The key point about a promotion is that it can be effective in every part of the promotional mix and can be used for every element of the Offer. If used well, it can spice up any element of the six Cs alongside any marketing communication.
Promotions within the ‘promotional’ mix
How does a promotion fit with the rest of the mix? The promotional mix describes the marketing communication alternatives that are available, divided into six. Remember to base all marketing communications on the ‘mind file’ hook (see Chapter 3). The importance of having a unique hook on which a shopper or buyer can build his or her mind file has now been realised. The engram is the total picture of the brand held by the shopper/buyer on your mind file hook. The brandgram is the desired picture of the engram held by the brand manager.
To recap:
1 Making the shopper/buyer aware
a Advertising: paid-for space and time in broadcast, print media or the new media (websites, interactive TV and mobile) and other paid-for communications; material can also be presented to the shopper – whether as video or audio. The purpose is to inform, educate and build the mind file. A promotion adds the extra excitement and fun, perhaps as a reward for a shopper/buyer for accepting a direction to a website or Social Media.
b Publicity as an addition or alternative to advertising: information and opinion about your products or services carried by third parties. This is very powerful if you can get it. Public relations involves the payment of an agency to stimulate publicity. A promotion alongside publicity makes it memorable.
c Direct relationship marketing: personal presentation to customers or prospects to which they can respond directly through filling in coupons, posting tip-ons, contacting call centres, e-mails, and using the new media – interactive TV, mobile advertising including text messaging and e-mails – all are a part of direct marketing. The promotion itself is a call to action – remember the 55 per cent coupon response!
2 Social media and website investigation by the shopper/buyer
a Social media is ‘free’, but is customer/shopper-generated publicity. A brand manager/retailer/supplier or business can respond to, stimulate and generate social media which has an impact on the mind file of shoppers. A promotion stimulates the activity, say, getting a coupon or voucher offer, which the shopper/buyer can share with others.
b The website. A website visitor is able to browse and learn and examine the product and services and can be persuaded to buy or to return and buy. Further action can be rewarded and stimulated through a promotion.
3 Experiential marketing
Personal selling face to face is where a personal presentation of your products or services is made to customers, prospects or intermediaries; carried out through a shop, exhibitions, demonstrations, by allowing the shopper to test drive or sample the product or service, or by personal selling at customer premises and merchandising. A promotion adds to the experience and enhances the hook mind file, all adding credence towards the validity of the decision to buy.
4 Local media
Signs, local advertising, local newspapers marketing material at the entry point to a shop or store add to the mind file. Nowadays, mobile technology allows the local presence ascertained from GPS proximity to send marketing messages through the mobile to the shopper/buyer. The achievement of Excess Share of Voice should be the aim. A further opportunity to add a promotion – to reward a visit to a premises.
5 At the point of sale (when a promotion is used in the retail space, it is known as a sales promotion)
a Point of sale material. Shelves, ceilings, surroundings and special stands or bins or displays can be used with great effect around the product or for hair, nail, massage, etc. services to persuade the shopper/buyer to reach the tipping point and buy. Add a promotion and that may close the sale. Seventy per cent of decisions are made here.
b Packaging. A product packaging or logo, etc., used as the hook, has to be distinctive and readily recognised. A promotion is easy to add to a pack.
6 A promotion (tool 6) adds to the fun and differentiates the product, service and brand. Apply it to any of the above.
Looking at the promotional mix helps in a number of ways. It gives a rough-and-ready definition of what each is able to contribute to the mix and helps companies to decide which will be most useful in achieving particular marketing objectives.
Comparisons of the effectiveness of different types of media might help, and Tables 6.1 and 6.2 should give you an idea at least. Mobile marketing of course depends on the permission of the customer. Table 6.1 shows that cinema ads are best at getting attention and are loved by the young, but the impact does not last. The internet and mobile marketing are moving ahead of the other media, which reflects reality. Table 6.2 perhaps illustrates why experiential marketing is doing so well. The two tables, if nothing else, are designed to make you think about your target audience and how effective your planned promotion is likely to be with different media. Just how effective are promotions? Table 6.3 illustrates the difference when a promotion is added. So what can a promotion do?
The 12 core promotional objectives
There are 12 core promotional objectives that a promotion typically addresses:
1 increasing volume;
2 increasing trial;
3 increasing repeat purchase;
4 increasing loyalty;
5 widening usage;
6 creating interest;
7 creating awareness;
8 deflecting attention from price;
9 gaining intermediary support;
10 discriminating among users;
11 restoring brand perceptions and deflecting attention from complaints after operational mishandling of customer accounts;
12 retaining brand perception on service failure.
These are covered in more depth in the paragraphs that follow.
1. Increasing volume
The volume of product or service that you sell is, in the long run, dependent on a range of fundamental marketing factors defined in customer terms as the Offer. Promotions geared towards increasing volume can never overcome deep-seated weaknesses, but they can be of considerable value in meeting short-term and tactical business needs such as to shift stock of an old model prior to a new introduction, to reduce inventories prior to their financial year end, to increase stockholding by retailers prior to the introduction of a competitor’s product and to lift production to a new and higher level. Volume-generating promotions invariably bring in the marginal buyers, those who only buy when a product or service is ‘on offer’. These buyers tend to be regarded by many companies with the distaste felt for the morally promiscuous, but they do not form an exclusive group. The more people buy of a particular product category, the more brands within it they tend to buy. We are all promiscuous purchasers to some extent. A volume promotion can bring in marginal buyers to an improved product or service who may well stay with you thereafter.
Almost any promotion that provides an incentive to buy will help to increase volume. Price promotions used to be the most effective in the short term, but recent and continuing experience suggests this is no longer the case. They can be aimed at trialists, regular users or new markets; they can put the emphasis on intermediaries or on the final customer; and they can use a very wide range of the offers described in this book. What must be provided is a real and genuine incentive: a low-budget self-liquidator may massage consciences, but it will do nothing to shift volume. Two case studies in this book are examples of non-price volume promotions: Maxwell House (Case study 42) and Faber & Faber (Case study 73).
The variety of techniques available to increase volume carries its own weakness. It is better to be specific about where you expect to find the extra volume. This means linking the increased volume objective with one of the other objectives listed below.
2. Increasing trial
A major source of extra volume is those who have not used your product or service before or have not used it for a long time. In the case of retailers, these would be people who have not visited your premises before. Increased trial is also a self-standing objective that is fundamental to the growth of any business.
Potential trialists have, by definition, no personal experience of your product or service. They may be using one of your competitor’s products or services, or none at all in your category. A number of offers are particularly effective in gaining increased trial:
• providing a free sample or a trial coupon so that people can try out your product or service;
• providing an additional benefit so that your product or service seems superior to others on the market;
• providing short-term financial benefits, such as good credit rates, so that it seems better value than others;
• doing something different and imaginative, such as an open day or special event, that lifts it out of the general run.
Among the examples of trial promotions in this book are ‘Bovril’s Bang!’, Bovril’s sampling programme (Case study 43), and the ‘Tango Bash’ (Case study 47). These both focused on giving reasons for people new to (or lapsed from) the brand to try it. Offers such as free extra product or those that require the purchase of large quantities of your product or service are unlikely to attract potential trialists. They will not, after all, want to buy it in volume until they know they like it.
3. Increasing repeat purchase
Repeat purchase promotions overlap considerably with volume promotions, as existing customers are most likely to be prepared to bring forward their regular purchases and buy in bulk. Repeat purchase promotions are also effective in achieving other marketing objectives, such as spoiling the launch of a competitive product and getting your customers into the habit of using your product to the exclusion of others. This can be particularly important in markets such as the pub trade and frequently purchased confectionery products where people habitually use a range of different brands, chopping and changing between them from day to day (a pattern known as ‘repertoire purchasing’).
Here are some of the offers that are particularly effective in increasing repeat purchase:
• coupons on the product giving discounts off the next purchase;
• specific incentives for multiple purchase – for example, ‘buy three, get one free’;
• collector promotions, such as collecting 10 tokens and sending for free merchandise or a cash refund.
Maxwell House (Case study 42) and Gale’s Honey (Case study 57) are both imaginative examples of promotions that target the need to increase repeat purchase. Promotions that are unlikely to be appropriate for increasing repeat purchase include door-to-door coupon drops and straight pence-off flashes. They simply give the regular purchaser a discount without requiring any multiple purchase to take place. This is very nice for the purchasers, but of no use to the promoter.
4. Increasing loyalty
Loyalty to a product or service is a much more subjective and personal quality than repeat purchase. It is possible to buy something on a regular basis because it is the cheapest and best, without feeling any loyalty towards it. Loyalty keeps you buying when (perhaps temporarily) it ceases to be the cheapest and the best. See also Chapter 1 on loyalty.
An example of loyalty occurred in the early 1980s, when Ford replaced the Cortina with the Sierra. The early Sierras suffered from a number of teething troubles, and although Ford did lose market share to Vauxhall’s Cavalier, its extent was limited by Ford’s high level of loyalty among motorists and fleet buyers. To paraphrase Winston Churchill: Anyone can support you when you are right; friends are there to support you when you are wrong.
Most supermarkets in the UK have adopted loyalty promotions. They are designed to achieve a high level of personal identification and involvement with a company’s product or service beyond the collection of points. They tend to be long running and to become integral to the way purchasers think about the product or service. There are a number of types of promotion that work well in building loyalty:
• long-term collector promotions, where a wide range of merchandise branded with the product or service can be collected (e.g. McDonalds and Minion models);
• clubs that people can join that offer a range of special benefits – these are particularly effective for children’s products;
• factory visits, roadshows and other direct-contact promotions which bring purchasers into personal contact with the people behind the product or service.
A good example of a loyalty promotion is Shell’s Smart Card (Case study 52); the two ‘Music for Schools’ promotions run by Jacob’s Club and the Co-op (Case study 77) are also relevant. In their different ways, they link closely to the interests of their consumers.
Immediate cash discounts for those who are not members of the scheme have no place in loyalty promotions. Their objective is to supersede immediate cash considerations by appealing to longer-term benefits. This is one of the major ways in which value promotions can contribute to long-term brand value.
5. Widening usage
Very often a product or service will be widely used in only one of the many possible ways it could be used. For example, most households buy honey, very infrequently, to use as a spread. A minority of households use it in great quantities as a cooking ingredient. Telling people how to use honey in cooking is therefore an important objective for honey processors. Sometimes a company will have to widen the usage of a product or service because its original use is fast disappearing. The transatlantic shipping companies had to do this when people stopped seeing ships as a mode of travel and had to be persuaded to start perceiving them as a form of holiday. Promotions can be very effective in widening the usage of a product or service in a number of ways:
• by physically linking the product or service with something else already in the new usage area, for example issuing trial samples with another product;
• by offering books or pamphlets that are of value in themselves and explain new ways to use the product or service, for example a ‘cooking with meat’ cookbook offered by Donald Russell;
• by creating a non-physical link with something else already in the new usage area, via coupons or joint promotions with another company, for example coupons from a travel agent for winter ski gear.
Widening usage will almost always be achieved by a combination of promotional tools, including advertising and publicity. There is often huge consumer resistance to overcome – for example, to the idea that you should put Mars bars in the fridge or drink sherry with a mixer. The Lee & Perrins promotion for Worcestershire sauce (Case study 58) is a good example of extending the usage of a very distinctive product.
Pence-off or other cash-related promotions will not help at all in this. The right kind of value promotion can encourage purchasers to make the leap and try out the new usage of your product or service. Only when they’ve done that will they be convinced that what you have said in your advertising is true.
6. Creating interest
This can seem a very woolly objective, and is often avoided in favour of something that seems more specific, such as ‘increasing volume’. Many consumer markets are mature and offer limited scope for product differentiation. Providing a reason to buy one product rather than another can be as simple as creating interest and excitement.
It is no accident that our ancestors punctuated the year with a series of festivals, fairs and holy days. Life becomes very boring if it proceeds at a regular, uninterrupted pace. Purchasing products and services is exactly the same. Out of sheer boredom, purchasers can decide to buy something else or go somewhere else. Creating interest in your product or service by means of a promotion is a way of keeping purchasers with you. It is a matter of ringing the changes, having something fresh to offer and keeping interest and enthusiasm on the boil.
The principle has long been understood by people who run successful businesses. One of Jesse Boot’s colleagues recalled the early days of what became the Boots chemists chain in the 1880s: ‘Always, Mr Boot had something striking, something to make people talk about Boots’. Richard Branson of Virgin has similarly had people talking about his companies as a result of a constant stream of striking innovations, stunts, offers and promotions.
Value promotions that create interest are characterised above all by their humour, inventiveness, topicality and style. Examples include:
• being the first to offer a new product or service as a promotional premium;
• linking up with a celebrity or relevant charity;
• finding a totally new way to do something that people enjoy doing.
BRIEF 9.1. British Airways’ offer of tickets on Concorde in spring 1997 achieved a massive 30 million responses. Older examples include the treasure hunt for a buried hare featured in the book Masquerade and later copied (with disastrous results) by Cadbury’s Creme Eggs; the telephone Trivial Pursuit game run by Heineken lager; and the enormously successful ‘tiger in your tank’ campaign by Esso in the 1960s, which had millions of cars driving around with a tiger tail hanging from their petrol cap. A case study in this book that shares these qualities is the promotion by Eversheds solicitors (Case study 17).
7. Creating awareness
For new or relaunched products, creating awareness is a key objective. This is a different challenge to that faced by mature brands, where the aim is to maintain interest. It is often assumed that creating awareness is a job for media advertising. In fact, there are a number of promotions that are very effective at making people aware of products:
• joint promotions with another product or service that is already well known in a particular market (e.g. offering electric kettles through household electricity bills);
• link-ups with charities or voluntary groups that have a relevant image;
• the production of books or educational materials for schools and the general public.
Generating awareness is a wholly legitimate business objective, particularly in industries where purchases are infrequent and for new brands. Major brands – for example, the Body Shop, Häagen-Dazs and Swatch watches – were launched and developed largely through promotional activity. In the case of the Body Shop, it included the active engagement of customers in campaigning against animal testing. Häagen-Dazs used placements in leading restaurants and selective arts sponsorship. Swatch hung giant watches from buildings and, early on, built a customer club. The ‘Tango Bash’ (Case study 47) is also an example of this kind of promotion. The ill-fated ITV Digital offered a monkey doll to those who subscribed – probably now a highly valued collectors’ item – which increased awareness significantly.
Crucial to such ideas is the understanding that people are selective in the attention they pay to advertising. There are more than 9,500 brands in the UK that advertise enough for their advertising to be recorded by MEAL. How many can you name? Most people run out of names after a few hundred. Promotional activity can cut through this selective attention.
8. Deflecting attention from price
An obsession with price on the part of your customers is dangerous. It can readily lead to price wars, which have a destructive effect on company profitability. Price wars are a form of mutual masochism into which many industries fall from time to time until, finally, weary and impoverished, they find more sensible ways to compete with each other.
The purpose of a great deal of advertising is to replace price considerations with a focus on features such as quality, brand identity, performance and loyalty. That way, companies can both compete effectively and achieve attractive margins.
Both price and value promotions are part of the armoury companies have at their disposal to do this. The key is to offer benefits that justify a higher price and cost less than an equivalent price cut. If your product is priced at 10p more than your competitor’s and that differential cannot be justified on intrinsic grounds, you can either discount by 10p to achieve price parity or offer an extra benefit that costs you 9p or less and looks at least as attractive.
A very wide range of promotional offers can achieve this objective. Among the main ones are:
• variations on price cuts, ranging from ‘pence off next purchase’ and ‘buy three, get one free’ to cash-back or cash share-out offers that appear more valuable than a straight price cut;
• making price comparisons less direct, for example by offering extra-fill packs, short-term multi-packs, joint packs or part of the product or service free;
• long-term collector promotions, such as Shell’s Smart card promotion (Case study 52), which can seem more interesting than price cuts.
SMP’s promotion for Gale’s Honey (Case study 57) is a good example of deflecting attention from the premium price of branded honey. In 2007, the forecast shortage of honey was likely to push the price up further, and the need for deflecting attention was likely to be greater. This is a constant challenge for manufacturers of brands in markets in which retailers’ own-label products have taken a significant share. Part of the success of Kleenex Facial Tissues in the last 10 years has been the extent to which its active promotional campaigns have limited the market share of cheaper own-label tissues (Case study 74).
9. Gaining intermediary support
Some products and services rely very heavily on the support of wholesalers, distributors, agents, retailers and other intermediaries. Others, sold directly to the end user, rely less heavily on, but still benefit from, the support and recommendation of other businesses. And every business benefits from word-of-mouth recommendation from one satisfied customer to another.
All these people can be regarded as intermediaries. Gaining their support ranges from being absolutely critical to simply important, and there are a number of sales promotion techniques that businesses can use to this end. Among the key ones are:
• specific programmes directed at wholesalers, retailers, agents and distributors to gain distribution, display and cooperative advertising;
• ‘member get member’ schemes, which reward customers for introducing new people to you: the Institute of Directors did this (for a case of wine);
• promotional events aimed at the media and other decision-making influencers.
Gaining display is a central objective for promotions run by manufacturers who sell via retailers, wholesalers, distributors or other intermediaries. It is often the display that results in extra sales, but it is the promotion that secured the display in the first place.
Display can take many forms: extra shelf space, a gondola end (the end of a shelving rack), a window bill, the display of door stickers, the use of point-of-sale material, the presence of leaflets or the installation of a dumpbin or special display rack. It is all about achieving extra prominence for your product or service.
A number of promotional offers are effective in achieving display:
• incentives directed at store managers and sales assistants or free offers targeted at those who make the orders, as in the direct ordering of stationery items, where the person placing the order is effectively offered a personal gift;
• price offers that enhance the margin to the intermediary;
• the production of attractive, compelling offers of every kind that the intermediary believes will provide it with an advantage – tailor-made promotions, which run only in one store group, are particularly effective.
There is a close relationship between trade and consumer promotion in the retail trade. If a promotion succeeds with the trade, but lacks a strong consumer element, it may still succeed with the consumer – simply because of the display and volume support of the retailer. However, the reverse is not true: A promotion with a strong consumer element that does not appeal to the trade is unlikely to succeed with either.
Examples of effective promotions to intermediaries include Zantac 75 (Case study 75) and the Electrolux campaign for the X8 (Case study 64).
10. Discriminating among users
A large number of businesses, such as hotels, airlines, train companies and leisure facilities, face three unavoidable market factors. They have a high percentage of fixed costs in providing the service, which do not vary significantly with the number of people using it. Usage varies considerably from time to time. Also, different people are prepared to pay different amounts for the service and accept different levels of restriction. This has been particularly true of air travel.
This last factor enables businesses to manage fluctuations in demand. The price paid for an airline ticket varies depending on the time and day of the flight, the degree of flexibility allowed, how long in advance the ticket was booked, the type of seat purchased, the purchaser’s participation in a loyalty scheme and the outlet where it was booked. The objective that airlines and similar businesses share is to maximise the revenue per seat – and that means avoiding giving better terms to those who do not need them at the same time as giving the optimum terms to those who do.
For these businesses, promotional thinking is at the heart of marketing strategy, and they use a number of mechanisms:
• Customers who are motivated by price are self-selected. They book early or via particular outlets and so on, while those who are less motivated by price do not bother with these aspects.
• The difference between business and leisure travel is marked by requirements to spend a Saturday night away to qualify for leisure pricing. Business users are, in turn, given special discounts on leisure flights.
• Particular groups are given additional benefits not available to others. For example, families and the retired can buy train tickets at a price not available to a group of adults travelling together (though that is changing).
Pursued to its logical conclusion, discriminating among users allows companies to develop particular packages of product, price, distribution and promotion for different categories of user. The major challenge is to keep the boundaries between them clear so that those prepared to pay higher prices do not take advantage of lower prices. This in turn means that offers are often deliberately short-term, focusing the benefits on those most motivated to take advantage of them.
11. Restoring brand perceptions and deflecting attention from complaints after operational mishandling of customer accounts
Some of the more astute financial services companies, banks, utilities and communications companies that typically charge customers automatically and on a monthly basis are finding a new way to handle customers who complain. They offer a promotion. The complaints are often justified, particularly from a customer perspective. Automation of the operation is usually the culprit. For example, bank (and bank credit card) customers have found that if they omit to pay a few pence on a £100 charge they will still incur the full late payment charge because the response is automated. Where a mobile telephone company offers 3 months’ free insurance cover on purchase, automation automatically adds the insurance cost on to the invoice for subsequent months and, as there is a 1-month notice requirement for termination, customers end up at minimum paying for 2 months’ unrequested cover. It is unclear that acceptance of the free coverage at the time of purchase implies acceptance of the insurance terms. On taking over a telephone business, a telephone company adds in a handling charge for non-direct debit customers or fails to provide a ‘payment by’ date so that late payment charges are raised unwittingly through automation of which the customer is unaware and for which the customer is the poorer. What some banks offering their credit cards to third parties, say a petrol retailer, have yet to realise is that they can damage the third-party brand at the same time as damaging their own brand.
When a customer complains, a way to mollify him or her (particularly to avoid OFT or Ofcom involvement) is to offer a promotion, such as offering additional services but at a reduced overall cost (say, one that is being offered to new customers anyway). Or when an insurance product is accidentally run on, despite customer cancellation, to keep the door open to a customer returning in a future year, a financial reward is offered to maintain the brand perception as favourable. The key is to balance the time and resource for following up complaints with a recognition that the offer of some form of sales promotion deflects the person complaining. It also saves the often huge investment in a brand, which may have taken years to grow, from a dissatisfied customer’s potential future adverse perception of the brand, all arising as a result of automation and a failure to handle a complaint.
12. Retaining brand perception on service failure
The borderline between what is a contracted service and what is an implied or an expected extra service is no longer straightforward. Passengers expect a refund if a train is cancelled. Airlines offer free drink and food when there are short delays. To attract customers, garage-servicing companies offer courtesy cars. But what happens if there is a shortfall, say in the case of the garage? The customer can be distracted with the offer of an alternative to retain the goodwill, for example a voucher to allow free entry to an event or attraction. It is simply offering a promotion at a different point in the cycle. The key is contingency planning and then training staff in what to do when a hold-up or disaster strikes, with the sales promotion immediately on hand to restore customer faith in the brand.
Value and price promotions
The key phrase is ‘add value’. ‘Value promotions’ essentially give an extra benefit. Ways to add value are to offer extra features, such as a free mail-in item, a chance to win a prize, a special container or some other benefit over and above the normal product offering. They often have a positive impact on brand value.
There are promotions that cut price, called a ‘price promotion’. Such promotions offer the concept at a reduced price; or with a favourable finance deal; or on a buy-now, pay-later basis; or with a coupon against the present or future purchase. In doing so, there can be a negative impact on brand value – particularly if it is a ‘me too’ price offer. Price promotions can seriously undermine the added value that years of advertising have built up. A study has shown that most price promotions, though helping in the short term, end up lowering the price people are prepared to pay for brands. Many advertisers believe that a price promotion is a short-term fix that detracts from long-term brand building. On the plus side, a price promotion can put your product in the hands of customers for them to experience. This can affect behaviour positively and, of course, during that time, they are not using a competitor product.
Value promotions include:
• free draws;
• mail-in premiums;
• container promotions;
• competitions.
Price promotions include:
• money-off coupons;
• pence-off flashes;
• buy one, get one free;
• extra-fill packs.
There is some doubt over where some promotions lie: for example, some believe extra-fill packs (‘33 per cent extra free’) belong in the ‘value’, not the ‘price’, category. If you want to put them there, you will be in good company – but remember that they can reduce the price people are prepared to pay for the standard size and that can come to the same thing as a price cut.
The logic of value promotions is clear to see. There is evidence that these contribute not only to short-term sales, but also to long-term brand value. The ‘Hay Fever Survival’ campaign (Case study 74) is an excellent example. The case for price promotions is more difficult, and there are criticisms made by eminent industry people.
Why do companies use promotions that can undermine brand value? The reason is competition. For most of the last half of the twentieth century, the detergent manufacturers Procter & Gamble and Lever Brothers were locked in a titanic battle. Their leading brands competed for performance superiority, communicated by single-minded product-performance advertising. The classic ‘side-by-side’ comparisons of clothes washed in Daz against those washed in another powder were once considered a definitive form of TV advertising. Product innovation has been far-reaching and relentless.
These two giants also spent massively on price promotion. In the early 1960s, 95 per cent of packs of Procter & Gamble and Lever Brothers’ detergents carried a price promotion offer of one kind or another – from a pence-off flash to a discount off the next purchase. The situation was mad – and known to be mad. One day it stopped: Daz launched a ‘near-pack’ premium promotion involving plastic flowers (Case study 62). Millions of families collected plastic roses from Daz in the following years. By the late 1970s, however, the majority of detergent packs once again featured pence-off flashes and coupons. Retailers have also veered between price and value promotions. Case study 56 looks at 20 years of Tesco’s promotional activity, which has swung between the two. Unbelievably, Tesco in 2014 initiated another price war, with Morrisons following suit.
Sometimes price promotions can be catastrophic for the company concerned. In 1996, the electrical retailer Comet made an offer for its competitor Norweb. Norweb held out for more, which was refused, and then began an extensive campaign of 0 per cent finance offers (see Chapter 12 for details of how these work). Comet decided not to match them. Instead, whenever customers asked about finance, it directed them to Norweb. Comet’s margins went up, and Norweb was crippled by the cost of its promotion. Soon afterwards, Comet was able to buy Norweb at a lower price than it had offered before.
What do these stories tell us? Price promotions can drag a company or a whole industry into penury. However, they are not the cause of penury. Rather, they are the symptom of a competition that is so intense that it lays hold of every tool at its disposal – even if some of them are self-destructive. Price promotions are not the ideal way of competing. They are sometimes seemingly unavoidable in the marketplace. This makes it even more important to understand how they work, and the circumstances in which they can be less rather than more destructive. The work on the engram indicates that price is not the key shopper mover, though high on the list. Consider also the petrol wars in the next paragraph.
One of the things to watch is the evidence from opinion polls that people prefer price cuts to any other form of promotion. Sometimes companies make use of this in their advertising. During the spate of petrol promotions in 1986–1987, Jet ran a series of poster ads with the slogan ‘98 per cent of motorists prefer cheaper petrol’. Not for us, they were saying, were all those tacky gimmicks – we just offer lower prices. Shell, meanwhile, achieved huge gains in market share with its ‘Make money’ promotion. People may say they prefer cheaper petrol (attitude), but they often buy more expensive petrol supported by promotional offers (behaviour). In 1997, Shell and Esso were taking two very different approaches to this – one with a value promotion, the other with a price promotion (Case study 52). It’s interesting to note that Jet was also actively engaged in value promotions, winning a European sales promotion award for its non-price collector promotion.
Keeping the distinction between price and value promotions clearly in mind is essential to making sense of the subject. The core of sales promotion is the attempt to influence behaviour here and now, and these are the two ways you can do it. It may contribute to a change in attitude, but that is not its primary task. A definition you may like to consider would run like this: ‘A promotion is a range of price and value techniques designed within a strategic framework to achieve specific objectives by changing any part of the Offer, normally for a defined time period’.
BRIEF 9.2. Promotions versus social media. Research by Atom reported that Unilever were reappraising their approach, as Unilever found in-store promotions beat social media ROI, delivering a 50 per cent higher return on investment. Unilever had shifted large parts of brand budgets to social media but the evaluation showed that Unilever were now undertaking more in-store promotional activity too! Promotions using vouchers, coupons and discount codes for shoppers to present at the time of purchase tend to support the Atom findings: effectiveness is covered in reports by Valassis (who manage 86 per cent of UK coupons) which show a 14 per cent rise in redemptions year on year with retailer issues beating manufacturers’ redemptions. There is more on promotions in Part III, describing implementation (see Chapter 13).
Case studies
Six case studies illustrate the central points made in this chapter about the 12 promotional objectives and the capacity of promotions to support change to every part of the Offer.
Case study 40 – Off Guard gigs for Right Guard Henkel
Right Guard, after its acquisition by Henkel, targeted a younger male audience around music to give them the opportunity to experience the brand. Off guard gigs, with focussed online content and social networking, were created in collaboration with Yahoo music to provide an exclusive brand experience, alongside a competition to win a seat in the campaign’s VW camper van at festivals. Winning a gold award at the ISP 2009 awards, the judges praised the repositioning of the brand in such a unique and creative way through taking ownership of music.
Case study 41 – MasterCard World Cup on-trade activity by Arc Worldwide
With the objective of increasing usage of their card in pubs (changing behaviour), MasterCard capitalised on World Cup fever. Despite having no established relationship with the on-trade, they succeeded in recruiting 903 bars. High-impact POS encouraged customers to pay with MasterCard, entitling them to an instant-win gamecard. One in five cards rewarded the customer with a football-related prize (including foam hands, face paints, ‘Crap Teams’ books and World Cup DVDs). Win or lose, they could then text their details to be included in a prize draw to win tickets to football matches at five top European stadiums over a two-week holiday. Awareness was raised with TV screen and washroom media.
MasterCard’s share of transactions increased by 39 per cent, and 42 per cent of customers said that they would be likely to use their card in this environment in the future. Mystery shoppers reported that 58 per cent of outlets visited were 100 per cent POS and TV screen compliant. MasterCard was a gold award winner in the ISP 2007 awards.
Case study 42 – Agency Triangle Communications for Maxwell House
Maxwell House operates in the highly competitive instant coffee market, dominated by Nestlé’s Nescafé, as the number two brand. How was it to persuade repertoire purchasers (those who buy Nescafé and other brands from time to time) to buy Maxwell House? And how was it to persuade existing users to buy the brand more often?
This was a major promotional ‘Out of the blue’ on-pack, on TV and in events round the country. The basic mechanic was a free draw. Consumers were invited to win £500,000 of cash prizes by entering via on-pack coupons or ‘plain paper’ (which means those who had not bought the product could enter by writing in on a piece of paper). Noel Edmonds phoned 100 winners ‘out of the blue’ from the Maxwell House hot air balloon. The phone calls were featured on TV ads as a live dialogue, giving viewers the responses of winners to hearing they had won cash prizes of £2,000–£10,000. Meanwhile, the balloon made a series of visits to events around the country, creating a direct link between brand, balloon and offer. The novelty of the delivery of the free draw created extensive PR cover-age: 500,000 entries were received, the brand achieved its highest market share for 6 years, and in the promotional period its share was 50 per cent more than it had been the previous month.
This was a free draw on a massive scale, but the mechanic was simplicity itself. What characterised it was the involvement of Noel Edmonds, the novelty of the means of contacting winners, the use of live dialogue on TV and the close link with the brand’s mainstream advertising. The promotion won two ISP gold awards.
What were the advantages/disadvantages of the Maxwell House promotion compared with spending the same amount on mainstream TV advertising?
Case study 43 – Agency Promotional Campaigns Group for Bovril
Everyone knows Bovril. It’s one of those brands you can’t remember not knowing. It’s not constantly in your mind, though, and people lose the habit of drinking it. For some years, Bovril has had a strategy of reminding people that, when you are cold or wet or in flagging spirits, a drink of Bovril cheers you up and sustains and nourishes you. It is one of those messages that can be put across by advertising, but is very much more powerful when it is experienced.
Bovril linked with local radio stations and charities organising firework displays to provide samples of Bovril at 467 bonfire night parties, which are often cold, damp and wet. Kits of paste, cups and promotional material were supplied free. Charities could raise funds by accepting donations for cups of Bovril. Local radio stations were offered the opportunity to provide roadshows at the largest events and to trail the events with both DJ plugs and paid-for advertising.
Two million people attended the sponsored bonfire nights, and over 5 million were reached by radio coverage. Thus, 520,000 people were sampled with Bovril at a fraction of the cost of door-drop methods. Sales rose by 4 per cent over the year. Bovril did not have to create bonfire night – it was already there. The ingenuity of the promotion was recognising it as a perfect sampling occasion at exactly the right time in the year to promote sales. The executional skill was to provide charities and radio stations with a reason to be involved in the delivery of the promotion. Extended over time, the promotion offered Bovril a direct link with a popular annual tradition.
What behaviour was Bovril seeking to change, and how did the promotion seek to change it?
Case study 44 – Schoolbags by Promotional Campaigns Group for Sainsbury’s
A promotion’s capacity to impact directly on consumer behaviour can be used to good ends and bad. Sainsbury’s ‘Schoolbags’ promotion is an example of a promotion that achieved business objectives along with social and environmental ones. Sainsbury’s faced two unrelated challenges: it needed to increase its appeal to families, and it needed to tackle the financial and environmental cost of nearly 100 million carrier bags issued every year at a cost of £20 million.
The promotion provided a reason for families with children both to shop at Sainsbury’s and to reuse their carrier bags. The link was raising money to buy equipment for schools. The mechanic was simple. Customers were offered a ‘Schoolbags’ voucher at the checkout for every carrier bag they reused. These vouchers could be used by schools to obtain equipment, starting with a pack of crayons for 120 vouchers. Schools were recruited to the scheme via direct mail, and the promotion was advertised in store, on TV and in the press.
The promotion succeeded in all its dimensions. Over 10 per cent of Sainsbury’s carrier bags were reused, saving 900,000 litres of oil in their manufacture and £2 million in cost. A total of 12,000 schools (about half the total in the country) and a million families participated. The nature of the mechanic will have ensured a substantial incentive to making repeat visits to Sainsbury’s. And the schools benefited too: they claimed about £4 million of equipment.
This promotion is a good example of hitting more than one objective at the same time, and doing so with a simple mechanic that is easy to communicate via a multiplicity of media.
How did Sainsbury’s ‘Schoolbags’ promotion reflect on Sainsbury’s core values?
Case study 45 – Rural Retreats by Small Budget Campaigns for Scrumpy Jack
Erosion of market share arising from rival new products entering the category caused the campaign, described as the quintessential on-pack promotion that affirmed Scrumpy Jack’s premium credentials, and winning the ISP’s 2009 Gold Award. Scrumpy Jack’s on-pack promotion offered prizes of weekend retreats with an SMS and online entry mechanic. An existing on-trade creative was used to keep costs down, while each retreat supplied visuals free. The campaign achieved a 37.1 per cent return on ROI with a 26.3 per cent increase in off-trade sales.
Summary
Promotions are primarily tactical in nature, but can be part of a long-term strategy. They must be understood in the context of the functional, economic and psychological benefits with which firms seek to meet customer needs. Promotions are a means of influencing behaviour, and alter every part of the marketing mix to do so.
This chapter has set out how a promotion fits into the central business challenge of building relationships that confer differential advantages. It does so as a process that focuses on behaviour, and in two different ways: price promotions and value promotions.
There are reasonable criticisms of certain types of promotion that undermine rather than enhance brand value. Tacky and dishonest promotions have no place in long-term relationships. The manager who understands the place of promotion in the firm’s strategy will be best placed to manage the risk of using the many techniques available.
Chapter 10 describes the five types of promotional offers. Chapter 11 describes how to use and implement promotions.
Self-study questions
1 What are the 12 promotional objectives that sales promotion tackles? How many does and should your organisation use?
2 You are a newspaper retailer selling at stands outside the Chelsea Flower Show in May, when the weather is likely to be hot and dry, or cold and wet. What promotions as a contingency would you consider offering alongside the newspaper? (This is for real!)
3 What complaints do customers make most often in your organisation? What sales promotion might you offer to restore your brand’s values?