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Sunday, June 15, 2008

“How do we find out the type of sales promo that consumers want?”

Q: It was helpful to read your previous column tackling the issue of sales promo duration and extension. Our company is heavily into the snack food and beverage markets. We have a different sales promo problem. Every time any of us brand managers would propose a sales promo campaign, our marketing director raises the same 2 related questions: “How do you know that this is the type of promo that consumers want? Is this the effective promo for your consumers?”

We don’t seem to know the right answer or maybe how to answer. That’s because our marketing director has never been happy with what we say. We often justify our sales promo or below-the-line campaigns with past experience. “This worked well the last time we did it,” we would say. Our marketing director would just sigh. And because of the urgency to get his okay, he usually but reluctantly gives his “go-ahead” signal. He communicates the same non-verbal rejection to our other justification: “This was what worked with our leading competitor last quarter.”

So please tell us. How do we find out the right answer or what’s the process for us to follow to find out? We’ve closely followed your column and don’t recall that you’ve dealt with this sales promo issue.

A: You’re partly correct in saying that we’ve not dealt with this sales promo issue. We’ve actually touched on it before but only in an indirect way. We’ve not completely addressed it. So here’s our more direct and more complete diagnosis and prescription.

Let’s begin our diagnosis by asking you: “What was your starting point when you formulated your sales promo campaign?” Actually, you already answered that. But we’re asking because we’d like to highlight the importance of this starting point.

You said you and your fellow brand managers start with either a sales promo that “worked well last time” or else with one that previously “worked with (your) leading competitor.” So your chosen starting point is to go immediately to a sales promo tool, say, product sampling, price-off, contest, coupons, or some other.

This is the first thing you have to correct in the implicit “sales promo selection process” you’re following. Starting with the sales promo tool to use is the wrong starting point. The correct one is just like in any other marketing mix element. For example, the Brazilian company that introduced the world to “Havaianas” when it was developing this phenomenally successful fashion footwear, started by asking what other needs and product values of a pair of slippers consumers would find irresistible. In the same manner, when Cebu Pacific was deciding on the pricing of their budget flights, it chose to start with what its target passenger market would find as “value for money” ahead of cost and competitive considerations. So the correct starting point is what you specifically want your target consumers to do. What’s the target specific consumer response you want your sales promo campaign to go after?

Why is it that sales promo became a blatant exception to the correct practice of always starting with the consumer? It’s a marketing mix element that’s even more well-known and more often used than product, price, placement, or packaging.

One primary reason relates to sales promo’s multiplicity and variety of forms. That multiplicity came from sales promo’s character as a limited period marketing mix element. By definition, sales promo is “a device aimed at generating active consumer response within a short period of time” (Blattberg and Neslin, 1990). So if the product category where your brand belongs is sales promo driven as with apparel, shoes, bags, and other fashion items, you’ll need to have many options for doing a sales promo series. Thus, there must be variety and many forms to choose from for what sales promo to do next and the one after.

Under the circumstances of tight decision timetable and a whole lot of open options, it’s understandable to see why marketers would tend to start with the sales promo tool more than with the target consumer response. Considering what consumer response to target requires additional time or even consumer research. In contrast, the available sales promo options are there and are familiar. In addition, there’s past experience and competitive history about them as quick and ready guides.

But the very same argument applies to the choice of target consumer responses. There’s past experience and competitive history available as decision guide. The only real difference is that tradition and conventional practice are with immediately starting off with the sales promo tool. So we say: challenge tradition and convention.

What are the consumer responses that past sales promo campaigns have targeted and which sales promo tools have proven more effective than others in attaining which target response?

Lehmann and Winer (2002) have as good a list as any of target consumer responses with their corresponding appropriate effective sales promo. These two authors partitioned their list and distinguished between sales promo “for short-run and transactional purposes” and those “for long-run and relationship building purposes.” Here is the list:

For short-run, transactional purposes.

Target response = “to get current consumers to buy more.”
Appropriate sales promo = volume discount, value packages.


Target response = “to get current consumers to be more loyal.”
Appropriate sales promo = frequent buyer programs, premiums, pack-in coupons.

Target response = “to get current consumers to buy now.”
Appropriate sales promo = rebates, coupons.

Target response = “to get non-user consumers and/or competitors’ consumers to try your brand.”
Appropriate sales promo = sampling, trial pack sizes.

For long-run, relationship building purposes.

Target response = “to enhance brand awareness and recall.”
Appropriate sales promo = sweepstake, contest.

Target response = “to enhance image.”
Appropriate sales promo = sponsorships, scholarships

Most likely you probably are asking now: “So how do I decide which consumer response to target?” That basically depends on what stage of brand acceptance your target consumers must be in at the moment. In other words, what consumer response to target depends on knowing that stage. So learn that brand acceptance stage.

Suppose that your target consumers happened to be product category non-users. Let’s say that they’ve just gone through the awareness and recall stage for your brand and are now ready for the next stage of brand trial. If we now refer to the Lehmann and Winer template, we can see that the correct target consumer response is: “to get non-user consumers to try our brand.” From the same template, we learn that the appropriate effective sales promo is a choice between sampling or trial pack sizes or both.

If you are a careful reader, you may have noticed our first qualifying sentence: “Suppose that your target consumers (are) product category non-users.” This is important. It says that the stage of brand acceptance will differ with the target consumer segment. So, you have to be specific about your market segmentation and your target market segment.

The foregoing contains the elements of the process you’re after: “the process … to follow to find out” the right answer to your marketing director’s question about “the effective promo for your consumers.” If you work the preceding diagnosis and prescriptions backward, you should come out with this emergent 4-step process:

1st step. Do your market segmentation and market segment targeting.

2nd step. Identify your target consumer segment’s brand acceptance stage.

3rd step. Determine the right consumer response to target in the brand acceptance
stage where your target consumers are in.

4th step. Identify and choose the sales promo that fits the target consumer
response.