Special Offers

It is impossible to predict accurately whether a promotion will be over-redeemed, but there are a few simple rules that can minimise the risks and help to make an offer successful, says Becky Munday.

If it were possible to gaze into a crystal ball to predict the outcome of a sales promotion, any unexpected elements that arose could be anticipated and dealt with in advance, leaving budgets and reputations reassuringly intact.

Crystal spheres aside, if you are planning a promotion there are always tangible elements that can be taken into account. It’s the intangible that causes problems. But while there is always a risk of unforeseen factors coming in to play, you can take steps towards minimising the risks involved in promotional activities.

Being handed your annual sales promotional budget is like receiving a stick of dynamite with a lit fuse. It is not so funny when you come to dispose of it. You want to run campaigns that boom not bomb, that encourage maximum purchase but at the same time don’t blow your budget through over redemption. The key to this is careful planning and ensuring that obvious but often overlooked precautions are taken.

Firstly, promotional management and reporting is key. It is crucial that you establish an open working relationship with all partners involved in the project – client, agency, consultants and suppliers. Sharing information and working closely together from the embryonic stage – when the mechanics of a promotion are being devised – to fulfilment, leads to greater efficiency and quicker response times. It also cuts out any misunderstandings when it comes to the inevitable post-mortem.

It is amazing how many companies fail to keep marketing data on file from previous campaigns that they or their competitors have run. Information on target markets, methods of promotion, communication devices, prize structure and subsequent outcomes provide vital knowledge that will contribute to future campaigns as well as help to predict likely outcomes of the promotion. Therefore, it is essential to set up, or at least have access to, an historical database, with as much detailed information as can be gathered.

An essential part of promotional planning is the creative concept but even here there are potential pitfalls. In terms of redemption projections, even with the most meticulous market research and testing procedures, the strength or weakness of the creative approach can make or break a campaign. The key is not to do your predictive work until the creative concept has been finalised. Surprisingly, it often happens the other way around.

The next consideration is the timing of your launch, two external forces can influence this. Firstly, competitors who may be running campaigns simultaneously or having got wind of yours, may instigate a “me too” spoiler campaign. Therefore, any market intelligence you can glean (though this is not easy) regarding rival campaign scheduling is invaluable.

The second potential banana skin relates to retail activity and its potential impact on in-store promotions. There are a number of ways in which retailers can affect the success of your promotion for good or ill, either by not co-operating or by being overly supportive.

For instance, last Christmas a leaflet-led in-store promotion fell flat. The reason was quite simply timing. At any other time of year the promotion would probably have flown, but the retailers in question didn’t display the leaflets because they would have taken up valuable display space that could be used for Christmas merchandise.

Size matters

The same applies to point-of-sale (POS) activity. With retailers, size matters. Their sheer strength means that they can operate by their own rules and if they decide not to display your POS material, or perhaps, with the best intentions, create their own monster size banners, it is bound to have an impact on the success of your promotional activity. Retailers also run their own promotions which may include your products, so you need to consider if what they are doing will conflict with, or enhance, your own activity.

You can’t dictate to retailers, but by maintaining a close dialogue with them, as well as retaining a field force to monitor activity, you can encourage retailers to use promotional material as it was meant to be used.

A promotion last year by a gardening equipment company illustrates how retailer activity can have an impact on a promotion.

The campaign was designed to increase sales of selected products and offered free additional products as an incentive to purchase. Unbeknown to the company, one retailer dropped the price of one of the products specified in the promotion – and another retailer swiftly followed suit, thus making the promotion even more attractive. Consumers were quick to see the advantages and as a result the campaign exceeded all redemption predictions by a factor of five. During the promotional period, 33.5 per cent of sales were through promotional activity with a 46 per cent redemption on the discounted model.

It is imperative to have accurate information with regard to distribution and to ensure that what you think is going to happen actually does. Your prediction of likely redemption levels will be based on a fixed universe, but what happens if this is exceeded, or not attained?

Fulfilment

Budgetary planning must take into account all premium merchandise and fulfilment costs. It is a good idea to hold a contingency budget for dealing with the unexpected. If a promotion leads to over redemption, you still have to meet the demand to protect brand and corporate image. Extra stock and financial resources are therefore needed, which can, if you are not prepared, overspill into other internal budgets or from one financial year into another. Management and agency time spent overseeing a campaign should also be accounted for.

The following elements are a prerequisite for running efficient promotions (you can of course outsource these requirements): comprehensive resources for redemption fulfilment; stock and related materials; purchasing and handling; and control logistics and warehousing and transportation. You may also need a call centre with good customer service personnel, plus state-of-the-art data management systems. The ability to handle a variety of communication devices (on-pack; off-page; direct mail) and methods (try me free; instant win; competition or coupon; no purchase necessary and so forth), should be standard.

Watchdog

When sourcing prizes or merchandise, issues of quality, safety and availability are paramount. Consumers can talk about a brand long after a promotion is over and, if they feel they were palmed off with shoddy goods, may not be complimentary. No one wants to find themselves justifying their company’s actions on Watchdog.

One household goods manufacturer ran into problems when it was unable to supply some of the items featured in the promotion. It seemed a straightforward, if somewhat generous, offer. Any customer buying one of its products would be sent a &£10 box of cleaning products, simply by sending &£2.99 to cover postage and packing. The offer was, however, over-subscribed and problems arose with supply. Six different suppliers were contributing to the boxes, which contained everything from pine wax to dish cloths. This led to out-of-stock situations on some items, which meant doubling up on others -leaving customers dissatisfied.

Memorable sales promotion campaigns that have gone awry are usually the result of bad planning or communication.

Fully briefed

A very successful “try me free” promotion on a cheese pack was over-redeemed by about 100,000 and went awry when the handling house unwittingly destroyed the proofs of purchase because they began to smell. They were unaware that part of the insurance company’s conditions stipulated that the proofs of purchase were necessary in order for the insurance cover to be valid, as a result the insurer refused to pay the &£250,000 settlement. This situation could have been avoided if all parties had been briefed about what the insurance company requirements are, should the company need to make a claim of this kind.

Hoover

On the subject of planning, I hate to be the one to mention Hoover yet again. It’s a story that should, even now, strike fear into the heart of any would-be promoter who fails to plan an activity and look at the possible implications of the campaign mechanics from all angles. Everyone is aware of the main issues in this campaign – a high profile value incentive for a product purchaser at relatively low cost, which resulted in Hoover becoming liable for &£48m worth of flights. There were a number of contributing factors to this result but the primary one was very simple – the offer was just too attractive. Customers weren’t buying vacuum cleaners, they were buying flights. The fallout of this promotion has been well documented and court cases still continue.

One 2 One

Another promotion in the just too good to miss vein was One 2 One’s free phone calls on Christmas day for purchasers of a mobile phone. A hugely attractive offer, the demand virtually seized up the network preventing many callers getting through to their loved ones. If you are concerned the offer is too good, reduce it, or build in some conditions to limit the potential number of possible redemptions.

Finally, while it might sound obvious, it is essential to pay attention to those boring but crucial terms and conditions. It is astonishing how often these are overlooked. They may take up valuable space and encroach upon the stunning creative work, but one sentence in time could save you millions.

Becky Munday is managing director of Mando, The Fixed Fee Company

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