Money for nothing

Although there’s no doubt that everyone is keen to save money, big discounts can lead to damaged brand values, not to mention slashed margins. What’s more, consumers may just spend less on what they were going to buy anyway – or delay their purchases until the next round of sales.

But used carefully, vouchers can be a brand’s best friend – they not only drive sales, but also boost loyalty. The internet is playing its part, making special offers available to anyone with access to a computer. In March 2009, coupon or reward sites were visited by more than 100% more Britons than in March 2008, according to Nielsen Online.

But Louise Isaacs, formerly at Tesco Clubcard creator Dunnhumby and now head of agency Hicklin Slade & Partners’ loyalty practice, warns that insufficient planning around promotional marketing has “nearly bankrupted” many brands. “Put conditions around offers to encourage positive behaviour,” she advises. “Ask for something in return – some information about consumers that will help you to learn how to change behaviour.”

Isaacs uses the well-known Threshers 40% off voucher distributed in 2006 as an example of a campaign that was lacking in terms of effective data capture despite it being used by many consumers. “It had so many people coming into the stores, but it didn’t collect enough data to really inform future offers. It drove footfall but it was a wasted opportunity in this respect,” she says.

It is fortunate, then, that recent tactics employed by the likes of Tetley and Kellogg are showing some awareness of the need to tie promotional techniques into longer term strategies.

Tetley has launched a £3m sampling campaign with the aim of introducing consumers to its niche Redbush, Green and Extra Strong ranges. Samples will be given out alongside 40p off coupons at targeted events such as Cancer Research UK’s Race for Life.

Tetley brand manager Siddhartha Butalia says he understands that the use of vouchers in isolation without other marketing backing can be ineffective for FMCG products with low penetration levels.

He says that while a company selling “value” products in massively high volumes, such as McDonald’s, might be able to run a money-off voucher in newspapers without damaging its brand, this wouldn’t be a useful strategy for these particular Tetley ranges.

Tetley’s money-off coupons form just one part of the brand’s wider campaign, which includes TV and online elements. The initiative hasn’t been driven by a desire for a short-term sales boost, but to engage current and potential consumers, while generating awareness of products.

“It’s about dialogue, not just tactical use of vouchers. There are the means now to be more sophisticated. You can do so much with new media – yet brands aren’t exploring the opportunities,” warns Butalia.

There are some exceptions, however. Kellogg, for example, is using on-pack promotions to drive consumers to a dedicated microsite as part of its £3m coupon push. The brand claims this is the first time it has used digital redemption techniques in the UK.
Jared Keen, managing director of Couponstar, which is handling the online coupon operation, says that the campaign is designed to allow Kellogg to remarket to these consumers via email. “Primarily it’s a brand promotion, but it’s also designed to take away the anonymity of consumers as a CRM tool,” he says.

It comes as no surprise to learn that the company is running more promotions this year than last. “This was a business decision due to the fact we’re in a recession and because we want to drive trials of new products,” explains Sam Blunt, consumer promotions controller at Kellogg.

But brands may not always get this right. Guy Hepplewhite, managing partner of agency Space, suggests that too much discounting can backfire. “When M&S held a 20% off sale before Christmas, people started re-exchanging goods for the new price,” he claims. “And what will the expectation be this Christmas? John Lewis didn’t use this approach yet its sales were up, while M&S’s sales were down.”

He advises brands to consider alternatives to unimaginative discounting techniques. Fashion label Diesel did this for its recent Black Friday promotion. Over one weekend in April, the brand offered free, specially designed black bank notes that allowed recipients to save 30% in its stores.

These were hidden around key shopping areas and could be downloaded from the brand’s website. There were also a limited number of gold notes offering 99% off purchases when £500 was spent in store. This approach reaffirmed Diesel’s brand values and generated interest via word of mouth.

Space’s Hepplewhite adds that price is not the one and only barrier to purchase. “Appeal to the emotional side of the brain and offer added value; perhaps at the same price, but more for it,” he advises.

Unfortunately, some brands slip at the first hurdle by failing to consider what will appeal to the target audience. Charles D’Oyly, managing director of coupon specialist Valassis, believes that many brands forget to invest in sufficient research before running a promotional campaign. “You need to have an understanding about what will shift behaviour,” he says.

Clearly, it helps if the marketers behind these promotional campaigns possess a range of skills and experience. Yet Matt Ramsay, managing director of digital agency InboxDMG, claims that a number of sales promotion agencies have been slow to wake up to the opportunities inherent in digital marketing.

His agency is launching a dedicated “eSP” – or digital sales promotion – arm, in anticipation of increased demand for these types of integrated online promotional tactics during this recessionary period. “It’s all about the exchange of information and you need to involve some commitment on the part of the consumer,” says Ramsay. “With a current United Biscuits campaign for Go Ahead!, essentially people have identified themselves in return for 30p. That’s not bad value.”

Coupons or vouchers do pose risks for brands if only considered as a short-term solution to long-term problems. But with money tight, it is possible for companies to use them without damaging brand values. After all, consumers want discounts and they understand that there’s no such thing as a free lunch.

dos&don’ts

• Do choose the most appropriate offer based on customer insight. Test to gauge price thresholds and redemption levels – consider first rolling out a campaign regionally rather than nationally.
• Do grow your customer and prospect database, but don’t ask prospects for their life history in return for 30p off.
• Don’t forget about brand values in a bid to boost sales.
• Don’t rush coupons in as an afterthought; instead link strategies together to raise awareness.
• Do use the internet to generate learnings and to improve targeting. Emails and microsites can be significantly cheaper than printing coupons on-pack or in newspapers.
• Do exploit the power of coupons with strong creative ideas and execution; don’t just be lazy and do what’s worked before.
• Do consider scaling the offers according to an individual’s worth to the brand.
• Do use voucher communities as seeding environments – viral elements can dramatically reduce media costs.

Case study: unilever

At FMCG giant Unilever, marketing director Matt Close explains that promotions marketing is treated as part of the broader customer marketing programme. “It’s just one part of the toolkit; I tend not to view it as sales promotion,” he says.

“When the objectives are clear, we see better redemption rates and you are far more likely to change long-term behaviour,” says Close. “You need to understand what will motivate your audience, so we do lots of test and learn on subsets to get it absolutely right. The tactics depend on the audience.”

He advises against using vouchers or coupons as a tactical tool to see if the company can “drive volume in one month”.

Using his cosmetics brand Dove as an example, he says that promotions have been designed with reference to the lifetime value of individual consumers. Rather than being a short-term sales idea, they are vital for keeping going a conversation between the business and its customers.

He says: “We have a large number of subscribed and opted-in women, who want regular communications, so they are likely to respond to communications from Dove. As such, we invest in them.”