Promotions: To be, or not to be, that is the question?

The same study estimates that only 4 percent of consumers in certain fmcg categories would be willing to stick with their brand if a competitor cut price or offered better value for the same price. It seems that consumers are continually looking for a better deal - leading to most fmcg categories being dominated nowadays by promotions and price-offs.

Trade spends across fmcg categories have seen a dramatic rise in the last decade. In the US, trade spends accounted for 20% of the total marketing budget in the early '80s. That spend has now grown to almost 80%. Clearly marketers see an increasingly important role for trade marketing.

In the Middle East various trade promotions have attracted huge consumer spending in recent years. TNS World Panel data shows that price-offs constitute the most common promotion type followed by value added offers. Increasingly deals are being offered to consumers in the form of price attractions, especially in Saudi Arabia - the region's biggest market.

For the marketer a big question is: what do price-offs do to brand equity? Consumer Panel data tells us that price promos normally increase brand volumes during the time of the promotion. In fact, for many categories the increase can be as high as 20 to 30%. A good enough reason for such a huge variety of promotions to hit the market during Ramadan and other festive periods.

And other typical questions are: will the effect be long term? Are my own users buying more, or is the price-offs bringing in new users? If new users are being brought in, are they continuing to purchase even after the promotion period is over?

Consumer Panel data shows that there is a 'deal shopper' who usually takes advantage of price promotions. These shoppers have a propensity to buy brands or categories on offer, which they may not otherwise normally purchase. In fact such consumer segments typically contribute three-fourths of a price promotion pick-up. But then again it is the deal shopper who is attracted to promotions of competitive brands as well.

It's important to know then, what proportion of your brand's franchise is made up of 'deal shoppers'? In effect how vulnerable the brand is to competitive promotional activities.

Another question which looms large is - do price promotions have the same impact on new brands as on established brands? And if the new brand is a line extension what is the extent of cannibalization of the parent brand? That is, can a promotion on the new brand eat into the volume of the parent brand?

Consumer Panel data can help marketers understand such dynamics hidden within the overall volume numbers. It is one thing to say that a promotion has improved overall sales volume by 20%. It is quiet another to realize that the incremental volume has come from buyers who are looking only short term for any price off; or that the incremental volume has in effect been drawn from the parent brand's core franchise.

In other words, it is the difference between knowing that you have attained a certain share point increase (the obvious) - and appreciating the quality of the franchise that makes up this increase (the insight). Share points are immediate outcomes of marketing inputs, but quality of share is the basis for longer term future planning.