A horizontal sales promotion is a joint effort between several companies. The horizontal sales promotion reduces the marketing expenses of each individual company because the companies share costs, and its goal is to increase the sales of every company. Sales promotions, such as coupons, sweepstakes, and quantity discounts, attract customers without changing other product features.
Legal Protection
A company may spend a large amount of time and money creating a sales promotion strategy, but the sales promotion strategy usually has no copyright, patent, or other legal protections, unlike the company's actual products. According to the Massachusetts Institution of Technology, sales promotions typically make up 31 percent of a company's total advertising costs. If a company's purchase discounts, coupon design, or free samples are successful, competitors can simply copy the sales promotion without incurring any design costs.
Similar Products
A horizontal sales promotion strategy is effective when the partner companies are selling similar products. If several farms are selling milk, creating a sales promotion strategy that gives away coupons for any type of milk, or free milk samples, increases the demand for all types of milk. If a company sells a unique product, such as designer clothing, a sales promotion that encourages more people to purchase cheap shirts and pants from other companies might not increase its sales.
Complementary Products
Horizontal sales promotion strategies that involve companies in different industries are also effective. The customers of a large retailer may be interested in purchasing prepared food which the large retailer doesn't sell. The large retailer can allow a restaurant franchise to open up inside its store. The restaurant's advertising will also attract hungry customers who would not have visited the retail store otherwise. This strategy also works well with complementary products, such as peanut butter and jelly, or corn chips and salsa.
Considerations
When a company conducts a sales promotion without partners, part of the sales increase is from attracting new customers, and the company also gains some clients of competing firms. If the company is selling products in a new market, it may gain more customers by cooperating with other entrants using a horizontal sales promotion strategy to increase the overall size of the market. If the market is already mature, the company may gain more sales by offering better deals than its competitors with its own sales promotion.
Tags: sales promotion, promotion strategy, sales promotion strategy, horizontal sales promotion, large retailer, creating sales, creating sales promotion