Think BR: The future of the £26bn sales promotion industry
Brands and retailers are caught in a perfect storm of sales promotion, writes Colin Lloyd, co-author of sales promotion history 'Beyond Redemption' and chairman of Motivcom.
Colin Lloyd, chairman of Motivcom
Research published in 2009 by the Advertising Association identified that branded goods spent £26.5 billion on sales promotion activity, compared with £18.6 billion on advertising and marcoms.
While it might be a shock for many, I wasn’t that surprised by the figure, seeing that in the UK, and most of the modern world, there is hardly a brand that is not ‘on promotion’ in one form or another. Promotions pervade the lives of every citizen.
Indeed, The Future Foundation, which is soon to conduct the largest ever study into the phenomenon, has already identified that 70% of consumers will delay a purchase until it’s on special offer and then shop around to find it, 40% pass on high street vouchers to friends, 50% are unwilling to pay full price for travel, 40% for clothes, and so the list goes on.
The word promotion covers an enormous array of techniques: free this, win that, collect those, money off this, BOGOF, twofers - as the US call them - and every variety of discounting and couponing imaginable. In the US, Sunday is coupon clipping-out day from the FSI’s that pervade every US newspaper, resulting in almost $300 billion of coupons being redeemed annually. It’s massive in the UK, even bigger in the US and growing everywhere.
Unfortunately it’s also causing brand grief. One of the largest UK food manufacturers recently confessed to me a £300 million promotion brand cost just to "stay in the game". The retailers are in no better position. Between the brands and retailers a perfect promotional storm has been created and no one is able to get out of it. Mr and Ms Great Britain are the winners and are ‘loving it’. Of course, the digital phenomena is adding to this momentum as promotion delivery costs become minimal, and a quick look at voucher site Quidco will allow you a glimpse into the future.
As we peer into the fog of the recessionary future, I was inspired by 1970s financier Jim Slater, who said: "In the absence of a crystal ball, a history book is the next best thing". After reading this, my co-author Ken Spedding and I decided to create our own crystal ball and write and publish ‘Beyond Redemption’, the first ever history and future insight into promotion marketing as it’s now called. It catalogues the good, the bad and the downright ugly.
To see into the future we interviewed the country’s leading practitioners to see what they had to say: mobile, digital, green, procurement and personalities immediately came to mind.
What we have found is that the discounting spiral will continue to grow, but we will find a more imaginative way of expressing it to enhance brand values, and hopefully engender more loyalty than we have in this promiscuous world.
‘In your face’ promotions will be replaced by a more considered ‘permission’ engagement approach. At the heart of any good promotion is the mindset of creative entrepreneurialism and it’s needed now more than ever. If the laws do not change and procurement does not drive talent out of the business, new techniques will evolve that will hopefully get us back into the creative era that had real brand impact.
Technology, such as that used by Dunnhumby for Tesco, has and will create greater efficiencies. As we move from Web 1 through Web 2 and into Web 3 we will finally witness the predicted seismic shift in consumer power driven by social media, affiliate power, Skype, apps and the like. The winners will be those that remember that nothing has changed in what motivates consumers, it’s just the magnitude, social environment and delivery.
Colin Lloyd is co-author of sales promotion history ‘Beyond Redemption’, chairman of Motivcom, founder of KLP, and former CEO of the DMA and president of the IPM.
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