Final answer:
Sales promotion is a marketing strategy to boost sales through various promotional activities such as coupons, discounts, or contests, distinct from advertising which aims to differentiate a product from competitors. Effective advertising can increase demand or make demand more inelastic, leading to higher sales and profits. Product bundling is another promotional method to encourage sales.
Step-by-step explanation:
Sales promotion can be best described as marketing techniques aimed at target markets to encourage the purchase of a product or service. It’s not just about selling products at reduced prices, but involves a strategic approach that includes various promotional activities to boost sales in the short term. A sales promotion might involve the use of coupons, discounts, contests, or loyalty programs. Advertising, on the other hand, is about explaining to people or making them believe that the products of one firm are differentiated from the products of another firm.
Within the framework of monopolistic competition, advertising is thought to either make a firm's perceived demand curve more inelastic, meaning consumers are less responsive to changes in price, or it causes an increase in demand for the product. Ultimately, effective advertising can lead to a greater quantity sold or allow a firm to charge a higher price, yielding higher profits. Additionally, the concept of product bundling, which is selling multiple products or services together at a discounted rate, also falls under the tactics used to promote sales.