HOLIDAY PROGRAMME

Any promoter considering using travel as an incentive must wonder how much of a risk is involved. Since the Hoover promotion hit the headlines, one of the mainstays of sales promotions has become highly sensitive.

No brand manager wants to find that a travel offer has gone wrong. Yet a quick scan of the market shows that travel rewards are still in favour – from 100 off Thomas Cook holidays with purchases of Allinson’s bread, to 1 ferry trips to France from the tabloids.

Matthew Hooper, managing director of sales promotion agency Interfocus, believes this reflects the underlying psychology which sales promotions play on. “The motivating factors are still cars, cash and holidays.

“Like most things, over time, problems are forgotten. Be it salmonella in eggs or, in a few years, BSE and beef, those worries will disappear,” he says.

It should be noted that Hoover’s parent company, Maytag, fully funded the redemption of the free flights offer for those with a valid claim and the diligence to pursue it. From an initial promotional budget of 1.5m, this has meant a refund of 48m. The return on investment through increased sales seems unlikely to provide a profit.

Clients are now learning lessons from Hoover’s failure. Hooper says the first step is to ensure the promotion is believable. “With 1 ferry trips people think, ‘how can they do that?’, but it is possible and people still do it. It is a perennial promotion and it pulls the punters. People are still looking for a discount on holidays,” he says.

Money off has emerged as a strong incentive because it benefits the consumer without the liability created with free flight or holiday offers. Ken Spedding, client services director of The Watermark Group, has inside knowledge of the travel promotion business from running Flexibreaks. He agrees that “if you offer two free flights, people look askance”.

His company has just run a promotion which indicates that travel has a broad appeal. It required eight proofs of purchase from the Financial Times to take a first class trip on Eurostar for 105 instead of 220. “Redemption rates have been around 26 or 27 per cent. We have two special machines for the electromagnetic tickets for Eurostar and they have been working 16 hours a day,” he says. “There is lots of evidence that travel promotions get an extremely good response.”

Realistic consumers respond favourably to money-off travel promotions – they may get a dream holiday within their budget. Alongside this scaling down of rewards, there has been a move towards alignment of promotions with well-known travel brands.

“The Hoover promotion did have an impact. It has made clients think carefully about what they are doing. To some extent that has had a positive effect on our business,” says Andrew Healy, account director at Page & Moy, the direct travel agent and tour operator that claims to be the leading supplier of travel for consumer promotions. “This is a market where the suppliers are mainly small companies with a small staff and limited resources.”

In the travel sector, specialist agencies have identified potential schemes which use unsold holidays. By matching this supply to demand among promoters, they can run a profitable business which satisfies all four parties: the consumer, who gets a special break; the client, who gets an uplift in sales; the tour operator, which makes a profit through selling travel insurance and filling quotas; and the agency’s own bottom line.

The Hoover promotion illustrates the potential risks which can accompany a travel incentive. The principle was that redemption levels would be kept low through complex qualifying procedures. This is not uncommon in the industry, but doesn’t usually require the nine stages used by Hoover. The budget projection was based on a liability which could be met through pre-bought seats on flights. Tour operators would offer packages retailing at 400 for as little as 5.

Technically, the promotion was legal. It did not breach the British Code of Sales Promotion Practice since the small print spelled out the hurdles involved, but it played on consumers’ lack of knowledge. Despite advice from the Institute of Sales Promotion that Hoover faced difficulties, the company did not act until the promotion got serious media attention. Subsequently, redemption rates soared as customers with a valid claim became determined to get their flights.

The agency which set up the offer went bust leaving Hoover liable. Yet an identical offer in the market at the same time was successful, chiefly because the promoter recognised that problems could arise, moved its own people into the travel agency and limited the run of the campaign. Promotions which run away can often be highly profitable, Flora’s redemption rates for its BT Phonecard promotion were double those forecast, yet it sold 1.4 per cent more of its product.

Watermark’s Spedding says relying on keeping redemption rates low is the first thing to avoid: “We’re very careful. We would never put forward a promotional proposal that carries a serious risk. If you look at it and say, at 30 per cent we are OK, at 35 per cent it is terrible, we wouldn’t do it. The principle is, even if redemption is 100 per cent, that should not be a disaster.”

But the constant pressure to innovate is already putting pressure on promoters to conjure up unusual travel schemes. “People are looking for new destinations. Cruises are becoming more popular especially in South America and the Caribbean, and not just among the older customers,” says Hooper.

Declining capacity in the travel industry is fuelling this risk taking. As consumers delay holiday bookings, tour operators are reducing their liability by lowering the numbers of rooms and flights they will guarantee. That means there are fewer spare places to be used by sales promotion offers. Airlines, which traditionally had unsold seats to offer, have reduced their spare capacity through frequent-flyer schemes.

“Although everybody likes something new,” says Healy, “it is debatable whether novelty is necessary all the time. People know what they like when they travel. They don’t want something spectacular, they want a good offer. There are lots of very sophisticated offers prompted by people looking for something new. People are beginning to push the boundaries again.”

But alongside this risk taking, there has been the growing involvement in sales promotions of known brand tour operators. Both Thomas Cook and Lunn Poly now provide services to the sales promotion industry. The former only entered the market 18 months ago, setting up a dedicated department.

John Cole, head of promotions at Thomas Cook Promotions, says: “I believe it is vital to have a travel provider that you can rely on to deliver promotions successfully and within budget. Further, I stress that the most important factor for the promotion’s success and credibility is having a travel provider who the end consumer feels they can trust and rely upon.” This is what worries promoters too. Referrals to the ISP’s legal advice service have risen from 20 to 200 since the Hoover promotion (although not all of these campaigns involve travel).

Lunn Poly relaunched its travel vouchers, used for ten years as internal staff incentives, in 1995. It aims to be market leader in two years. Marketing director Peter Povey comments: “Because we sell twice as many holidays than any other retailer, we have had a steady stream of business from other companies wanting to use our vouchers in promotions.

“Companies like to use them because they know they can be easily redeemed at any of our holiday shops.” This high street presence, combined with discount holidays and security-minded voucher printing (including embossed prismatic foil, solvent-sensitive ink, serial numbers, watermarks and UV light sensitive logo), lends reassurance.

Longer term, the same dynamics which separate markets into large players and specialists seem likely to impact on the supply of travel promotions.

This should be to everyone’s benefit provided risks are kept low. As Healy notes: “The sector is still relatively new, I am not sure it has settled down yet. I take off my hat to the smaller companies who have more difficulty in selling their products to blue-chip clients. They do it through hard work and by going the extra mile in pushing the margins. I don’t agree with that, but they have to compete in some way. It will take time to see what effect that has in the market.”