Cutting The Promo Pie

How does it feel to be a respectable citizen?

That’s what promotion marketers have become, judging from Promo’s 2007 Marketer Trends survey.

Two-thirds of all firms now plan promotions as part of their overall marketing strategy. That’s up from last year.

Even better, last year’s marketing budgets were pretty evenly split among consumer promotion, general advertising and trade (non-consumer and retail distribution).

All of which means that promotion can no longer be viewed as below the line (the term used to be an insult on Madison Avenue). As one respondent wrote, “Advertising’s down, promotion’s up…it’s getting hectic as they overlap.”

This shift also is reflected in budget plans.

Or the 152 marketers surveyed, 42% intended to increase consumer promotion spending this year. Only 7.2% expected to reduce it. A third of those dollars have been earmarked for online media.

But they want to know what they’re paying for. Just how do marketers measure campaign effectiveness?

Many base it on sales growth. However, two-thirds believe brand awareness is the mark of a successful promotion. And more than half use return on investment.

Those aren’t the only trends worth noting. Another is that over a third of our respondents are doing more joint promotions with outside partners. Ditto cross-promotions with other brands.

Show business isn’t quite as hot as it was. Only 15% are increasing their tie-ins with entertainment properties, and 9% are cutting back.

Meanwhile, 10% want to form more affiliations with airlines and hotels. But almost as many are trying to cut back on them.

Direct mail remains the most widely used medium, with 37% putting it at the top of their spending list. Second place goes to the Internet (32%).

THE AGENCY BEAT

Let’s talk about loyalty — that is, loyalty to an agency.

Almost 20% of those polled hired new agencies last year, and 31% stayed with the ones they were using. Only 9% severed some relationships.

What are people looking for in an agency? Service was cited by 20% and price by 13%.

Creative work ranks third at 12%. Previously established relationships were mentioned by just 5%.

One thing’s for sure: More companies are outsourcing some of their work. The survey found that 38% did more of this in 2006, compared with 24% the previous year.

And who makes decisions on marketing strategy?

Executive management is involved in 66% of our responding firms. Then there are brand managers (38%); promotion managers (32%); promotion directors (28%); ad agency executives (17%); assistant brand managers (14%); and promotion agency executives (11%).

HOW BIG IS THE BIZ?

It may not signal a boom. But growth in promotion marketing last year was hardly shabby.

In-store advertising and product sampling helped fuel a 3.8% lift in spending. The grand total was $44.25 billion, according to last month’s Veronis Suhler Stevenson Communications Industry Forecast.

Investment in business-to-business promotion jumped by 4% to $44.76 billion, as corporations expanded investments in employee incentives and quality giveaways.

Point-of-purchase outlays grew by 5.6% to $19.33 billion. In-store media became the focus of marketing campaigns instead of an ancillary activity, according to the VSS report.

Games and contests generated $1.83 billion in spending in 2006. Product sampling achieved the highest growth of all promotion efforts, rising 9.4% to $2 billion. Roughly $7.09 billion was spent on coupons, a 2.3% increase.

Then there’s what VSS calls “alternative advertising” — Internet, mobile, video games and digital out-of-home. That category grew 37% to $26.53 billion last year and posted a compound annual growth rate of 24% from 2001 to 2006.

In contrast, spending on traditional marketing like direct mail and promotions went up just 5% to $192.34 billion in 2006, the forecast notes.

Branded entertainment rose 15.7% to $52.87 billion, as marketers increased spending in the double digits for events and sponsorships. VSS groups branded entertainment and PR together under “marketing services.”
— Larry Jaffee

METHODOLOGY

This survey was conducted for Promo by Penton Research, an in-house firm. It was e-mailed to 22,702 of the magazine’s e-newsletter subscribers as well as print subscribers in manufacturing, retailing and service fields. Participants were chosen on an nth-name basis (a representative sample of all subscribers).

An initial copy of the survey, offering a chance to win one of four $50 Amazon.com gift certificates, was sent out July 10. Two follow-up e-mails, along with the sweepstakes offer, were sent to non-respondents.

Results are based on surveys returned by 152 qualified participants, including those in manufacturing (10%); financial services (7%); grocery products (7%); retail (6%); entertainment (5%); health and beauty aids (5%); automotive (5%); non-alcoholic beverages (4%); travel and tourism (4%); communications (3%); industrial products and services (3%); miscellaneous packaged goods (3%); alcoholic beverages (3%); and apparel and accessories (3%). The remaining 32% came from a variety of industries, among them Internet services; publishing; toys and games; home furnishings; sporting goods; office products; restaurants; consumer electronics; public utilities; and tobacco products.

In some cases, subscribers who marked “Don’t know” or “Unsure” in response to certain questions were eliminated from vote totals. Any question for which this was done maintained the minimum number of responses to ensure stable data.