Marketing Technique: Sales Promotion - Survey/Budgets the hottest issue/Do sales promotion agencies have the marketing director’s ear? To help answer this question, we asked a number of clients how they are changing the way they spend their cash.

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?

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.



Varied selection



The questionnaire went to selected readers in medium to large companies,

known to include sales promotion among their budget

responsibilities.



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

recently.



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

split.



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

sceptical.’



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

solutions.



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

supplier.



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

by this.



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.’



Winning attention



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

represented?



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

missing.’



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.’



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