Promotions
#marketing
#promotions
#advertising
In this series, we started with a discussion of what marketing is, and have gone through three sections talking about the first three P’s: product, price, and place. We now get to the most visible section of the marketing mix, Promotions. For most consumer products, promotions is how consumers get to know about the products. Promotions is also where the “pull” side of the equation starts, in reference to the “push and pull” segmentation of the marketing mix. At this point, all the three other P’s (the “push” side of the equation) have already done their jobs, and the product is at the stage where it is about to come into direct contact with the consumer, perhaps for the first time, and hopefully not the last. The horse has been led to the water. From here on, the manufacturer turns over control of the product’s movement into the hands of the consumer (oftentimes quite literally). There is no longer anything that the marketing team can do to push the product any farther towards the consumer. This is the finish line. They cannot make the product jump into the consumer’s hands. All efforts now switch to getting the consumer to move his or her hands to pick up the product. It is time to make the horse drink.
How is this done? There are many, many tools available to the marketer. Let us start with the easy and simple ones. Using the bakeshop example from the previous chapters, let us say that you have produced a good batch of scones from your oven, thirty pieces. It is a new product offering using a new recipe and you are excited to see how well your customers will take to them. You put them in your store and wait for customers to buy them. Some do, some don’t. Towards the end of the day you have about eight pieces left. You don’t want them to spend the night there because tomorrow they will not be as fresh, and whoever buys them may resent that you have sold them some not-so-fresh bread. These customers might not want to go back to your store anymore after an unpleasant experience with your products. Marketers know that it is infinitely easier to get a satisfied customer to purchase your product again once they have tried it and were happy with their purchase, versus convincing someone to try it for the first time. And it is even harder to convince someone to try it again if they have already tried it once before and they were not happy with their purchase. Going back to your leftover scones, when you are faced with this situation, what do you do? You go into promotions mode. You put them on sale by offering them at half price, or you pack them two-in-a-bag for a buy-one-get-one (BOGO) offer, or you bundle one onto a loaf of your fast-selling sliced bread.
Promotions allow you to manipulate the other P’s to make your product more attractive to the consumer. A simple discount could get the job done. You simply tinkered with the price. If you repacked them and bundled two of them together, or added them onto some other product, then you have manipulated their packaging, not just their price. You could add some other item such as a single serve tub of herb butter to the bundle package, which means you have added a premium item to your bundle. That is called a “premium-on-pack” (POP) promotion. If your product is the premium item bundled onto another product that’s doing the promotion, then you have also manipulated your established distribution setup because you are now riding on the distribution system of the other product that is giving you away as their premium. One very popular example of the premium on pack tactic is the McDonald’s Happy Meal. The consumer gets a free toy when buying the kiddie meal. You can cut up one or two pieces of your brownies and offer the bite-size serving as a free sample to get your customers to try the product. This is called sampling and it is very effective particularly for food products. Costco stores in the US have been using this simple marketing tactic not just to promote particular items but taken together, as one of the attractions that draw foot traffic into the stores. On a good weekend, a customer could get quite full just trying out the many samples on offer. Some cookies here, some noodles there, and even some juice drinks to wash them all down with.
Apart from manipulating the other P’s, what else can promotions do to attract customers? The single biggest part of Promotions is an industry unto itself – it is called advertising. It is such a major part of marketing that it is often treated as a separate and almost equal entity in relation to marketing. It is certainly what most people are familiar with when they think of promotions, or even of marketing in general. And it is arguably the most visible element in the marketing mix. Advertising is such a large industry that its influence and scope extends to several ancillary sub-industries. We will need quite a few sub-chapters to cover all of the branches that grow out of the main tree trunk that is advertising. Just to mention some of the more prominent sectors: advertising agencies, commercial production companies, design studios, and the media. The media itself is also a large industry on its own, with its own set of subsectors: broadcast (television and radio), traditional print, outdoor (with its many variants), digital (also with its own set of variants), and cinema. There is also an endless variety of creative executions available for practically every medium. Billboards, for example, can be purely two-dimensional or three dimensional, stationary or mobile, and even incorporate a video element. Let us not forget research. Research companies do not just tell manufacturers who will likely buy their product, they provide marketers and advertisers with data to tell them what media these people consume – what they watch on TV, what radio stations they listen to, what they read in online media, blogs, social media, etc., etc., etc.
With such an expansive set of elements and options for the marketer, where do we begin a discussion on promotions? Let’s start with a definition. What exactly, is a promotion? The simplest explanation is that it is a tool used by marketers to boost sales. A promotion is normally resorted to as a means to achieve a certain sales goal. Hence a promotion is usually also known as a sales promotion.
A secondary definition looks at promotions as a discipline that is not limited to merely a tool to give sales a boost. This other definition is what some people might call Branding. What is branding? How is it different from promotions as defined in the previous paragraph? To help distinguish one from the other, let the first definition be referred to as sales promotion, and the second definition branding. A separate discussion on branding will follow in a subsequent chapter. For now, a quick description should suffice: branding is the creation and cultivation of a particular image and reputation associated with a brand to distinguish it from its competitors. This is achieved through various means mostly in communications, including, but not limited to advertising, PR publicity, and all forms of media visibility. Apart from communications, product design, packaging and even pricing can affect a brand’s reputation, In other words, anything that can enhance how people perceive a brand.
Let us circle back and work on the first definition. The simplest sales promotion is a SALE. You see this all the time among retail businesses. What is a Sale exactly? Usually it is a limited offer of reduced prices for certain products that would normally be priced higher. Many retailers conduct regular sales to move inventory. There is a popular shoe store in Manila named Via Venetto. It had a very strong following because they offered really good quality shoes. In fact their shoes were so good they cost more than their imported competitors, and in spite of the higher prices, people kept buying them. The owner once declared that whenever she needed money, for whatever reason, she would just do a sale. She did not even need to advertise the sale in the media. All she would do was put up handwritten signs on the display window that said, “Sale.” And overnight (almost literally overnight) she would be awash with cash. Her loyal customers know the value of her products and they need very little prodding to buy more, whether or not they need more shoes at the moment.
There is a current equivalent of this shoe business model in the US today, an even better version of this model. It is a brand called Rothy’s. Their product is superior to most other brands because their shoes are exceptionally comfortable, and are made from raw materials that include recycled plastics – think bottled water plastics. While that alone is impressive enough, this also makes their shoes washable. You can throw them in your washing machine when they get dirty and they will come out good as new. But the real distinction of this brand is that it has gained a cult-like following. They have their own exclusive circles within certain social media platforms. Their loyal customers not just swear by their product, they go out of their way to endorse them, and go even as far as “investing” in some of their stocks when they feel they will be worth more after a certain period of time. This happens because their stocks are always limited, with many of their models and designs archived after a short run, and the few pairs that were acquired by the lucky buyers then become “collector’s items” fetching more than double their original price tags. Their social media circles allow them to buy and sell to and from each other. So if a particular design is no longer in stock in their Boston store but is still available at their Chicago store, a buyer could ask another group member to buy it for her and ship it to her separately. For a fee, of course.
Going back to the discussion on promotions, how does a regular consumer product do a promo? What does that involve? Let us have an illustration. Let’s say Coca-Cola sales in the first quarter had been below average due to an extended and unusually cold weather. Management decides to run a promotion in the second quarter leading up to summer to make up for lost sales due to the decreased demand caused by cool weather last January to March. If the average sales volumes for Q2 in previous years was around 10 million cases a month, they would like to achieve a 20 percent improvement. So the new target for April-May-June is now 36 million cases (30 million plus 20 percent). How do they do that? The marketing team comes up with an idea to entice consumers to buy more Coke by offering a premium-on-pack giveaway item, and the trendiest toy at the moment is the fidget toy. They engage a supplier to provide six million fidget toys that will be given away to consumers who will purchase two six packs at a time (as opposed to the usual one). Number crunchers have determined that with this incentive, at least 20 percent of their consumers will want the toy and buy double their usual purchase to get it. If it clicks, they will achieve the goal and overall sales will more than make up for the loss in the first quarter. Let us say the promotion is a hit and they do indeed meet their target and even surpass it. Everyone is happy, and some of the top salespeople get performance bonuses.
This begs the question: if promotions are so effective at increasing sales, why don’t they just keep running them all the time? Because by their very definition, sales promotions are temporary and are done to achieve an artificial boost in sales. They are not what you would call organic growth, and are therefore unsustainable. Let’s take a closer look to get an explanation – remember that the people who bought twice their normal purchase only did that to get the toy. Once they have it, they are not likely going to do it again. In fact, they may discover that they have overstocked on Coke, and will simply not buy another case on their next grocery run. The promotion did not increase their thirst. It may have simply encouraged the consumer to advance what would have been his next purchase. What happens to sales after the promotion? In many cases, they go into a slump again. A sales promotion may not necessarily increase product consumption, but it is intended to increase product purchases. However, it does happen sometimes that actual consumption is increased – for whatever reason, such as seasonal factors, like warmer weather, parties, etc. – and so the extra case purchased to get the toy sometimes gets consumed anyway without disrupting the regular purchase cycle, meaning, the consumer still buys a case of Coke at his next grocery run.
Understanding Marketing 