IPA warns against rising trend in price promotions

Product marketing chiefs must “stand up” to retailers over price promotions to prevent long-term damage to their brands, the Institute of Practitioners in Advertising (IPA) has warned.

Discounts: Harm brand loyalty

The IPA has shown for the first time how increased price promotions has led directly to a deterioration in brand loyalty in sectors including soft drinks, beers wine and spirits, household products and snacks.

The organisation compiled its report “Price promotion in the downturn: shrewd or crude?” in collaboration with Tesco Clubcard datahouse Dunnhumby.

The report looks at a 12-month period and analyses the number of sales promotions against sales. It found that the number of consumers who purchase one brand 70% of the time they shop in a particular category, known as “brand loyals”, reduced across categories that have seen a corresponding rise in price promotions.

It shows brand loyal purchase declined from 20.8% to 19.3% in soft drinks and 4.6% to 3.9% in snacks in the 12 months between the end of 2007 and 2008.

“While the percentages may seem small, the associated value and volume of units sold are significant,” says Dunnhumby’s Lawrence Janes.

IPA consultant head of marketing and reputation management Janet Hull is calling on brand owners to work with retailers to deliver value-added promotions such as rewards for loyalty rather than price.

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