Pressures of Promotion

First, the good news. The budgets allocated for sales promotion looks likely to soar over the next 12 months.

As part of this year’s Marketing Week Sales Promotion Agencies Reputation Survey – the third such survey – marketers at leading British companies were asked what plans they had for their sales promotion budgets over the next 12 months. A significant 44 per cent said they would be spending more through their sales promotion agencies, while 45 per cent said they would be spending the same. Only 11 per cent plan to cut their SP budgets.

Apparently, that is also the bad news. It may seem perverse, but Britain’s sales promotion industry claims to be somewhat depressed by the news that clients are switching more money into the area.

There is logic in their angst, however. As John Quarrey, chief executive officer of IMP, observes: “There are general fears about the economy and whether we are heading for a hard landing or a soft landing. Based on my experience of the last recession, in straitened economic circumstances, sales promotion sees its share of marketing expenditure increase.”

Kevin Twittey, chairman of the Triangle Group, and Stephen Callender, a director of consultancy Black Cat, both agree. Twittey says that “the economy has enormous impact on our sector. Over the past 20 years, below the line has been much more buoyant in recessionary times”.

Callender adds: “Those clients which remember the last recession know that responsive marketing and sales promotion worked best during that time.”

And while overall expenditure on sales promotion might grow during hard times, both Quarrey and Twittey say that if a mini-recession does hit – as many economists now believe – margins are likely to come under pressure.

Twittey says with resignation in his voice: “The whole world is much more focused on value. We’ve become a nation of bargain hunters.” And Callender admits that “inevitably, below-the-line margins have moved down”.

However, while the UK may be heading for a mini recession, there could be another factor at work. Clients may not be planning to spend more on classic sales promotion at all. Instead, they are buying a wider range of other below-the-line services from their sales promotion suppliers.

There are two reasons for this: Firstly, the clients contacted for this survey are senior marketers working within the 100 companies with the biggest marketing budgets in the UK – exactly the sort of companies which have over the past few years been reducing the number of suppliers they work with around the world.

Wherever possible, they are seeking to buy a range of services from single suppliers. So if they have established a good working relationship with a sizeable sales promotion consultancy and that consultancy then extends into other below-the-line services, they are highly likely to spend more money with them.

Secondly, classic one-off, short-term sales boosting sales pro-motions now play a much smaller role in most clients’ marketing programmes. Instead, promotions are increasingly seen as having an integral part to play in long-term loyalty and image building campaigns.

And what that means is sales promotion consultancies have been forced to add direct marketing skills, an understanding of relationship marketing and long-term strategic thinking to what they offer.

As Iain Ferguson, managing director of KLP and chairman of the Sales Promotion Consultants Association, says: “The basic skills needed in the sales promotion industry have always been to gain attention and to start a dialogue.” It is only a small step to add more technical direct marketing skills, he believes.

It comes as no surprise to anyone in the sales promotion industry that clients expect consultancies to be able to handle certain other below-the-line services as a matter of course. When asked what other services they expected their sales © promotion consultancies to provide them with, 63 per cent said direct marketing, 47 per cent event marketing and 41 per cent interactive communications. And 43 per cent want their sales promotion consultancies to offer strategic consultancy services.

But before SP agencies rush out and reinvent themselves as through-the-line consultancies, offering all services to all clients, they should note that clients have set them fairly solid boundaries. MW’s survey shows that clients are not looking for above-the-line or media planning skills from a sales promotion consultancy, nor do they want public relations or market research.

On the strategic consultancy side, Matthew Hooper, managing © director of Interfocus, argues that consultancies are increasingly being asked to take over functions that would a decade ago have been performed by client marketing departments. “There has been an eradication of certain layers of management within client companies, so there is a need for suppliers to be able to shoulder extra burdens,” he points out – and that demand can only grow, as clients continue to slim down their in-house operations.

But as consultancies are asked to provide an increasing range of services, many in the sales promotion industry believe that some fundamental changes need to be made.

To begin with, there is the question of what the industry calls itself. Many now argue that “sales promotion” belongs in the past, and are agitating for a new name – with “promotional marketing” seemingly the front-runner. Indeed, after a major two-day conference to discuss the future, members of the SPCA are currently mulling over a proposal to rename the body the Promotional Marketing Consultants Association.

But whether renaming the industry will defuse increasing pressure for some kind of rationalisation of trade bodies covering sales promotion is another matter. While 82 per cent of clients expect a sales promotion consultancy to be a member of the Institute of Sales Promotion, rather fewer – 63 per cent – expect membership of the SPCA, while 42 per cent expect sales promotion consultancies to be members of the Direct Marketing Association.

Yet the SPCA is supposed to be the body representing agencies, while the ISP represents everybody within the industry, including premium and incentive suppliers, fulfilment houses and so on, and the DMA is primarily supposed to represent the direct marketing industry. How can consultancies be expected to continue to pay dues to three different bodies?

Ferguson certainly believes there is a continuing role for the SPCA to play (whatever its members might decide the body should be called), although he accepts that “if these trade organisations are not providing good market value, then members will vote with their feet”.

But the director of one sales promotion consultancy was blunt. “If it were my decision, I’d fold the whole thing into the DMA. It’s got superb leadership in the shape of Colin Lloyd (one of the founders of KLP) and it’s a very professional organisation.” As for agonising over what to call the industry: “It’s an irrelevancy, from the client’s perspective.”

Marketers were also asked to say how important they thought various criteria were when choosing a consultancy.

There were no surprises here: as in the previous two surveys, the top three answers were creative execution, creative concepts and account handling, with close to 100 per cent of respondents saying these were either very or fairly important.

Respondents were then asked to name the three consultancies which they thought were the best for each of the seven criteria – creativity, account handling, multi-disciplinary expertise, full service capabilities, evaluation techniques, and international expertise.

Because the methodology for this year’s survey is slightly different (see box, right), the only comparisons that can be drawn are on the criteria indicators.

The consultancy which is best regarded by clients overall is IMP, which was picked as top at account handling and ranked number two in every other category.

Next was Triangle, whose main weakness was perceived to be in international expertise, where it ranked sixth. The same goes for third-placed The Marketing Store, which scored 11th in the international expertise category.

The Marketing Store does in fact have a European presence – but as we have said before in these surveys – perception is everything.

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