For some time, sales promotion agencies have been claiming that
they, and other below-the-line specialists, are taking a bigger share of
marketing budgets, and are being given a more strategic role by their
clients. Well, they would say that, wouldn’t they?
In fact, this is a complex issue. For instance, what are the pressures
on clients influencing how they allocate budgets? It is not just a
matter of what sales promotion agencies actually do these days, as most
have found it necessary to diversify into other skills areas.
’This whole area is a very big issue, about the way people are
communicating with consumers in a time of escalating costs and media
fragmentation,’ says Peter Dart, managing director of marketing agency
The Added Value Company. ’It is the hottest topic around.’
Marketing Technique decided it was time to seek a client perspective and
mailed a questionnaire to a cross-section of marketing directors and
other senior marketers. We’re not making huge claims for the results, as
the sample was not massive, but the survey does illustrate some
interesting trends, as well as supporting some of the popular views on
what is happening in the marketplace.
The questionnaire went to selected readers in medium to large companies,
known to include sales promotion among their budget
Forty per cent of respondents work in FMCG companies, with the remainder
drawn mainly from the retail, consumer durables, motor, financial
services and leisure sectors.
Clients seem to have been giving a lot of thought to how their often
constrained budgets should be allocated.
Respondents were asked if the way they allocate money between marketing
disciplines has changed. Most have looked at this question very
In FMCG companies, for instance, about half of respondents say they have
made changes in the past two years, and a third say they did so between
two and five years ago. Four out of five non-FMCG companies claim to
have changed the way they allocate budgets in the past two years.
Matthew Hooper, managing director of integrated agency Interfocus,
points out that most companies calculate marketing budgets from what
they spent in the previous year, modified by inflation and sales
forecasts. This may determine the size of the pot, but not how it is
In our sample, 55% of non-FMCG companies and about 20% of FMCG firms use
what we called the ’tried and tested’ route of formally dividing out the
budget at the outset between advertising, sales promotion, public
relations, direct marketing and so on.
An alternative approach is the ’blank canvas’, or integrated solution,
where the money devoted to any particular discipline can vary
substantially from year to year, depending on what appears to be the
most effective solution.
A quarter of the non-FMCG companies say they use this approach, but a
few eyebrows are likely to be raised by the assertion by 80% of FMCG
respondents that this is the method they favour. Is this genuinely the
case, or a slightly skewed response?
’It would be very refreshing if it were true,’ says Dart, ’but I am
One factor that has a bearing on this is the emergence of new marketing
tools, such as database marketing. A fifth of replies from FMCG
companies, and as many as 40% from the other sectors, acknowledged that
these developments have either caused or are causing a major rethink on
how budgets should be allocated.
Around 60% of FMCG respondents, and a slightly higher proportion of the
remainder, say they are spending significantly more below the line than
they were three years ago.
One anonymous FMCG manufacturer says: ’Value-oriented trade promotions
to enhance consumer value and create impact at the point of sale are
becoming increasingly important. Large amounts of advertising and
promotion budget are now being used tactically for this purpose.’
Even higher numbers (two-thirds of FMCG respondents, over 80% of
non-FMCG) agree that increasing amounts are being allocated to new areas
such as database marketing, the Internet, roadshows, highly targeted
sampling, and so on.
Tick as applicable
We provided a list of factors which might have influenced budget
allocation, and asked the marketers to choose those which most applied.
On a couple of these, the responses were very similar across the board;
on others, there were marked differences (see chart).
For instance, about half the total sample sees a squeeze on budgets as
being an important element, and a similar proportion feels that a
flexible approach to budgeting provides the best route to effective
Media inflation seems to be the biggest worry to FMCG marketers, with
70% ticking this box. Conversely, it attracted the vote of only a
quarter of non-FMCG respondents. For them, the need to measure results
looms largest - 80% picked this, against only 40% from the packaged
goods sector. ’We all, rightly, have to prove the case,’ says Raoul
Pinnell, global brands director of Shell.
Other factors, too, such as the rise of database marketing and pinpoint
targeting techniques, are rated much more highly by non-FMCG companies
than they are by those in FMCG. The same is true of the idea that
below-the-line techniques are now seen to have a strategic role, where
once they may have been regarded as purely tactical. ’Strategy can be
determined by below-the-line agencies too,’ says one financial services
So here we have, on the one hand, FMCG companies saying they are
spending significantly more below the line. On the other, they’re saying
they believe media inflation has had a bigger impact on the way they
allocate their budgets than the emergence of, say, database marketing.
This is not necessarily a conflict.
’There is an absolute movement away from what was previously the
dominant element: ’theme’ advertising,’ says Dart. ’I am not surprised
We know a lot of companies, such as Unilever, Nestle and Heinz have been
using, or experimenting with, new techniques.
’The question going through their minds in this survey is, what is the
overriding thing affecting budget allocation? And for FMCG companies, it
is how ridiculously expensive ’theme’ advertising now is. That is why
they have ticked that box, because I cannot believe they would say the
rise of database marketing has had no effect whatever.’
That leads on to the central question of whether below-the-line agencies
now have the ear of the marketing director, as many claim.
We asked our sample whether or not they now hold strategy meetings at
which all of their agencies, above- and below-the-line, are
Exactly half of non-FMCG respondents say they do, and among FMCG
companies the figure is as high 70%.
While Dart questions whether seven out of ten FMCG companies really hold
monthly meetings with all their agency suppliers, including, say, their
packaging designers, the finding confirms a strong trend in this
direction which has been noted several times in the past.
Matthew Hooper, at Interfocus, says: ’We have insisted for many years
that, where other agencies are involved, we all sit around the table
together. That way, we can often save time and money, as well as ensure
a consistent approach.’
And the fact that very few companies in the survey develop their
strategy with their ad agencies, then feed it down to their other
suppliers, drew this comment from Dart: ’Whereas some ad agencies think
they are the centre of strategic advice, that’s not what their clients
think. Marketing directors don’t see ad agencies as providing the
complete, holistic thinking, which is a trick the ad agencies are
On the contrary, a distinct minority - only 20% of FMCG companies, a
quarter of non-FMCG - now see the role of sales promotion agencies, as
being purely tactical. As Shell’s Raoul Pinnell says: ’We have to think
of the strategic benefit and value of a promotion, not just its tactical
sales value. Our global association with Lego, for instance, will help
us strategically and tactically.’