Strike the Right Balance Between Advertising and Promotions Spending
Strike the Right Balance Between Advertising and Promotions Spending
Two common questions we hear from senior managers are "How can I strike a better balance between advertising and promotional spend?" and "When am I spending too much on promotions?" Intuitively, marketing organizations want to spend more on advertising, but trade pressure and short-term budget requirements often pull the brand owners towards promotions. One could argue that, given that on average 70 percent of in-store promotions lose money for the supplier, the answer is pretty straight-forward: "you are spending too much on promotions!"
But there is nearly always more to it than that. One good rule of thumb though is, if you are investing heavily in any in-store activity, but not gaining market share, you're spending too much on the wrong activities.
There is no easy solution or magic formula, no panacea to deliver the uplift you want. The right balance will vary by category, brand and channel. And it depends on the competitive scenario and the country in which you are operating. Yet, in spite of all these variables, there are ways to trigger effective activity above and below the linegaining faster growth and better profits.
But before you can treat the problem, you have to diagnose its cause. Consider the flow of demand of a product from the consumer's desire to the shopper's purchase and the effect this has on your relationship with the retailer. Think of this like a pipeline; look for the pinch points in that pipeline.
If we spend money on advertising to drive consumer demandbut the shopper doesn't get the message and respond by buying morethat demand will not turn into consumption and the advertising funds are wasted. Conversely if we market effectively to shoppers, but consumers don't change their usage, then again the brand doesn't growand money is wasted.
When this occurs, pinpoint where the bottleneck is choking your results. Where are the opportunities for you to drive more consumption by the consumers? How can you effectively influence shoppers to buy your brandand to do so more often? Before you spend your valuable marketing monies on any activity, be clear about the opportunity to influence the desired outcome. Identify the barriers that prevent you from realizing the uplift you're seeking. Then define your desired behaviors so that you have a clear picture of your advertising and promotional spending needs.
So let's think through this pipeline. Is there a need or desire for the brand? Is the product format suitable for the consumption occasion? Is the consumer's experience with the brand likely to encourage consumption?
However, if all of those are in place, but consumption isn't happening, it is probably because the brand isn't available to consume when the consumer wants it. At this point, your problem is a shopper pinchpointsomeone didn't buy the brand (or enough of it), which is constraining consumption. If the shopper isn't making the product available for the consumer to consume, you need to influence that bottleneck.
So then the big question is why? Did the shopper understand the consumer's needs? Did we understand and meet the shopper's needs too (think budget, convenience, etc.)? Was the brand in the right stores (i.e., do your target shoppers (the ones that can unblock that consumption opportunity) shop there)? Could the shopper find the brand? Or did we get beaten at the fixture by a promotion?
To strike the balance of advertising and promotional spending, invest against the barrier. Use your knowledge to widen that bottleneck. If consumers don't want your brand, address the obstacle through advertising or product sampling. If your shopper can't find your brand in stores, invest more heavily in your distribution. Imagine a highway that is widened to five lanes so that more traffic can move more quickly. The wider highway funnels more vehicles. But when that highway is reduced to two lanes, the road becomes a parking lota bottleneck created because someone didn't have the foresight to recognize that traffic flows in a certain direction. Find the bottleneck in the path to purchase and invest in widening it
There is little value in driving consumer desire if the bottleneck lies with shoppers. And why invest in a retailer or activities that have no impact on shopper behavior? And if your customerthe retailerdoesn't support your in-store marketing goals, your advertising will deliver diminishing returns.
You can't dice up your advertising and promotions spending into two neat little piles. The influence of one overlaps the other. Instead, identify the opportunities for consumption, recognize the barriers that prevent consumption and purchase, and build a plan that balances advertising and promotion most effectively.
If you want to learn more about this contact me today and ask about how we can help you build effective investment frameworks for your brands.
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