Introduction
Sales promotions have long been a staple in marketing, offering a quick boost in sales. But over the years, many brands have fallen into a cycle of excessive promotions, leading to long-term harm.
Data from the Analytics Partners ROI Genome Report shows that promotion ROI has been steadily declining since 2010, while advertising efficiency continues to rise. Similarly, the IPA’s Media in Focus report finds that brands are increasingly prioritizing short-term sales activation at the expense of brand-building, weakening their long-term effectiveness.
Like a drug addiction, promotions can provide an immediate high, but the long-term consequences can be destructive. Let’s explore why.
The Promotion Spiral: How Brands Get Hooked
Imagine a brand that has never run a sales promotion. One day, it offers a limited-time discount and sees a spike in sales. Encouraged by this success, it runs another promotion, then another.
At first, there are no visible downsides. But slowly, side effects start creeping in:
Customers anticipate promotions and begin waiting for discounts, reducing baseline sales during non-promotional periods.
Competitors respond with their own promotions, leading to a price war that benefits no one.
The perceived value of the brand erodes as customers begin associating it with discounts rather than quality.
What began as a simple sales boost now becomes a dependency—one that’s hard to break free from.
The Myth of Trial Generating Loyalty
One common justification for promotions is that they encourage trial usage, converting first-time buyers into loyal customers. But household panel data analysis has debunked this theory.
🔹 Promotions rarely attract first-time buyers—most of the sales come from existing category buyers stockpiling rather than switching brands permanently.
🔹 They don’t increase long-term usage frequency—people simply shift their purchases to promotional periods.
Academic research supports these findings. Koen Pauwels’ sales data study concludes: “The tests reveal that permanent effects of price promotions are virtually absent.” Similarly, Carl Mela’s research finds that increased promotions lead to greater price sensitivity over time, reducing overall profitability.
How Promotions Reshape Consumer Behavior
The more promotions a brand runs, the more it changes how consumers perceive value and pricing.
Stanford professor James Lattin found that promotional activity alters consumers’ price expectations, making them reluctant to buy at full price.
Marketing scientist Andrew Ehrenberg concluded that “the true value of price promotions is virtually negligible.”
Consumers learn to wait for deals, making full-price purchases increasingly rare.
A downward spiral begins: to maintain the same sales peaks, brands must offer deeper and more frequent discounts.
Retailers and Promotions: Who Really Wins?
Retailers love promotions—just as a drug dealer loves to sell drugs. They negotiate deals where most of the price cuts come from the brand’s margins rather than their own. In addition, retailers charge brands for:
In-store promotional placement
Advertising in circulars and online listings
Endcap and aisle displays
Retailers benefit by using promotions to attract foot traffic—knowing that shoppers will buy full-price items along with the discounted ones.
Products that can be bought in bulk and stored for later are especially attractive for retailer-led promotions. For example, diapers are a high-cost item for families. Parents will happily switch retailers to take advantage of diaper discounts, stock up, and then buy other full-price products in the store.
Brands, on the other hand, suffer margin loss—yet feel forced to participate because opting out could mean losing shelf space or even being delisted.
Why Brands Struggle to Break Free
Once a brand becomes dependent on promotions, breaking free is extremely difficult.
Retailers expect brands to participate. Many have pre-planned promotion slots per category, offering them to the highest bidder. If a brand refuses, a competitor will take its place.
Retailers may threaten to delist non-compliant brands. This is especially dangerous for brands that lack strong consumer preference.
Short-term sales drops are inevitable when cutting back promotions. Marketers are often under pressure to meet quarterly sales targets, making them reluctant to reduce promotions.
The Prisoner’s Dilemma of Promotions
This is a classic case of the Prisoner’s Dilemma. If all brands in a category stopped promotions, they’d all benefit from higher margins and stronger brand equity. But since cooperation isn’t allowed—and brands don’t trust competitors to do the same—everyone keeps discounting, leading to mutual destruction.
Over time, categories with excessive promotions see baseline sales shrink, while promotional peaks grow higher. The result? Lower profits, weaker brand differentiation, and greater reliance on short-term tactics.
Breaking the Addiction: How to Escape the Promotion Trap
The good news is that brands can recover—but it requires a long-term commitment.
Strengthen Brand Equity – The stronger your brand, the more people will buy it at full price. Invest in advertising, distinctive brand assets, and consistent messaging.
Reduce Promotional Frequency Gradually – Going cold turkey is risky. Slowly scaling back promotions allows for a smoother transition.
Shift to Value-Added Promotions – Instead of discounts, offer bundles, exclusive gifts, or experiential rewards that reinforce brand equity.
Educate Retailers on the Long-Term Impact – Show how over-discounting harms category profitability. Some retailers are open to strategic category management discussions.
Be Willing to Accept Short-Term Sales Declines – Long-term recovery means accepting temporary drops in sales as you rebuild full-price demand.
Sales data confirms that brands with higher baseline sales achieve better promotional uplift. Strong brands don’t need excessive promotions—but when they do run them, they get better results.
Final Thoughts
Promotions are not inherently bad—but when overused, they create a cycle of dependency that weakens brands. Many categories are trapped in an arms race of escalating discounts, leading to shrinking profits and reduced brand equity.
The way out isn’t easy. Like rehabilitation from an addiction, it requires discipline, long-term investment, and a willingness to take short-term hits.
If brands want to reclaim pricing power and rebuild sustainable demand, they must shift focus away from excessive promotions and toward brand-building strategies that drive long-term growth.