Country Practice

National differences governing promotions are denying the industry cross-border activity, says David Reed.

Next time you are wheeling your shopping trolley through the Carrefour hypermarket in Calais, turn away from the alcoholic drinks section for a moment and wander the aisles of the packaged goods. It is not that the products will be unfamiliar – companies like Procter & Gamble, Nestlé and Danone are increasingly using the same brands across Europe. But what may strike you as odd is the absence of an incentive to buy.

French products, for example, rarely offer an extra product for free because the amount of free fill they are allowed to give away is limited to seven per cent. If this was an Aldi in Germany, there would be no banded-on offers or three-for-two, since these are banned. Across Europe, national laws covering sales promotion activity mean that what is permissible in one country is prevented in another.

This creates barriers to the realisation of the single market. “Manufacturers have moved to European production, pricing, sizes and distribution. Then they find in below the line that they can’t transport work. They find that frustrating, but it is a fact of life,” says Peter Crossing, chairman of 141 London, part of the newly-formed Bates Worldwide global sales promotion network.

Compared with other communications vehicles the mechanics used in promotions and incentives are highly regulated. While category-specific restrictions, such as bans on alcohol or tobacco advertising, can be readily understood in terms of national objectives, it is harder to understand why some techniques are prohibited.

For example, take the campaign which won the Grand Prix at this year’s Institute of Sales Promotion Awards. The Cadbury Watch & Win promotion, run by Triangle Communications, tied in chocolate bar wrappers with sponsored break bumpers in Coronation Street to offer an instant win. But the same campaign could not run in Ireland, since there is a different interpretation of what constitutes a lottery rather than a competition.

This has denied sales promotion the kind of cross-border activity which supports above-the-line networks. “Legislation and working practices differ across Europe, thus it is impractical for a UK-based agency with no international network to formulate a pan-European sales promotion strategy. The pitfalls are too great and too costly for the client,” says Chris Parry, chief executive of Impact FCA!

This has been recognised by the European Commission, which is determined to make the idea of Europe as a unified market work. It published a Green Paper on commercial communications last year, which underlined the need to tackle local laws that are getting in the way.

It based its recommendations on five main findings. These were that cross-border services are growing; that differing national legislation could create problems for companies wanting to offer cross-border services; that these differences will cause more problems in the future as communications services increase; that the growth of information technology is increasing this risk; and that information needs to be more available about which laws apply where.

According to Andrew Cecil, a lobbyist with Cabinet Stewart, which represents the European Promotion Marketing Alliance: “It points out in the Green Paper that there is a problem. The purpose of the paper is to establish a mechanism to overcome those problems and prevent them from going any further.”

What is envisaged is a formal structure whereby any member state planning to introduce new legislation would have to consult with other European Union members, plus industry and consumers, before it could proceed. “Any legislation will have to be justified,” says Cecil. The same structure will also look at existing laws and, if it sees fit, ask member states to remove them.

If the Green Paper comes into force – and it has been adopted by the European Parliament – it could bring about real changes. Running cross-border promotions in Europe might even become a reality. The existing problems should not be underestimated. In Italy, promoters have to pay 55 per cent tax up- front on the prizes in any competitions they plan to run.

In Germany, for example, cash discounts to the consumer are limited to three per cent. Such laws are not simply anachronisms, they are taken seriously by some groups. “In Germany there is a strange body which picks up promotions and threatens to sue big companies if they get it wrong,” points out Mark Rigby, associate director at Interfocus. Luft-hansa has been targeted for offering a discount on car hire to its frequent flyers, which was worth more than three per cent.

His agency works for Visa International across Europe and has to be conscious of fine details. Even countries which appear homogeneous, such as those in Scandanavia, vary. “In Norway it is illegal to mail an offer to cardholders, but it is allowed Sweden. In Norway, you have to make the same promotional offer available to the total market, which means advertising it in well-known newspapers or magazines so anybody can take it up,” says Rigby.

What most of these differences mean is that campaigns are run either nationally, or on the basis of local interpretation of a regional strategy. But the risks to promoters are not simply that the offers they make might be illegal – even the premiums they use could cause problems. As Alan Kahya, chairman of Supremia International, points out: “It is not simply a matter of sales promotion law.

“There are also differences in other national standards. For example, Germany is far stricter about the use of azo dyes, and Sweden about cadmium in product pigments. Likewise, the smoke alarms that we sell in the UK – which are endorsed by the Fire Services – would not be usable in Germany because they contain traces of radioactive elements,” he says.

These issues have led to a feeling in Britain that European sales promoters are not as creative or clever as their British counterparts. But in many respects, the limitations faced on the Continent have tended to fuel creativity. Some good examples can be found among the winners of this year’s European Federation of `Sales Promotion awards.

In Germany, a campaign for Toys R Us, which involved opening up the stores’ car parks for “touch and play” sessions, giving kids hands-on interaction with toys, had up to 20,000 people at a time visiting each event. In Holland, Daewoo sent teams into the street looking for cars which its target customers tend to drive (four- to five-year-old Vauxhalls and Toyotas). A leaflet was left on the windscreen quoting an individual cash price for a trade-in, valid then and there.

And the Grand Prix was awarded to a French campaign for Sac Sapin (a gold wrapper for the base of Christmas trees which converts into a bin bag) which used a simple charity tie-in.

The point is that consumers across Europe tend to have the same motivations, regardless of the mechanics. “It is not as bad as all that. The laws are different but that does not mean you can’t communicate. The issue is how you can get the best communications strategy to ensure consumers try, use and become loyal to your product,” says William MacDonald, managing director of Brands Across Borders. A consultancy within the IMP network, it advises multinationals on the issues of working across borders.

He stresses that there are cultural differences which need to be respected: “Consumer reactions can be very different market by market. That relates to culture, not promotional technique. Spain is different to Germany because of the way it approaches the product,” he says.

Kahya underlines this point by saying that while napkin rings are a popular premium in France, they would have no appeal in the UK.

Where commonality is increasingly to be found is surrounding events which cross cultural and national boundaries. That means promotional tie-ins with the World Cup, Formula One or the Tour de France can leverage brand equity, hit common themes, but still be flexible in local markets. Cecil believes that if companies design communications around such events “people will start to see the opportunities which the single market promises”.

The pace of legislative change may be relatively slow – the consequences of the Green Paper could take over three years to be seen – but cultural change may be more rapid. Rigby believes marketing is already leading to greater homogeneity within Europe.

“Some people say when they look at mainland Europe that it is back where the UK was ten years ago. That is partly an effect of legislation, and partly culture and economic prosperity. But in Turkey, for example, over the past 18 months there has been a craze for collection-based promotions,” says Rigby. It is on such small developments that the single market will ultimately be founded.

But change brings risk as well as opportunity. The Green Paper is being steered through the European Parliament by rapporteur Jessica Larive. She supports the need to promote cross-border commercial communications, especially given their job-creation potential. But she adds: “It is, of course, of importance that consumer protection is ensured, an issue on which the Green Paper is particularly vague.”

How that protection is interpreted will affect the degree of freedom which below the line may be granted. For every UK lobbyist promoting a “buyer beware” self-regulatory approach, there will be a German body keen to protect the market from marketers.

Kayha says: “If the Commission decided to harmonise the UK laws and regulations, the result would undoubtedly be a bonanza for British consultancies and sourcing companies. On the other hand, if we were to be harmonised to the German standards, we’d all be looking for other jobs.”

As with most promotional offers, the extra you receive is not always quite what you hoped for.

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