Sales Promotion: Price promotion: the brand killer

Slashed prices and product giveaways may keep shoppers happy, but brands must consider the long-term effects on their health.

Shoppers love buy-one-get-one-free promotions (BOGOFs) and retailers know it. Supermarket shelves are awash with signs screaming about products being given away. But it's not just the value brands at the lower end of the market running such promotions - BOGOFs abound among brands that spend millions on creating a premium positioning through marketing: Lynx, Anchor, Frijj, Ski, Covent Garden Soup, Aquafresh, Timotei, Johnson & Johnson, Clairol, Bird's Eye, Goodfella's Pizza and Wotsits, to name but a few.

And if they're not running BOGOFs, many brands are offering other discounts, such as dishwasher powder Glist's 50% extra free, '3 for £2' on Fairy Liquid, 99p for Nestle's Cheerios Cereal bars and '2 for £2' on Radox shower gel. There's no doubt these price offers are good for retailers in driving traffic as they fiercely fight competitors for a value positioning, but is it good for the brands?

Although marketers are often forced into running price promotions by their rivals' price cuts, these offers are the antithesis of rewarding loyalty. They don't build up relationships with consumers because they reward promiscuity and potentially alienate loyal customers by encouraging them to doubt the quality of their previous brand of preference. 'The advantages to the retailer are greater than to the brand. It's hard to see what benefits price promotions can bring to a brand,' says Peter Kerr, managing director and chairman of MRM Promotional Services and Teledynamics, who takes up the chairmanship of the Institute of Sales Promotion (ISP) on 5 July. Brands' strengths lie in a consumer's perception that they are better than the average product in the category. They create and reinforce this perception in advertising, but these values are undermined if a brand runs too many price promotions.

Chris Macleod, marketing director at Papa John's and chairman of The Marketing Society, is responsible for marketing two brands: the value-based Perfect Pizza and premium pizza brand Papa John's, which is marketed on its home-baking credentials. He can relate to what's happening in the supermarkets as he tries to figure out how best to promote the Papa John's brand across his retail network. 'Is heavy promotional work inconsistent with talking about better ingredients and cooking style?' he asks. 'Or will consumers think we're so proud of our pizza that we want them to try it to see?'

Experts agree that a trial price offer can effectively introduce users to a brand. But once many brands have started running price promotions, they get caught in a cycle. 'If your brand is strong enough, you don't need price promotions. But if you're not strong enough, you keep on doing them,' says Macleod.

Putting price aside

To break the vicious circle, brands have to find ways to add value, for retailers and consumers alike, that don't rely on price - or at least don't make price the main ammunition in the promotion. Incentives that get round this conundrum support the brand's overall business objectives and so increase its equity. They bypass the retailer's obsession with value by delivering initiatives that boost the category's growth because they grab consumers' attention. Heinz's 'Win A Home' promotion, through Dynamo, is a good example.

The aim was to grow volume for beans and soups in a way that engaged customers by offering them an aspirational prize, linking with the brand's homely values. Heinz ran an instant-win promotion in which four cans contained a gold-coloured house, which popped out when the packaging was opened. It communicated the promotion via TV, press and billboard ads and in-store activity. As the promotion nears its end, it has achieved double-digit growth for both categories, while consumer brand awareness has grown. 'It's about building long-term brand equity through an integrated sales promotion campaign,' says Nick Cunningham, managing director of Dynamo Development. 'Marketers should be combining all elements of the marketing mix so they feed off each other.'

Ros Horne, category marketing manager for Nescafe at Nestle, agrees that supporting a promotion with advertising endorsement, as in Nescafe's campaigns, is crucial for best results, but she warns against token references to promotions in ads. 'If you have a promotion that is a great expression of your proposition, the advertising can be leveraged in a way that prevents it coming across as a tacky promotional ad.'

Running high-profile promotions with heavy advertising support won't eliminate retailer demand for price cuts, but they prove to be an effective bartering tool. Heinz's current prize-draw promotion on its salad cream, offering a VIP trip to the set of Emmerdale, based on its sponsorship of the TV soap, has reduced the brand's depth of the price cut. 'There's a trade-off between offering something exciting and the price discount,' explains Cunningham. And avoiding deep price cuts in this way is going to be the best-case scenario for premium brands, since there are no signs that retailer, or consumer, appetites for price promotions are waning.

But BOGOFs are probably the most expensive promotion a brand can run and there are more creative ways to package a discount to avoid damaging the brand in the consumer's eyes. Getting a consumer to do something to claim a free product, such as saving a token or a previous packet, is a start. Giving away products as part of themed activity or to mark a landmark date is also a credible reason for a promotion. 'Rather than buying one item and getting an identical one free, consumers could equally gain instant gratification from receiving a different award on the spot - perhaps a voucher suited to their lifestyle. This makes for a deeper consumer relationship,' says John Davis, managing director at Argos Business Solutions.

Mike Bowen, director of UK agencies at The Marketing Store, cites beer brands' promotions around Euro 2004 as another good example. 'They know people will be going into the supermarkets to buy big packs, as a lot of people will be having their friends over to watch the football. Price promotions aren't detrimental here because there's a clear reason for them.'

He speculates that many clients seem to be taking the easy option of running badly thought-out price cuts because they're unsure of their product's USP. If the product has a clear point of difference from its rivals, it shouldn't need to reduce its price. Take Ariel, which has built an association with tennis. This year it has taken the theme further through an on-pack promotion offering free tennis lessons - a strong enough pull to make it less susceptible to price cuts. The promotion is also highlighted through its TV ads featuring Tim Henman.

But examples of truly creative promotional work such as these are rare.

'Because of this price issue, there's not a great deal of innovation out there in the sales promotions industry,' says Sam Ellis, head of sales promotion at Poulter Partners.

Sporting tie-ups

One of Poulter's clients bucking this trend is Pepsi, currently running promotions to leverage its links with football during Euro 2004, such as its sponsorship of the Football Association. Ellis says: 'The worst thing about the focus on price is that it is making brands lazy in engaging customers at point of purchase. This is dangerous because, with media fragmenting, brands should be taking every opportunity to reinforce their brand values when the customer is in-store. Pepsi takes the view that you can be creative in-store, so it demands creative executions and focuses on creating a promotion of which only its brand can take advantage.'

Bowen agrees: 'Promotions should be used by premium brands as the way to get the consumer to the fixture.' He cites his agency's work for soft drink Snapple. Its first on-pack promotion in the UK, which hit shelves in May, used radio ads on Xfm to drive listeners in-store, where its offer of instant prizes, including Piaggio scooters and Sony Ericsson camera phones, was heavily flagged by point-of-purchase material.

When Kerr takes up the ISP chairmanship in July, one of his aims will be to hit home to marketers that 'if the barometer keeps moving to sales, brands will lose all value'. And it's the client promoters - not the agencies - that he believes are the brand killers. 'The quality of our agencies is as good or better than it has ever been. Agencies are more than up for this fight. It is clients that need to work through their angst and find the balance between what they want to do creatively and what they have to do to satisfy the retail pressure.'

PRICE ACTIVITY

Premium brands are increasingly turning to price to drive sales, with Glist's 50%-extra-free deal, Fairy's '3 for £2', 99p for Cheerios Cereal Bars and '2 for £2' on Radox shower gel. However, such offers risk alienating loyal customers by rewarding brand promiscuity and encouraging them to doubt their previous product choices

VALUE ACTIVITY

Some brands have successfully found a way to add value without resorting to lazy price reductions. Ariel, Pepsi, Snapple and Heinz have all run proactive promotions that build on the brand's equity and grab consumers' attention. Ariel and Pepsi have based campaigns around current events such as Wimbledon and Euro 2004

SALES PROMOS

Pros and cons

Pros

1. Guaranteed to sell more product.

2. Needs little external input/resource.

3. Can quickly steal sales from competitor brands.

4. Simple to communicate and easily understood by the consumer.

Cons

1. Costly, as you reward all those consumers who would have paid full

price.

2. Does not distinguish your brand from any other.

3. Causes logistical problems in terms of manufacturing, stockholding

and post promotion.

4. Can lead to price wars and long-term price erosion of the brand and

category.

Discussion

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