|Sales Promotions Can be Bad for Your Brand
Today's economic doldrums have spurred a tidal wave of sales promotions from companies. The reasons are understandable: A tight economy requires aggressive measures to keep and attract new customers. However, a singular focus on sales promotions can backfire, particularly if conducted too often, and can do more harm to your brand than good.
Lately, I've been receiving an unusual number of mailers and emails promoting one special after another, from printing companies as well as companies in other industries. The offers range from dollars off a purchase to giveaways and sweepstakes. While this is a predictable practice for retailers who are eager to dump inventory in the new year, it's unusual to see businesses of every variety playing the same game.
Risks to brand
An interesting article entitled "A Look at the Brand Economics of Sales Promotions," by Kartikeya Kompella, the head of a leading direct marketing agency in India, presents an economic model to evaluate the addition or diminution of sales promotions on brand equity. In it Kompella makes the case that too-frequent and ill-conceived sales promotions can negatively impact the value of a brand.
And vice versa. In other words, if a brand's equity decreases as a result of a sales promotion or a series of sales promotions, these hidden costs must be added to the sales promotion budget.
While mega-companies like AOL Time Warner have teams of researchers on staff to measure responses to sales promotions, even these large firms often neglect to measure hidden costs associated with brand fluctuations.
Zero down! Zero interest! Zero-percent financing!
The auto industry typically goes into high promotional gear at the end of the year. This past December, though, many car manufacturers hyped "zero" financing promos to get people to buy. While the promotions proved successful in bringing more people than normal into the showrooms, buyers were turned off by what they considered deceptive advertising.
According to a study by CNW Marketing Research, barely nine people out of a hundred actually got the zero percent financing. Additionally, the Digital Federal Credit Union reported that even if consumers were given the promotional financing, they actually wound up paying more interest over the long term. Car sales may have been boosted in the short term, but many car brands have suffered from consumers' perception that they've been bamboozled. Obviously, this negative effect on brand equity, Kompella argues, can and should be measured to determine a promotion's cost-value ratio.
Measuring a sales promotion's effectiveness, then, must include not only the impact on sales, positive or negative, but also the impact on a company's brand, positive or negative. While it's difficult to measure the impact of a single sales promotion, the extent that promotions have affected a brand over the course of a year can be guestimated. For those of us without hefty research budgets, one way to measure would be to conduct a "benchmark" poll of randomly selected customers at the start of the year, prior to any sales promotions. Then ask the same questions of the same sampling at the end of the year. As always, though, special care needs to be taken in the design of the questionnaire to avoid biasing responses.
Lower prices, lower perceived value
Unfortunately, desperate times often beget desperate measures. There are many printers who have been forced to lower prices in an effort to gain quick market share. Beware, though. Such bargain-basement tactics can lead customers to perceive a drop in your brand's quality, too. This perception, in turn, can lead to a drop in sales or an unwillingness to return to pre-promotion prices.
In an effort to contain marketing costs, printing companies are prone to cutting corners when designing and executing sales promotions. With all those underutilized in-house Macs and prepress techies, it's hard to justify outsourcing design and marketing help. However, the risks to your brand of too-frequent, ill-conceived, and poorly designed sales promotions can cause irreparable damage to a brand.
Charlotte Mills Seligman is president of Traversant Marketing Communications. The firm specializes in planning and executing integrated marketing programs for printing and allied graphic arts companies, with nearly two decades of expertise in the industry. Previous columns and issues of the company's Ti Monthly e-newsletter are posted on http://www.traversant.com. Inquiries should be directed to (415) 357-2929 or charlotte @traversant.com.
© 2003 Charlotte Mills Seligman
January 20, 2003