Promotions left on the shelf

Do you know where consumers decide to buy your brand? Are you targeting your promotions correctly, and with the right offers? Are you overestimating their loyalty to your brand? Do you know which promotions are driving sales and at what cost? These questions, along with many others, were asked by Valassis, the promotional solutions business, in a strategic research study that set out to compare and contrast consumer and marketer opinions towards sales promotions – the results are startling.

In July and August 2007, 1,033 consumers and 171 marketers from leading brands were questioned about their attitudes and behaviours towards sales promotions. The results were then compared to see how aligned the responses were.

Astonishingly, 45% of marketers say that 40% or more of their brand sales are driven by promotions. When the discount off the recommended retail price and the campaign costs are considered (as they should be), a brand’s sales promotions budget can leap ten-fold, and dwarf the brand investments that marketers labour over with so much care.

With such high levels of marketing spend going into promotions, do marketers have the necessary insights to know whether their campaigns are being effective? Only 28% state confidently that they do. Could this be attributable to the low-level of importance major brands place on analysing promotional activity and a failure to devote enough senior focus to the topic?The research reveals that across seven of the most common sales promotion types, marketers consistently overestimate their effectiveness when compared to what consumers say. Nearly three-quarters (73%) of marketers believe that “buy one get one free” (BOGOFs) promotions will strongly persuade consumers to buy, whereas less than half that number of consumers feel the same.

Marketers are also overly optimistic about how loyal consumers are to their brands, perhaps suggesting a level of complacency that brand sales just happen rather than being fought for. Against the most loyal category tested, tea, 85% of marketers say they believe consumers almost always buy the same product, whereas consumers reveal this percentage to be just 68%. This misunderstanding even applies to the least loyal category, confectionery, where marketers believe 28% of consumers “almost always/always” buy the same product, compared to just 19% of consumers.

Saying where consumers make their buying decisions is also an area where marketers are consistently over confident in their predictive powers. Again using tea as the example, marketers think that 85% of consumers usually or always know what brand they are going to buy before leaving the home, while only 55% of consumers say this is the case. The implication of this misplaced assumption is that marketers could be in danger of targeting consumers with offers in the wrong place.

Referencing the few marketers (28%) who state they understand the effectiveness of their promotional plans, and consumers who show lower levels of enthusiasm than marketers for popular types of promotions, the research shows surprisingly high levels of future commitment by marketers to some of the most cost intensive promotions. For instance, 37% of the marketers say they intend to increase the amount they spend on BOGOFs in the future, 25% plan to increase three-for-twos, and 32% plan to increase free product samples.

Marketers were asked if they thought consumers felt bombarded by unwelcome product promotions they receive in the mail – 48% say they agree slightly or strongly with this belief. However, when consumers were asked to what extent they agreed with “I’d welcome more information and offers from household product companies”, 55% say they agree strongly or slightly, and a mere 16% say that to some extent they disagree. Could it be that this misunderstanding is holding back major brands from more direct to consumer campaigns?

The research findings reinforce the point that retailers increasingly drive the promotional investments of major brands. Marketers were asked to what extent they agree with the following statement – “I feel that too much of the promotional activity for my brand is determined by retailer demands”. Marketers responsible for promotional budgets in excess of £1m support this, with a majority of 75% slightly or strongly agreeing.

Valassis’ research suggests that if brands are going to take a step up in their promotional effectiveness marketers need up-to-date insights on consumer attitudes and behaviours towards promotions. It also suggests that unless marketers engage more strategically and deliberately, by employing experts and taking time to get closer to consumers, then last year’s promotional plan will be repeated and could result in significant and avoidable financial waste.