It should also be considered that most of the products in the fmcg market are at the mature stage of their product life cycle, with little or no growth in primary demand. Brand proliferation is common during this stage, and the experience consumers have had with various brands implies that a growing number of consumers are likely to be better informed and more price oriented. These consumers are likely to consider several brands as similar and, given the proper incentive, would probably not hesitate to switch between similar brands (Gosh, 1997). There is also a lack of product differentiation, which makes it difficult for advertising to influence consumers by touting unique product features (Papatla et al, 1996), hence the use of sales promotions are of great importance to attract consumers, the loyal ones as well as the deal-prone ones or in other words those who keep switching between different brands. With this point of view the market is divided into two segments, the loyal ones ant the deal-prone ones. The loyal ones whatever there motivation – positive brand beliefs, habit or indifference – they repeatedly purchase a single brand. Their purchase behaviour suggests that, due either to their satisfaction with current choices or to their high search costs, they are unlikely to search for new information or spend time looking for deals. The second segment consists of deal-prone consumers who are likely to switch brands when provided with the right incentive. This segment is composed of experienced and informed consumers. Depending on the extent of their experience and knowledge, they consider several brands as equivalent and do not mind switching from one to another. They are also more likely to actively search for information and deals. Consequently, they are likely to be more price-oriented than the loyal segment. There is a third segment, however since the market is mature, it is assumed that emergent consumers, or those who buy are entering the market for the first time, make up a very small proportion of the market (Ghosh, 1997). It is important to be aware of these two segments since they need to be targeted differently. The loyal consumer needs to be targeted with persuasive and reminder advertising based either on current brand position or on the basis of a new brand position, whereas the deal-prone consumer needs to be targeted or provided with adequate incentives to switch into the brand, for example coupons. Targeted couponing methods are recommended by Ghosh in markets where deal-prone consumers consider only a few brands similar and mass couponing are more likely to succeed when past switching pattern indicate that most brands are considered similar. It appears like a balance between advertising and sales promotion is necessary in order to attract all segments of the market. This is further confirmed by Prentice’s concept of consumer franchise building (CFB). The basis of this theory is that the ratio of advertising to sales promotion is the major determinant of a brand’s consumer franchise building ability, rather than simply the level of advertising and sales promotion support as is often thought (Stewart et al, 1998). CFB activities include advertising and those types of sales promotion that register unique and important ideas about a brand (for example, sampling, in-store demonstrations, and service materials, such as recipes). All other sales promotions are described by Prentice as non-CFB because the function of these activities is to generate immediate sales, or shorten the buying decision instead of implanting unique and important ideas about the brand in the consumer’s mind (Stewart et al, 1998). It becomes clear that it is necessary for managers to distinguish between those promotions that add value and those that do not in order to extract the maximum value out of sales promotions (Srinivasan et al, 1998). The aim of sales promotions should therefore be to influence the consumer to buy a brand on the promise of a quality premium and hopefully on a long-term basis. It can be said, that it all comes down to consumer persuasion at the most critical moment-the point of purchase. If a really good reward at a reasonably high perceived value is established as the attraction, you have managed to move from a price promotion to an added-value promotion. The consumers pay a premium and the promotion directs them towards a loyalty relationship with the brand (Admap, 2003, March). However, care must be taken; if the perceived value of the reward is greater than the cost of the promotional product, the consumer could effectively purchase and discard the product, simply to redeem the offer. The most classic example of this is Hoover’s infamous scheme, where buying a £100 vacuum cleaner entitled the purchaser to two airline tickets to New York worth approximately £400. Such mistakes made by companies could frustrate their consumers and are most certainly harming the perception of the brand.
If managers properly managed their promotions, the more they can add value to the brand and possibly help to build loyalty- a feature of many retail loyalty card promotions (Admap, 2002, July). The retail loyalty card or smart card key feature is its ability to hold information about the cardholder, which becomes available to sales personnel at the point of use and assists them in delivering a service that is uniquely to the individual. The loyalty card schemes are based on magnetic-strip cards, with stand-alone card readers and transaction details are polled to a central database. The transaction details include three different types of data; personal attributes- including likes/dislike, purchasing behaviour- including spend, frequency and even the contents of previous shopping baskets, response history- including which promotions are of interest, what turns them on, what makes them spend more, visit more often (Admap, 1999, June). The response history, possibly the most useful one, records how costumers actually responded to previous offers and promotions. This improves targeting and provides a new dimension to segmentation. Making relevant offers increases the customer’s belief that they are being treated as an individual, not a category. This demonstrates the immediacy of the loyalty card. Targeted promotions can be carried out in real time, instant rewards given at the point of sale, and the actual response recorded (Admap, 1999, June). A good example of a company who introduced the loyalty card is Scottish and Newcastle Retail (S&N), on of Britain’s best-performing pub, bar and restaurant operators who re-launched its costumer loyalty scheme. A scheme design to capture transaction and individual costumer data, which would then be used for focused marketing activities. The scheme provided a full transaction history by individual member, enabling the production of detailed management reports, trend analysis and the opportunity to implement targeted promotions. A system like this is extremely flexible in its ability to capture costumer transaction data, and target individual costumers and segments, and should therefore become an essential management information tool (Admap, 2002, April). However, one of the major challenges for any company working in this sector is the actual implementation of scheme at branch level.
What further can improve the use of sales promotions is an in-depth understanding of the interaction between different types of sales promotions on brand sales and profitability. It is essential to design optimal value creating joint sales promotions, and thus consider the synergy between different promotions. Interaction effects call for creatively thinking trough the promotional impact process. If you have a number of product categories that are complementary in use, manufactures and retailers should design promotions that optimise total profits instead of individual profits (Srinivasan, 1998). It is also of high importance that the sales promotion support, and is in tune with the brand, first then you build loyalty to the brand or the product and not the promotion. Berol pens developed a promotion that was running for two years successfully. Using a competition mechanism, consumers were asked to write a short story of 50 words with a top prize of £ 10 000. The objective was to encourage people to switch brands, raise sales and to position Berol as a brand that is synonymous with good writing. The result was a long-term improvement in market share and a concept that is now established as brand property.
Finally but of no less importance, is the role of relationship marketing. It is important to keep in mind that advertising, personal selling, public relations, and sales promotion all have their unique, often overlapping, roles to play in the promotional mix and, collectively, as on of the vital 4Ps of the company’s overall marketing mix. Without effective sales promotion, overall marketing strategy would be severely hampered in its ability to respond to competitive initiatives. Thus, the old competitive question of whether to spend money on advertising or sales promotion in consumer promotional efforts is giving way to integrated marketing communication strategies (Srinivasan et al, 1998).
It becomes clear that in today’s tough market environment in which sales promotions operates, an incentive to consumers is needed to gain attention towards a product. Sales promotions are unique in their ability to respond in quick, focused, and flexible ways to motivate consumer or trade or counter attack the sales promotion of activities of competitors. These flexible, rapid-response, market targeting characteristics of sales promotions are particularly well-suited promotional tools for this technological age of worldwide communication, rapid innovations in technology, and intense competition (Srinivasan et al, 1998). Brand managers need to be clear with what they are trying to achieve and make a clear distinction between short and long-term promotional goals. Even though short-term benefit promotions have a negative effect on price sensitivity and brand loyalty it is still needed in a high competitive market. Long-term benefit promotions should be designed to work with the brand and be non price-based and thus implant unique and important ideas about the brand in the consumer’s mind, which in return will create a healthy relationship with the brand from a consumer point of view. Furthermore, sales promotion should work together with the other marketing tools and consequently become integrated. Todays and tomorrows marketing managers really do not have the choice whether or not to use sales promotion but only whether to use these valuable tools poorly or skilfully (Srinivasan et al, 1998).
Reference list:
Brian Gibb, 2003, March, “How to get your promotion right”, Admap
2002, July, “Sales promotion and the brand”, Admap
2002, April, “Can sales promotion help build brands?”, Admap
Maggie Templeman, 2002, April, “Data is key to new S&N loyalty schemes”, Admap
Chun Wah Lee, 2002, “Sales promotions as strategic communication: the case of Singapore”, Journal of Product & Brand Management
Chris Jacobs, 1999, June, “Relationship marketing with smart cards”, Admap
David Stewart, Bridget Gallen, 1998, “The promotional planning process and its impact on consumer franchise building: the case of fast-moving goods companies in New Zealand”, Journal of Product & Brand Management
Srini S. Srinivasan, Rolph E. Anderson, 1998, “Concepts and strategy guidelines for designing value enhancing sales promotions”, Journal of Product & Brand Management
Amit K. Ghosh, 1997, “Targeted promotions using scanner panel data”, Journal of Product & Brand Management
Purushottam Papatla, Lakshman Krishnamurthi, 1996, “Measuring the Dynamic Effects of Promotions on Brand Choice”, Journal of Marketing Research
A.S.C. Ehrenberg, Kathy Hammond, G.J. Goodhart, 1994, “The after-effects of price-related consumer promotions”, Journal of Advertising Research
Bibliography:
Edward Garner, 2002, July, “Do Sales promotions really work?”, Admap
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John Bunyard, 1999, May, “If ads alone fail to boost sales”, Admap
Carl F. Mela, Sunil Gupta, Kamel Jedidi, 1998, “Assessing long-term promotional influences on market structure”, International Journal of Research in Marketing
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