Promoting good relations
by Adam Wilbur, Account Director, Jacobs Agency
The days when retailers were quick to offer market development fund (MDF) dollars to help fund a promotional campaign are long past. To put it simply, retailers have more control over the channel than ever before. The rise of the big boxes and their corresponding private label brands has led to a shift in the overall balance of channel influence. Due to the sheer volume of items large retailers purchase, manufacturers must do everything they can to incentivise the retailer to stock their products. For manufacturers that enjoy widespread retail distribution, there is still the issue of product placement.
Positioning products within eyeshot of passing consumers on a consistent basis can increase both product sales as well as overall brand awareness.
While manufacturers and retailers both continue to participate in promotional activities, they do so for entirely different reasons. While a promotional programme may be wildly successful in the eyes of the manufacturer for driving sales, it still could be perceived as disappointing in the eyes of the retailer.
Therefore, in order to drive retailer buy-in of promotional programmes, manufacturers must take an inclusive view of consumer-facing promotions when considering objectives, tactics, and communication channels.
In order to develop promotional campaigns that are more likely to gain retail buy-in, manufacturers must make a more concerted effort to see the world through the eyes of their resellers. Manufacturers pitch promotions to retailers, promising an increase in product sales.
Increased product sales are good for the manufacturer and good for the retailer, right? It’s not always that simple. From a retailer’s perspective, an increase in sales of brand X during a promotion will inevitably decrease sales of competitive and private label SKUs. Research indicates that a retailer’s revenue gain from promoted items is about the same or even slightly less than their loss from non-promoted items. Therefore, manufacturers must do more to offset the net-negative impact a promotion has on retail revenue.
The negative impact that promotions have on category revenue for the retailer can be offset by an increase in overall store foot traffic, leading to a rise in incremental sales in other product categories. It is vital for the manufacturer to include tactics in their promotional plan which will effectively drive increased traffic to a given retail location.
They also need to keep in mind that they are not the only channel members who face vast competition. Retailers feel the pressure as well and are no longer interested in cookie-cutter promotional activities offered through the channel to multiple resellers. Manufacturers can take advantage of this pressure to differentiate by offering up promotions that are custom-tailored for a given retail partner. That is to say, each retailer will have the opportunity to opt-in to a promotion that is available only to that retailer should they choose to accept. Retailers can differentiate themselves by participating in the manufacturer’s promotional campaign, even though that manufacturer may be running a different version in competitive stores.
When developing an account-specific promotional strategy for a given retailer, manufacturers would be well served to offer creative platforms that support not only their own brand, but that of the retailer as well.
One way manufacturers can tie into a retail brand while still upholding their own brand promise is to develop an over-arching umbrella promotional platform or theme that extends across all retailers and all promotions. By doing this, manufacturers can develop specific programmes for their retail partners, so long as the messaging of the promotion is consistent with the overall promotional theme. In this instance, the manufacturer’s overall promotional theme guarantees that all activity upholds the brand promise, regardless of which retail chain is executing the promotion.
It is in the manufacturers’ best interests to weigh the effects that promotions can have on their overall brand. While traditional ‘pull’ advertising tends to focus on product features and benefits, promotions have a tendency to focus on price. Because of this focus on price over product features and benefits, poorly planned promotions can degrade overall brand equity.
This is a challenge for marketers and brand managers who often fall prey to the need for short-term price drops and rebates to help spur trials and increased sales.
There can be long-term negative effects from these price manipulations. Marketers need to seriously assess their willingness to cut into their profit margins by offering price-based product promotions. There is a vast array of under-utilised promotional tactics and communications channels at product marketers’ disposal, many of which are highly effective, measurable, and will not degrade the brand’s equity. Of course, no single tactic is appropriate for all consumer-facing promotions. Marketers should take into consideration a host of variables. Before brainstorming promotional tactics, marketers must make sure they fully understand the business issue that the promotion seeks to address, the objectives of the promotion, and the metrics that will be used to evaluate its success.
Most importantly, marketers should never forget that at the end of the day, the focus should remain on engaging the consumer.
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