Shoppers are more likely to be buying supermarket goods on some kind of offer than at their full price, according to data from consultancy Symphony IRI Group (see Figure Focus, below). Executive vice-president Rod Street says: “Trade promotions have accelerated to unprecedented levels over the last three years and more than half of all FMCG products are now sold on promotion.”
Marketers therefore need to differentiate their promotions from those of competitors, and from the slew of offers in the consumer market as a whole. While traditional in-store and on-pack promotional methods remain widespread, brands are now exploring the online space.
Sam Blunt, consumer promotions and digital controller at Kellogg, says the most important parts of a sales promotion are the convenience to and preferences of the consumer.
A recent promotion on boxes of Kellogg’s Corn Flakes incorporated on-pack coupons with online redemption. Consumers who bought three boxes could enter unique promotional codes through a website and try one of the company’s new products for free.
“We asked consumers if they would prefer to cut out coupons from the pack and redeem them through the post, as they have for many years, or to take their codes online. Over two-thirds of consumers said they preferred digital fulfilment,” says Blunt.
Online coupon promotions, where a consumer inputs a code from an offline promotion into a website, have a redemption rate of between 2.5% and 20%, according to risk management company PIMS-SCA.
Like Kellogg, milkshake brand Yazoo combines on-pack with online channels to encourage the consumer to engage with the offer. This year, the brand is running separate promotions through TLC Marketing that target its two main markets of young men and mothers buying for children. Yazoo has created on-pack promotional codes for two-for-one cinema tickets online. At the same time as redeeming the voucher codes, customers can vote in a poll of their favourite comedy films as part of Yazoo’s sponsorship of Loaded magazine’s Lafta awards.
Yazoo will also launch a promotion of free after-school clubs for mothers and children in association with Premier Sports at the end of the summer. According to Yazoo brand manager Michelle Sutlieff, each promotion encourages the buyer to go online by giving access to added-value offers or extras. Far from deterring consumers with their complexity, she claims the promotions have led to a measurable increase in purchases.
Each promotion encourages the buyer to go online bygiving access to added-value offers or extras
The online element also helps build Yazoo’s CRM databases. When customers access an offer online, the brand asks them whether they wish to sign up to an email list, or to “like” its Facebook page. New promotions are then sent to these people before they appear on pack.
“They will be the first to find out about on-packs and they will be the people that we specifically run our ideas through. It is about capturing them for the lifetime of the consumer and not just this one on-pack promotion,” says Sutlieff.
Jonathan Starkings, category manager at travel website ebookers, says the trend of emphasising loyalty is an important development in online promotional marketing, particularly when the entire transactional process takes place on a website. He says that being online only has previously limited the loyalty generated among customers because they search for low prices rather than added value.
The focus on price promotions in this sector has been exacerbated by the growth of voucher code and discount websites. “That has become highly competitive and is driving down prices for the consumer,” says Starkings.
It has prompted ebookers to issue its own promotional codes, mostly distributed through its CRM database. Starkings says the trend is “sustainable at its current participation level”, but it could lead to a race to the bottom if vendors offer more and deeper discounts.
The influence of Groupon on promotional marketing including the website’s contribution to pushing down market prices, in particular for service industries is well documented, but the group buying model is still being developed in the business-to-business sector.
Huddlebuy, a website that launched in January, provides a platform similar to Groupon for brands to publicise promotions targeted at small companies of up to 10 people. Many of these businesses would normally be forced to buy products and services at retail prices because they lack the size and scale to buy in bulk.
Huddlebuy vice-president of marketing Chieu Cao says promotions on its website allow brands to target SMEs without devaluing their own offerings through dual pricing, and effectively provide access to wholesale prices for businesses that would not have had it before.
James Wilson, marketing director at B2B phone and broadband supplier XLN Telecom, says running promotions through Huddlebuy allows the company to communicate with an audience that was previously difficult and costly to reach.
It also provides a platform on which the company can make more of its own branding in a space that is visible to these targets. “In comparison with our main competitor, we do not have high brand perception so we have to find more granular ways to market,” says Wilson.
While the online options available to brands continue to grow, some promotional activities get better results offline. It is still possible to generate higher impact and experiential value with consumers when they are present in person.
Kantar Worldpanel retail analyst Fraser McKevitt says a higher proportion of products on promotion are sold online rather than in-store because people tend to spend more when shopping online. However, consumers are still more likely to take up a promotion in store than online. “This difference is largely due to strong in-store merchandising that persuades consumers to make purchase decisions they would not otherwise have made,” says McKevitt.
As well as the obvious on-pack tactics and point-of-sale promotions, there are numerous other techniques for creating interest in store, as Kerry Foods demonstrated at Tesco with its Chinese range over the Chinese New Year. Supplier 3sixteen organised a range of promotional activities to accompany the discounts of at least 50% on the products.
Kerry Foods category manager Andy Bolton says sales increased 15% over the previous year.
The humble window display is also being given a new lease of life by applications such as augmented reality (AR). Since the beginning of April, watch brand Tissot has been running a promotion at Harrods. When consumers put on a plastic strap and hold it up to the window, AR technology created by Holition causes a Tissot watch to appear on their wrist on a screen facing them.
The touchscreen then allows them to experiment with the features of the watch and cycle through different designs. Consumers can win a watch and a Swiss holiday.
According to Tissot marketing manager Victoria Hughes: “The direct link of the Tissot watches to the point-of-sale was very beneficial, resulting in an immediate sales uplift.”
The experience is one that would be difficult to emulate on the internet, where consumers would be missing the illusion of trying on a watch at Harrods. So although the trends in promotional marketing are towards online interactions with consumers, brands might be advised to consider the web as a complement to, rather than a replacement for more personal and tangible approaches.
- Consumers prefer to enter codes online rather than cutting out coupons.
- Promotions often encourage customers to interact further with a brand when redeeming offers on the web.
- Online redemption is becoming important as a means of building CRM databases.
- Price promotion and voucher codes are driving down prices for many online businesses.
- On like-for-like sales, in-store promotions have higher uptake than online, though more products are bought on promotion on the internet overall.
brand in the spotlight – Q&A
Head of category management for hotels
Marketing Week (MW): What are your usual objectives and priorities when running travel promotions on the website?
Jonathan Starkings (JS): Being profitable is always a plus point but we are seeking to grow our transactions significantly, so are more willing to accept lower margins to get that growth. We want to get people onto the site, using the site and discovering the experience they can have with ebookers.
MW: Are there challenges unique to running promotions entirely online?
JS: The online market is still fairly price-oriented, so we are not expecting to see the loyalty we would like to see, and that you would expect to see from an offline brand. If we can get consideration and people checking prices on our site, we are confident the experience our site delivers will get them to repeat and do that again.
MW: : Are there ways for you to add value to a promotion, as opposed to just cutting prices?
JS: We have looked at free breakfasts and full board, upgrades of hotel rooms, but invariably what works best is a price-led promotion. Consumers love to see added value it does not do any harm at all but at the end of the day, it is normally a percentage off. When it comes to hotels, people like to see percentage discounts, ideally with a “slash-through” price where they can see what the price would have been and see the new price.
MW: What do you need to do to make your promotions competitive in the online travel sector?
JS: True success comes when you hit the 50% mark. We have seen a massive increase recently in terms of the number of offers that online travel agents are putting out. We are leaning heavily on our suppliers to give us those discounts and ensure that we have the discounts our competitors receive.
A 50% discount is profitable for us because our business works on a margin basis, so whatever the sale value is, we will take a percentage value of it.
MW: How important are events like the royal wedding to driving redemption of your promotions?
JS: It is a nice thing to be able to market around. Our hotel partners probably have not at this stage seen the demand from the royal wedding they were hoping to come through. That might be because prices were set too high too early, so demand will come late, or they might just not see that demand at all.
- Percentage of supermarket sales on promotion in store
- Percentage of supermarket sales on promotion online
- Percentage of FMCG sales on promotion
- Average price reduction on an FMCG promotion
Source: PIMS-SCA, Kantar Worldpanel, Symphony IRI Group
top trends 2011 predictions
The number of smartphone owners is growing, so intelligent barcodes are going to be the way to go. When a consumer walks past a
promotion they can use their smartphone to scan the offer, then buy the bottle of milkshake and put in the unique code there and then.
Consumer promotions and digital
Unless we ran exactly the same promotion with two different fulfilment mechanics, it is hard to say whether one drives higher redemption than the other.
But the fact that our consumers tell us they prefer the digital route suggests to me that we would get higher levels of engagement with
the digital route.
If we say that when you buy three packs we will give you a free one, we are obliged to fulfil that offer. The primary objective is the way to fulfil that in the way that is easiest for the consumer.
The Groupon-style model is one that we would be negligent to ignore. We focus on the very small SME, which has similar trigger points to a consumer. It also gives us an opportunity to increase reach, and reach into an audience that is predisposed to favour that kind of approach. If we tried that from our website, would they be interested? Maybe not, because it is not the audience that we are trying to address
Head of communications
Institute of Promotional Marketing
Most promotions now involve an online or mobile element. If you are inviting responses, then it is a hell of a lot cheaper if you can do it
online. The other side of the coin is that there are a lot of people running promotions in the digital space who do not realise that the CAP
Code applies to any and all promotional activity. However, the extension of the ASA’s remit is helping to raise awareness and prevent breaches of the code.