Step Six: Set Your Promotion Budget

As you’re getting closer to executing your sales promotion, it’s crucial to set a promotion budget. After all, you don’t want to end up in the red, right? But don’t worry, setting a budget doesn’t have to be stressful or complicated.

First, consider any past data available to help evaluate costs and determine your budget. By doing so, you can avoid any unexpected expenses and have a better idea of what to expect. When creating a sales promotion budget, you’ll need to account for both fixed and variable costs.

Fixed costs include expenses that do not change regardless of the level of sales promotion activity. These costs are typically related to the development or creation of promotional materials or activities, including creative development costs, market research and training.

Variable costs on the other hand, are expenses that change depending on the level of sales promotion activity and can include media advertising costs, sales commissions, direct cost of your incentive (more on estimating this below), shipping and handling and more.

As mentioned, this is a variable cost, and it will be based on how many people actually claim the incentive – the redemption rate. For example, if you are running a traditional 10% off discount, you need to keep in mind that it represents 10% of 100% of sales, which you’ll need to fund with your budget.

But what about promotions where the customer needs to actively claim their prize, gift, or cashback? In these cases, not everyone will be motivated to claim, even if they are eligible. This means you can base your budget on a lower proportion of sales, giving you more flexibility in your spending.

You can also consider promotion insurance. This allows you to fix the price of your promotion, giving you peace of mind. Regardless of how many people have been reached, redeemed, and expressed interest in any promotional campaign, the costs remain the same.

• Use past data: Analyse previous campaigns to help evaluate costs and set a realistic budget.
• Account for fixed costs: Include expenses related to promotional materials or activities, such as creative development, market research, and training.
• Consider variable costs: Factor in expenses that change with sales promotion activity, including incentive costs, media advertising, sales commissions, and shipping.
• Consider promotion insurance: Fix the price of your promotion for financial stability and peace of mind, regardless of the number of redemptions.