Simon Marshall looks at the risks involved in brand promotions – especially at Christmas – and how best to protect your brand through intelligent promotional development and management. The simple act of price discounting is often seen as the quickest and easiest answer to a sales issue but, as Simon explains, in such a crowded shopper market it can have lasting ramifications that can ultimately change the fortunes of a brand forever.
The Christmas songs are out in force and the festive frenzy is in full swing, but with a recent survey of 1,000 Brits revealing that 25 per cent of people are going to spend 50 percent less this year, we might be heading for a cautious Christmas.
Such omens of consumer restraint can tempt brands and retailers to offer seasonal bargains more than at any other time. However, whilst it is increasingly a fact of life that a promotional strategy is a key part of a brand’s wider retail and trade plans, brands should resist the lure of purely price-focussed activity.
Historically, the FMCG sector has led the field in terms of promotional activity, due to the need to stimulate regular purchases of often very low interest items. During 2009, recessionary pressures led to an even stronger promotional focus on price deals, particularly within FMCG, with the IGD reporting that up to 35% of sales were made under promotion across the key grocers. The recession made its mark and we should be aware that these types of changes in consumer behaviour can be permanent. Specifically, consumers are now much more concerned about getting value for money.
However, at Christmas, ‘value for money’ is afforded a bit of festive leeway. Despite the warnings that people are intending to spend less, they will still be spending more than the rest of the year. It is Christmas after all – the one time of the year where consumers allow themselves to spend a little more and upgrade their average grocery shop. Budget-permitting of course, it’s ‘Taste the Difference’ mince pies rather than Sainsbury’s own label, luxury chocolates rather than Dairy Milk – retailers always experience a peak in sales on their premium range foods as consumers look for quality befitting of Christmas Day. Brands would be foolhardy to undermine this festive mindset by offering promotions with abandon.
Promotions can create brand risk at many levels, and at The Marketing Store our primary responsibility impulse is to ensure that the brand is protected, through intelligent promotional development and management. This covers all aspects of the promotion, from prudent selection of promotional partners, to ensuring that the provenance of promotional items is above reproach.
Promotional activity doesn’t have come in the form of a price cut or special deal – it can be through more complex, added value activity such as competitions, prize draws or discounted premiums. Even experiential activity can be counted as sales promotion activity, if it drives consumers to purchase more of a particular product, by delivering an engaging brand experience.
Whilst price promotions remain “the drug of choice” for retailers (and many brand manufacturers), there are signs of a more creative approach to delivering these promotions, particularly in terms of creating broader perceptions of added value. A good example of this new approach is the focus on occasion-based “bundling deals”, which allows shoppers to buy all the items they need for a special event (such as a Christmas party or girl’s night in) at a discounted price. This approach enables the retailer to deliver a deal with more emotional engagement than a simple price cut would offer, whilst brand owners are more able to protect their individual brand values.
This trend is perfectly reflected in the recent success of John Lewis and Waitrose. John Lewis has profited during
the recession, not by “piling it high and selling it cheap” but by consistently delivering great service and great quality at a fair price. It is also what has persuaded the major grocery retailers to re-invest in their premium food ranges, with both Asda and Sainsbury’s recently announcing re-launches.
Again, this is a great demonstration of how added value promotional activity has a real role to play in creating and reinforcing value perceptions.
The key to successful promotional activity has not changed: to drive sales by adding value to the purchase experience, without devaluing the brand. Price promotion can have long lasting ramifications that can ultimately change the fortunes of a brand forever and relentless price focus will commoditize a brand in the mind of a shopper. By all means brands need not ignore promotions, but they do need to make sure that any activity remains relevant beyond price if they want to maintain their brand value into 2011 and beyond.