Consumer Promotion Chaos!

Are you a consumer marketeer, struggling with having to plan a major consumer promotion? Here’s some food for thought: Given a particular budget at hand (say 20 per cent of Net Sales Value) a simple framework of choice would devolve to three choices. 

Should I run:

  i) a 20 per cent price off 

  ii) offer 20 per cent of extra quantity

 iii) or should I offer a freebie worth 20 per cent? 

While they seem nearly the same, are they?

Years back, as a corporate economist at #Unilever, I had the opportunity to model sales data to see the impact of many such consumer promotion choices - both immediate and in the slightly longer term. The results were very, very different, depending on the circumstances and stage of a brand. Over the years, I vetted these with separate observations in various D&E markets.

At the outset, let us take a quick look at the Cost-Complexity-Speed trade-off for the three routes: 

A 20 per cent price-off: Easiest to execute. Needs just a financial calculation and a change of artwork. The supply chain is largely unaffected. Quickest to execute. Consumer perceived value matches the cost of promotion.

Twenty per cent extra: More complex. Packaging typically needs a re-design and fresh production in the new effective size. Is an altogether new SKU, so may have regulatory implications as well. Most factors are still in-house, so lead times are not yet unmanageable. Packaging lines may need change parts to accommodate the new configuration. Consumer perceptions of value can differ- as accentuated by the packaging (think an elongated tube of tooth-paste).

Twenty per cent applied to a freebie: Most complex- needs a close tie-up on the choice of a freebie, and the entire logistics and sourcing around it. Typically bundled together, requires fresh packaging to be created as well. Think of a free toothbrush with a tube of toothpaste or a pack of biscuits with a packet of tea. The perceived consumer value can be significantly more than the cost. 

Now, there are three broad circumstances under which a consumer promotion is brought in:

• A Brand is in trouble and declining: First and foremost, accept that the brand has an intrinsic issue that needs to be fixed. A price-off, most commonly applied as an emergency fix does little other than stock up the pipeline. Little change noticed at the consumer off-take end. While it may buy you some time, it does lower the price-value equation of the brand. That is worrying as it is near impossible to get back to normal levels (think talcum powders and their perpetual 1+1 schemes- effectively dropping the price of an individual pack by 50%-since these packs are rarely banded very firmly together). The overall impact is to impact margins, signal desperation and hinder future supplies by clogging the pipeline. In sum, fix the core elements of the brand mix. Consumer promotion through a price-off is not the answer. The exception to this line of thought is if you are milking a declining category- and which is likely to peter out because of the emergence of better alternatives.  
• A brand is stable but needs a routine strengthening - A far better position to make a choice. Two paths emerge: keep a consumer locked in for longer, through an extra quantity offer and strengthen the bonds + prevent him from going back for a fresh purchase. This often- and conveniently takes the form of bundled packs- buy 3 get 4 types, seen regularly in shaving cartridges and bar soaps.

Alternately, use this as a time to strengthen the brand values: and a thematically matched consumer freebie has an excellent impact. Logistically more complex allows for some fabulous creative execution to magnify the impact of the promotion- and grow the brand attributes and associations. 

Often seen with beauty brands- they help score! Treat this then, not as an opportunity for a “promotion” but also as an investment in brand building. 

• The Brand is growing - and needs a rocket-boost to take it into the next orbit. This is a delightful time to get really aggressive with your promotion planning. Your brand is flying off the shelves already, competitors are on the run- go for the chokehold. You will get both short term volume uplifts, plus a long term gain through getting many many more trialists into the brand. Choose from a extra-volumes of the same product to get unbeatable volume into consumers home and block out your potential competitors or go for an attractive third party promotion, thematically matched with your brand. Both will strengthen the brand, and get you the competitive advantage in the short term. Stay miles away from a price-off in this stage - you will only harm your brand though you will get a near term sales uplift.

Agonise! The path of deciding on a consumer promotion is a delightful one: depends not only on your objectives but also on the stage the brand is in. The same costs can give you very different results. And yes, for consumer products, plan well ahead- getting all the moving parts together at the perfect time (say, a targetted festival takes time). After all the intelligent thinking, an immaculate execution matters: remember there are competent marketers with your competitors too!