Promotions are a critical component of increasing sales, pretty well regardless of category. But are all promotions effective, not just in the short term, but in their broader effect on various aspects of the brand or the business? The answer has to be “no.” A simplistic approach to promotional strategy can actually be harmful and it is indeed the strategy that is so frequently flawed, even if the execution is professionally implemented.
This opens up a whole raft of fundamental issues concerning the business positioning, brand identity and credibility, price positioning and the flow on effects throughout the value chain. The latter, in particular, cannot be ignored if there are resellers involved, because the same issues affect them and their relationship to the supplier and to the brand. Conversely, if only direct online selling is involved, the potential harm is at least restricted to the marketer,
Evaluating cause and effect
The term “win-win” is frequently heard, mostly in the context of one-on-one negotiations. It is certainly a valuable concept where it allows both parties to conclude that, even if not absolutely equal, tangible benefits have accrued mutually. Unfortunately, the broader concept of cause and effect is less well understood and there is often scant recognition of the complexities that may be created even with the best intentions.
Appreciation of cause and effect is probably one of the most important factors in devising promotional strategy. The outcomes must be considered from the viewpoint of each and every stakeholder in the value chain. A promotional idea that appeals to, say, the reseller, can easily backfire if it contravenes the manufacturer’s carefully developed brand positioning. The converse is also true when a manufacturer, perhaps overstocked in a particular line, decides to run a promotion without considering the effect on reseller inventory, or on end-user brand perceptions and so on.
Techniques affecting business and brand considerations
In addition to the value chain issues, business positioning, brand identity, credibility and price positioning cannot be overlooked insofar as promotions can have strongly positive or negative effects.
If the brand identity is largely irrelevant because it is a “me too” copy, there may be merit in promoting price deals, so long as the margin is not eroded for whatever stakeholders may apply. However, it is difficult to raise a price, once a low benchmark has been established. Better by far to offer an inducement in the form of a redeemable voucher or coupon, not forgetting the mechanism for redemption and if any problems will be created for distributors etc.
“With purchase” offers are much safer because they do not erode the perceived value of the promoted item. The key is, of course, value perception, not just for the item to be purchased, but for the giveaway as well. If the giveaway is seen to be rubbish, or inappropriate, it may do more harm than good.
“Win this prize” may have appeal and there may be contra possibilities. The downside is that for one winner, there will be many losers so numerous supplementary prizes may be needed to boost the apparent chances of winning something worthwhile.
Appraising the concepts
It is worth remembering that many promotional concepts are developed and sold to clients by professional promotional firms. They have their own objectives and these may not always meet the criteria of the client who can easily get carried away by the slickness of the concept and the presentation.
To devise a sound promotional strategy for a specific business, there is much merit in preparing a detailed chart and/or document defining the probably outcomes for all parties. Having to justify the issues in writing frequently helps to eliminate many of the notions that cannot stand up to scrutiny. It may also be value in discussing these factors with some selected stakeholders before planning goes too far. Care should also be taken to include stakeholders of strategic importance in key market segments, not just due to the amount they purchase.
In summary, promotions can work brilliantly if every aspect of the strategy and implementation is evaluated and executed well. The traps for the unwary are, however, both common and potentially serious.
