Promotional activity and its most recent incarnation, the multibuy, are an everyday part of our lives. But according to research company ACNielsen, marketers should question how effective these promotions really are.
Multibuys have taken an increasing share of expenditure on promotion. In 1993, 12 per cent of promotional activity was on multibuy and by 1998, this had risen to 28 per cent. Straightforward temporary price reductions remain the most popular promotion type, accounting for nearly half of all consumer expenditure on promotions.
ACNielsen believes that retailers are driving this growth because multibuys are an attractive proposition to them. Multibuys and price promotions can differ between retailers in timing, location and depth of offer in a way which would be difficult to achieve with extra free offers or on-pack coupons. This provides them with a point of difference to competitors.
Retailers are now moving on to the next generation of multibuy offers with the incorporation of loyalty card schemes. The simple “buy two packs, save &£1” deal is now being replaced with “buy two packs, collect 100 loyalty card points”.
The use of the multibuy promotion also differs significantly by category. Activity is greatest in health and beauty where there is the potential to link the purchasing of shampoo and conditioner to encourage growth. But multibuys are frequently used to protect market share by encouraging consumers to stock up on a particular brand, removing a consumer’s opportunity to switch brands.
In markets where brand leader dominance has been eroded, such as the petfood market, multibuys have played an important part in defending a strong market position. This adds to the retailer’s overall marketing proposition by reinforcing the perception that it is offering value for money.
Multibuy has driven consistently higher volume responses than other promotions. On average the promoted items’ sales have risen by 68 per cent during the activity. This compares with only a 27 per cent increase in sales for a ten per cent temporary price reduction.
The role of multibuys is very different to that of price reductions. While multibuys can encourage range trial, they do not tend to generate trial because consumers do not bulk buy items they have not tried before. For example, a manufacturer of a branded coffee launching a new brand of tea may link the two brands, thus leveraging the strength of its coffee brand to gain trial of the new tea brand.
ACNielsen’s research shows that promotion activity often encourages brand switching rather than genuine incremental category volume. This suggests that the retailer should be looking to run the lowest cost promotion to create the impression of value. However, retailers continue to pressure suppliers to create products with greater discounts.
Research also shows that the sheer quantity of promotional activity in the UK means that the consumer has become wiser. The aware consumer may shop around for the best deal but give no return on investment for the promoting store or brand. The unaware consumer, meanwhile, may miss the communications message and pick up the brand they wanted anyway, offering no return on investment.
As evidence of this, ACNielsen has identified a consumer type called the “promotion junkie”. Some 18 per cent of all households fall into this category.
Promotion junkies buy 30 per cent more on offer than the average household, despite the fact that they are better off than most and have no need to buy on promotion. They are also highly likely to use a store loyalty card and have more cards from more retailers than any other group. The type of offer matters little to promotion junkies. They will weigh up the relative attraction of different offers, but while value is important, the main motivating factor is the very presence of a promotion.
Multibuys are now spreading extensively to other distribution channels. However, it is important that multibuys are seen as only part of a marketing or retailing strategy – their role will vary by brand, by category and by target market. But retailers should beware of overusing any individual promotion type, as it may become devalued over time.