfully companies made use of promotions

1. Ancient Marketplaces: In ancient times merchants and traders often used various promotions to attract customers such as offering discounts to buy in bulk, providing free samples, or holding promotional events during festivals.
2. Early Advertisement: With the advent of printing technology, businesses in the 17th and 18th centuries started using newspapers to advertise their products in the form of clearance sales, or limited-time offers.
3. Birth of Coupons: The concept of coupons started in the 19th century when the first coupon was launched by Coca-Cola in 1887 to offer free drinks to customers. This concept gained popularity in 1930 when users started thinking more about saving money.
4. The era of Supermarkets/Departmental Stores: Supermarkets emerged in the early 20th century and played a major role in popularising promotions and discounts. They offered lower prices on everyday products and also introduced the concept of loyalty programs.
5. Retail Events: In the mid-20th century retail giants began hosting large-scale events like Black Friday and Cyber Monday which began the concept of holiday shopping, and bigger discounts.

What happened next?🤔

Digital era. With the rise of the internet and the boom in e-commerce in the late 20th and early 21st century, companies started using promotions and discounts to attract customers by doing email marketing, providing coupons, and launching flash sales to buy online.

Till now we have understood the history of promotions, let us jump to the different types of promotions in e-commerce.

Type of Promotions

1. Discount: This is one of the simplest promotions in e-commerce where the discount is applied to the products on top of the selling price.

Imagine you are the seller who has a wide range of electronic items like televisions, washing machines, etc. and it is the time of Christmas when you want to attract more customers by giving them discounts on your catalogue, so you can just set that hey for 1 week I want to give 20% discount on all my SKUs. So if the product normally costs 50k, for that one week customer will be able to purchase that product for 40k. One caveat that you as a seller can set is the minimum transaction and max discount, where the discount will only be applicable if the customer spends a certain amount and similarly you can set the max amount of discount you want to give to the customer no matter what the transaction value is.

2. Coupons: This is one of the most used promotions in e-commerce where the sellers and platform can provide coupons to customers on the total cart value. It is different from above where the discount was on each product. Here the discount is given using a coupon but is applied to the total cart value. Let us try to understand this with the help of an example

You are the owner of the Adidas online store and to increase the average order value, you want customers to spend more, but with your category of products, this can only happen if customers purchase a variety of products, so you launched the voucher to get 25% on a total cart value of 5k or more, so customers can purchase a blend of products just to reach cart value of 5k+ and they will get 25% off.

3. Combo Discount: This promotion is used when sellers want to give you a combined discount and want customers to purchase more than one item at a time.

So, let us say you are an Apple seller this time, and you want to increase the sales of your iPhone, we all know that Apple does not give chargers along with the iPhone. You can give a combined discount to customers if they purchase both the items together. For example: an iPhone costs around 90k, and a charger costs around 2k. So, if the buyer buys them separately, it will cost him 92k, but if the customer buys together it will cost him 90.5k (89k+1.5k). This is what we call a combo discount.

4. Free Gift: This is one of the most interesting and intriguing promotions where sellers nudge buyers by offering them free gifts from their store when customers purchase either a minimum number of items or spend a minimum amount. Let us try to understand this.

As a grocery category seller, if you want to sell out your dead stock or boost the ranking of SKUs, the free gift is one of the best promotions if you are not able to sell sugar (for example) because your ranking is low, and discovery is poor, so buyers are not able to see your product to even understand the value of it. Attach the packet of sugar as free gift with the high-ranked product say rice. So, your offer becomes, if a buyer purchases 5 kg of rice, he will get 1 kg of free sugar. This way more users will start noticing sugar, which will not just increase the ranking of the product but also reduce the dead stock.

5. Free Sample: This particular promotion is not very well-known in the world of e-commerce but is extremely helpful in testing new products in the market. It is similar to the free gift promotion but the difference is sample cannot be discovered or purchased separately. The reason is that first sellers want to understand the adaptability of the product and the right time to fully launch in the market.

Imagine you are an electric appliance manufacturer and you sell smart bulbs. You have started seeing huge competition in this market and as a part of innovation, you designed and developed a smart switch. Instead of launching it offline and spending a lot of money in the operations of increasing the reach of the product so that users can test it, a free sample is an amazing promotion for the above kind of scenarios, where you can just attach the smart switch with your high-selling products, and your promo will look like buy smart bulb and get a smart switch free which will not only increase the sales of smart bulbs but also helps you to test the new product in the market.

6. Shipping Voucher: As the name sounds, this particular promotion is a very common promotion in e-commerce where the buyer is nudged to spend more to get the shipping discount because we all understand users buying more products is better than giving the shipping fees. This is one of the amazing techniques to increase the upsell and cross-sell along with reducing the cart-abandonment rate

The above promotions are fine to run on a daily basis or for a certain occasion. But what if as an e-commerce or a D2C brand you want to create a year-end sale where buyers will be getting the best discounts on all the products? For this kind of big sales, we have something called campaigns and Flashsale.

7. Campaigns and Flashsale: These are not just promotions, these sales are celebrated as events among the users of the platform, where they have the understanding the best offers are given only in these sale periods. As a seller, you have to make sure, that this is the best time to boost your sales, but since the competition will be very high, discounts are right. For this, the best option is to experiment with past data on what can be the best price that can be attached to the product so that customers do not have to spend time looking somewhere else.

Flashsale is more of an exclusive product section where you as a seller understand that demand for a product will be very high but supply will be limited so even if the discount is not high probability of the product getting sold out is very high because buyers understand that this is time sensitive product and will be available for a short period of time.

There are many other cases where promotions can be used. For example: if your cart abandonment is high, along with a shipping voucher you can create highly curated private vouchers only for those buyers who are not converting their carts because of the absence of discounts.

Another use case of promotion is to reduce your return rate. At the time of checkout give the buyer an extra discount in exchange for no return. This will be an instant hit for those who are sure of what they are buying and prefer an extra discount.

Likewise, promotions have a broad range of applications in the e-commerce landscape and can work wonders when implemented correctly.

I trust you’ve found this article enjoyable and informative, gaining valuable insights into the world of e-commerce promotions and their associated benefits. While there’s much more to explore on this topic, it wouldn’t be fair to cover everything in just one article. Therefore, I’m planning to release Part 2 very soon.

Thanks!