08 The Year Ahead – Promotions & incentives

Get the buying process right and your promotions and incentives will win over consumers. By Kevin Harrington, Sodexho Pass

Buying better for a great return on investment

Get the buying process right and your promotions and incentives will win over consumers. By Kevin Harrington, Sodexho Pass

Promotions and incentives are big business. Consumer motivation strategies such as on-pack promotions, merchandise, vouchers or money-off coupons continue to play an important role in the marketing mix. In fact, the size of the motivation market in the UK is worth about £6.3bn. Yet, successful promotions aren’t always guaranteed. It’s easy for marketers to buy into a “one size fits all” promotion, but 2008 should be about getting the buying process right.

The two essential components to a successful promotional campaign are relevance and communication. Marketers need to make the right choice of promotional tool for the recipient. Promotions can open the door to a world of experiences, all of which can be rewarding and inspiring, but they won’t be effective unless they are relevant to the recipient. The promotionneeds to be useful and the quality on offer has  to be tangible. Quality cannot just be perceived, it must be experienced, for instance, through regular, excellent customer service, and enjoyed through extra added value.

Second, there is communication. A product or service, however excellent, is of no use unless people know about it, understand it, and appreciate why it is better than a competitor’s offering. Retailers, promotional issuers and marketers have a role to play in communicating the advantages. A well-planned communication channel to consumers is essential, but marketers should not forget that communication is two-way. Customer feedback presents opportunities to make promotions even better.

When choosing a promotion, marketers should look at their buying process and reassess at every stage. For example, gift vouchers and cards play an important role in promotions and incentives. With a changing array of services and products on offer, the shopping voucher and card are of prime importance in the marketing mix, bringing flexibility, convenience and a perceived higher value than cash. However, marketers should forget about comparing what discounts they can get from different suppliers and instead concentrate on the best choice in terms of relevance to the consumer.

We actively tell our customers to spend less with us and invest more in their communication methods. The more invested in communication, the better the return on investment. 

Let us not also forget added value. Consumers are looking for, and in some cases expect, more than just face value. It’s worth marketers investigating the added value that a supplier can offer. This added value could be something they could pass on to the recipient, which could take the form of discounts, promotions or giveaways. We set up the SayShopping Privilege Club this year to give useful added value to our customers, which includes monthly prize draws and downloadable money-off coupons for extra discounts with our retail partners.

Rise of e-commerce
Technology will continue to impact on our industry. The spectacular rise of e-commerce through the internet has changed everything. The UK is now Europe’s largest online shopping market. This has been possible, in part through cheaper computers, more widespread broadband connections, and the proliferation of retail websites. Indeed, UK retailers are widely viewed as being the most modern, most innovative and most active in Europe. The internet gives marketers an exciting and adaptable platform to access consumers. Promotions and incentives will have to adapt and reflect consumer needs, and suppliers should be one step ahead of demand. In 2008, marketers should look out for an increased presence of gift cards (plastic credit-card-like vouchers), online e-vouchers and coupons, and SMS promotional added value. 

So what does the future hold? Where will promotions and incentives be this time next year? Well, if marketers take heed and find ways to improve their buying power, they will benefit from more efficient, more consistent, and more cost-effective promotional programmes. Oldstyle, random or one off promotions will decline. Promotions and incentives will become the home for motivation. Ultimately, marketers will themselves benefit, not only from inspired consumers, but also from the tangible return on investment they’ve made into “buying better”.

Kevin Harrington, Research and Development Director, Sodexho Pass

Vouchers rise from slump

In times of economic decline the marketing industry often turns its attention to promotions and vouchers, but they are facing even more consumer scutiny. By David Benady

The promotions and incentives indusry is likely to benefit from a worsening economic picture in 2008. At this phase in the economic cycle, when growth turns to decline, brand owners tend to switch their marketing spend out of brand building strategies and into promotional discounting and prize competitions to boost sales.

Manufacturers will be hit by further hikes in raw material costs and will pass these onto consumers with higher prices. Meanwhile, a credit squeeze could mean a downturn in consumer spending, especially as home owners’ fixed rate mortgage periods end and they are hit by higher repayment costs. When consumers tighten their belts, brand owners plough money into in-store promotions to stimulate demand.

But the promotions industry is trying to get away from its reputation for creating cheap and cheerful discounts such as Buy One Get One Free and Two For The Price Of One offers. Sales promotions agencies claim they can inject high levels of creativity into their projects and build brand loyalty, rather than simply encouraging a downward spiral of brand switching through price discounting. Campaigns such as Coca- Cola’s on-pack music promotion TXT FOR MUSIC are held up as evidence that sales promotions can rival anything produced by advertising agencies when it comes to creativity and brand building. 

However, many brand owners will not take chances with their promotions, according to Tony Spong, head of sales promotion and direct marketing at agency selection company AAR. “A lot of clients play safe and want an agency that has worked in, say, grocery before. There isn’t risk-taking across the board.” That said, he claims that interest in sales promotions campaigns has outstripped interest in direct marketing projects. “The sales promotions briefs are getting bigger and better, they are more testing of what agencies can deliver,” he says. 

One of the big obstacles the promotions and incentives industry will have to surmount in 2008 is the damage to the reputation of prize competitions and quizzes following the TV fraud scandals of the past year. The Institute of Sales Promotions reports that the use of customer competitions has dropped following revelations of TV game show corruption and claims that a damaging blow has been dealt to consumer confidence by the goings-on at GMTV, ITV and C4. 

GMTV was hit with a £2m fine following the scandal over dodgy premium rate phone quizzes where people were encouraged to call in even though winners had already been chosen. According to Clive Mishon, chairman of the ISP, these outrages have had a knock-on effect on other sales promotion competitions.

Tremors from the phone-quiz scandal
“The year ahead is going to be about building on some of the issues we faced this year when things have gone wrong with premium phone line competitions. It has made people realise they need to be careful with sales promotions. Bad promotions can more easily damage your brand than a bad ad,” he says.

He believes it is vital that people working in areas such as television who are contemplating running promotional competitions join the ISP in order to get up to speed on the legal requirements. “There are more and more people involved in promotions, but they understand them less and less,” says Mishon.

None of the TV companies have joined the ISP, though Mishon says there has been a surge of interest from other companies concerned to ensure their sales promotions do not fall foul of the law. This comes against the background of a surge in complaints to the Advertising Standards Authority about promotions as suspicion spreads among consumers about their legality.

Another issue Mishon highlights is the misredemption of coupons, where supermarkets redeem manufacturers’ money-off coupons even when shoppers do not buy the specified products. “It has been going on for years,” he says. “Tesco has been putting up posters saying they redeem any coupons.” 

Such practices have led to fall in the number of coupons issued as they stop manufacturers gaining a sales uplift for their products. At the beginning of the decade 6.5 billion coupons were issued compared with 4.5 billion now. The situation is made worse by people selling blocks of coupons on Ebay at low rates, such as 50 coupons each worth 50p off a leading brand of toothpaste being auctioned for £2.99.

An optimistic future
But while promotional work struggles to increase its standing in the eyes of brand owners, some give an upbeat prognosis for the future. Scott Knox, managing director of the Marketing Communication Consultants Agency, says: “Sales promotion needs to cheer itself up, there’s lots of really interesting stuff coming around the corner and what sales promotions agencies need to do is grapple with what’s happening with digital. The way sales promotions can really come alive is by working closely with the emerging talents of the digital world.”

He says the bulk of promotion work will eventually be online, and predicts that instore promotions will be transformed by SMS text messaging. But he adds that marketers in general need to become more vocal about the benefits of advertising and promotions to the economy in the battle to stem the tide of restrictions on marketing.

Promotions and incentive campaigns are likely to increase in the coming year, but they could also become a focus for politicians looking to clamp down on binge drinking and the marketing of snack foods to children.  

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