With a surge in sales promotion budgets, are brands returning to marketing basics?

Increased spend on sales promotion is leading a revival of marketing budget growth, according to the most recent Bellwether Report from the IPA. Sales promotions saw the biggest budget increases of all categories in the first quarter, recording growth of 8.8 per cent year on year. In the last report, budgets has been shrinking at -4.4 per cent.

A marked rise in sales promotion budgets shows that brands are prioritising the customer - showing them support through the cost-of-living crisis. The increase represents the strongest rise in sales promotions spending for nearly two decades. The sales promotions category includes in-store promotions and incentives, coupons, discounting and loyalty card promotions. The first quarter increase in sales promotions budgets coincides with a burst of activity around retailer loyalty schemes, organised through growing retail media networks, to offer immediate deep discounts to shoppers suffering during the cost of living crisis.

But does that mean that brands (and their agencies) are falling back on marketing’s fundamental levers of growth, while ignoring the distractions of nascent technologies? And how can brands work to appeal to wider audiences and grow market share despite the ongoing economic turbulence? And does that mean brands are essentially forgetting that they are designed to defend price premium? How do brands strike a balance?

We ask industry insiders to weigh in with their thoughts.

Rob Sellers, head of retail at VCCP

The best creative marketers have always recognised the power of brand activations and promotions to deliver on both sales and salience. The key is to understand the audiences you are trying to engage - whether the end consumer, or the channel partners that help you reach them. And at the moment, we are in a period when the totems of value are incredibly important. We have seen people flood back into physical stores, partly due to rediscovering the ‘joy’ of shopping, but acutely because they feel it’s easier to navigate retail environments in search of the right deal for them.

So winning in these spaces has always been about the right, meaningful, human insights which can be scaled for millions of shoppers in thousands of stores. And has never really been about a stunt or a gimmick in pursuit of more brand fame. A promotion that resonates in a more fundamental way will build your brand credibly and lay a foundation for even more success when economic times are easier.

Lucas Brown – chief strategy officer, Total Media Group

A renewed focus on sales promotion budgets is a great example of how brands are being agile in the face of ongoing economic turbulence.

Brands must not forget though that they still need to position themselves for long-term sustainable growth, even in the face of uncertainty. An over reliance of sales promotions in the short term creates a false economy, aptly described as “the crack cocaine of marketing” by Les Binet - adam&eveDDB’s group head of effectiveness, at last October’s IPA’s Global Effworks conference. He explained how econometrics can prove that brands who lean too much into sales promotions, create an illusion of sales uplift, whereas in fact you are often just subsidising returning sales.

Of course, there is a balance here. Brands wanting to stay relevant to customers through the cost-of-living crisis by offering discount will continue to support this, but they should not forget to harmonise with both longer-term branding and a shorter-term sales strategy.

We would encourage brands to consider three important approaches to get the balance right:

Creatively grabbing attention

The ability to capture and hold someone's attention has become increasingly more important in today’s marketing. Brands must find more interesting ways of staying relevant and keep themselves front of mind. However, the opportunity for brands is to leverage the fact that media owners are opening themselves up to creative solutions, you just have to work harder to develop these. But the effort is worth it. Dr Melissa Hughes, President and Founder of The Andrick Group who specialises in brain-based research, describes the value of surprise by saying “Think of it as the reset button for the brain. It actually stops all of the other brain activity to let you find meaning in the surprise”. Recent brain-based research shows that surprise intensifies our emotions by about 400 per cent, as our brain releases noradrenaline, which is the neurotransmitter responsible for focus and concentration.

Tactical sales activation advertising

Marketers can strategically drive short-term sales by creating a sense of excitement, urgency, or need around their products or services through their advertising. One way to achieve this is by connecting meaningfully with the customer during the conversion process on a website or by placing branded advertising close to the point of purchase. By mapping out these moments, you can focus your media budgets, and deliver meaningful short-term uplift in sales. We increased our client, Young’s Seafood’s sales by over 10 per cent using this sales activation approach.

Embracing technology

Keep an eye on emerging technologies and trends that have the potential to disrupt the market and create new opportunities for growth. This might involve experimenting with new channels and platforms, developing innovative products and services, and leveraging data and analytics to gain deeper insights into consumer behaviour and preferences.

Neil Godber, executive strategy director, Wunderman Thompson

Shopping habits may have evolved as people hunt around for better value in the cost of living crisis, but they are still buying. So, for brands to grow, they need to build on the basics: continually create enduring brand value to as many category buyers as possible, coupled with immediate response driving mechanics, such as promotions, for people in-market now.

Whilst this sounds simple, brands face choices in how they chase all important relevance. Some are catering for cash-strapped consumers with strong value for money messaging and widespread heavy promotions. Alternatively, other brands follow the path of doubling down on what made them so distinct, different and desired in the first place, coupled with targeted promotions for key buyers.

Either way, it’s not only consumers’ budgets that are under pressure, but marketers’ too. So practitioners need to think carefully about how they manage their whole brand across the living, buying and using stages of the journey, to ensure they don’t blur into the conventional Covid-inspired comms we grew to ignore.

Tom Moore, VMLY&R UK head of commerce

Sales promotion served us well in the past but offered little in way of brand building - providing money off for purchase now rather than tomorrow. It no longer reflects the world today, where new generations of consumers define what brands stand for and use buying power to achieve this. The purchase funnel is collapsing as shoppers go from discovery to purchase in a click, meaning consumer connectivity to brands is made or lost in commerce interaction.

We need to redefine this marketing basic as ‘experience promotion’. Campaigns that move from pricing activity at shelf to ideas that capture imagination, living in or out of store and compelling shoppers to buy while building equity too. Within this, there’s a real role for technology. Not technology’s sake but as an enabler.

So no, this is not a binary choice, rather, a convergence.

Oreo ‘Stuff Scan’ is a great example– a promotion at heart, connected to culture to drive brand saliency and commercial return. Shrewdly recognising that the most popular colour way in the shoe world is named after Mondelez’s Oreo, the campaign invited people to scan hundreds and thousands of real-life trainers on streets, in-store and on websites for a two-for-one discount code for real Oreo cookies. Every pair of trainers became a commercial channel– delivering sales and new customers for Oreo and Target.

Paul Bainsfair, IPA director general

This (the report) is a positive start to the financial year for marketing budgets, all things considered, The overall increase in confidence from UK companies regarding their financial prospects is being reflected in their marketing budget decision making.

As the cost-of-living crisis continues, it is understandable for companies to offer sales promotions to help their customers’ tightened purse strings. To ensure brand loyalty isn’t eroded and to protect the long-term health of their brands, however, such activity must be coupled with investment in longer-term brand-building media. We are pleased, therefore, to see that while investment in sales promotion activity has spiked this quarter, investment in main media advertising was revised up to its strongest level since this time last year.