Misalignment between consumer marketing and trade channel promotions results in shopper confusion and loss of revenue. Perhaps it is time to insert more of the consumer into the content of channel promotions.
Finally.
We are now seeing more real discussion in the consumer products industry about collaboration between the corporate marketing organizations and the sales organizations that are traditionally responsible for planning and executing trade channel promotions. Whether this is due to an increased push by retailers to join these two groups within their suppliers’ organizations, a surge in topics on marketing-sales collaboration of trade events, the expansion of revenue growth management as a more influential role or simply common sense, it’s about time we began serious in-depth examination of how to improve the success of trade promotions.
Right now, we are not doing well as an industry on that one, are we?
Nielsen is boldly proclaiming up to 72% failure rates for positive ROI on trade promotion, and my guess is that they are not wrong. I’ve spoken, written and complained about this for years, and perhaps it is time to bring another chain of thought into the picture…the Consumer Chain.
I coined this term a few years back to define the process a typical consumer moves through from deciding on something they need in their life to each step in the cycle of purchase, consumption and validation. Now, I am not an expert on consumer desire and the psychology of purchase decisions, but I do think those who are can attest to the fact that today’s consumer, no matter what age group or “generation” they belong to is stimulated along the typical decision pathway of acquiring goods and services.
Marketing organizations pride themselves in their ability to know the consumer. And, for the most part, they are very successful at gauging the potential demand curves and product lifecycles. Their advertising themes, messaging and positioning all work together to generate interest, desire, and yes, need for the product. Their budgets represent about one-third of the entire corporate marketing and promotion spending. Trade promotion represents double that figure.
Trade promotions are designed to show where the product can be purchased and how much it will cost. That’s pretty much it. Seems a bit out of balance, yes?
Smart promotion planners will work collaboratively with their retail counterparts to take advantage of the corporate marketing calendar of events, when they know it, to leverage the timing for national advertising and promotions. Unfortunately, that is too rare today.
To be fair, however, some of the elements of the modern Consumer Chain are already represented in the content of trade channel promotions. The impact on price reductions, for example, can significantly orient the consumer to decide where to shop (Shopping Research, Decision to Purchase, Decide Purchase Method, Make Purchase and Secure Possession). Far too many key account managers, retail buyers and marketing managers will tell you that is all trade channel promotions are designed to do.
But is that right?
Can trade and channel incentive promotions be designed to create need?
If these promotions are exclusively designed to point the shopper to the store location, shelf, and price, then no, they really cannot, because the shopper already knows what they need. There are significant investments in the quality of displays, demonstrations and even pricing that will trigger a shopper’s brain synapses to feel the need and drop the product into their shopping cart. That is what we call impulse purchases.
So yes, the content and form of a trade promotion CAN generate a need, of sorts.
Down here in Texas, we love our regional food – Tex-Mex, Barbeque and of course, Cajun from our neighboring state of Louisiana. H-E-B Stores have annual Crawfish Boils right outside the store, and they promotion the living daylights out of that for weeks in advance. When you see the preprinted inserts in the newspaper, hear the radio ads, and see the signage posted outside each store, I guarantee (or as our Cajun friends say Gar-On-Tee) you will have a need for fresh crawfish – even if you are new Texas resident.
Conducting research for my book, I had the opportunity interview a self-proclaimed Consumer Psychologist and expert on human response to advertising about how trade promotions can actually form a need in an individual. She gave me this explanation:
“In today’s marketing environment, stimulation is everywhere. Social media has certainly had an impact on what we think and feel, any and all forms of digital expression adds to the existing stimuli found in our natural environments like hunger, pain, desire and attraction. As a shopper myself, I look at the ads in the newspapers, flyers or other media and notice that everything is about price. The images do not make me want or need anything, and I have not seen a change in this type of [retailer] advertising since I was a kid. That said, there is no doubt that a stimulating image and clever copy can indeed bring a person into the process of thought that says, ‘I think I would like this or I think I need this,’ and move them toward actions that may result in doing additional research and evaluation. Our minds, once engaged in such a process, will naturally increase the intensity of the need…or simply convince us that we do not need it.”
So, although retailers clearly work hard to make their advertising effective, perhaps a concerted collaborative effort between the retailer’s marketing organization and the supplier’s corporate marketing teams can improve the chances of stimulating not only a decision to check this product off on their shopping list but create and item ON the list – generating a real need.
I also asked about instore stimulation. Most of the research has been around how to attract impulse purchases, of course, but she believes there is more the trade promotion can do to generate real need within the store.
“Need is defined through the senses. Retailers often take advantage of the senses of sight and smell with cooking demonstrations, beautiful displays and product placement on the shelf. Online ecommerce has an advantage over the retailers in the ability to add in more media such as video and even portray the sense of smell through videos of people sniffing and smiling at the wondrous smell of a cologne or perfume. I know that many retailers including Walmart, use end cap and kiosk videos to provide visual stimulation, but one of the most powerful things the retailer can do is to take closer notice of the manufacturer’s own product messaging and embed that content in their own ads at a much higher frequency than before. This will have a natural effect of ‘subconscious reminder’ where the shopper will recall the continual stimulation of the advertisements they’ve seen in their favorite TV shows, sporting events or movies. That is not as prevalent in the ads, displays or even prices of products promoted by the retailer, but can be a powerful stimulant of consumer need.”
This can certainly become a lengthy process, to be sure. The discussion of “need” in the formulation of and content development for trade promotions is likely not on the agenda, is it? Product, Place, Price – that is what it has been all about, and that’s fine. But if you are the CEO and your CFO continually tells you that three-quarters of your trade channel promotion incentives spending does not deliver positive ROI, wouldn’t you take some action?
Here’s my two cents:
The Consumer Chain is a nice way to represent the check-off items in the development of promotional content; but it must also be a great way to bring the corporate marketing and sales teams together with the retailer to create a more effective class of promotions. While so many other variables impact the success and failure of trade promotions, the coming together of these three major organizations to build more effective overall consumer engagement is a win-win-win. We know that product has to be on the shelf, and we know that there is a more effective combination of promotional tactics, but this could be one major missing link that will get us to 90%+ promotion effectiveness one day. And it will also give the brick-and-mortar retailers another arrow in the quiver of shopper experience.
Given the fact that we are emerging from the nightmare of a pandemic, and we are going to soon be shaking hands again, let’s make this topic a primary focus point and change the nasty paradigm of failed trade channel promotions.
