Homer Simpson once said, “Beer. The solution, and the reason, for all of life’s problems.”
I was reminded of that paradox while reading business wire stories this holiday season. To paraphrase, it seemed as if the financial world thought promotion is, “The solution, and the cause, for all business downturns.”
The recession had millions of citizens jobless and the rest feeling uneasy about their status. The threat of terrorism was going to keep shoppers from congregating in large numbers. The only thing that would save the holiday shopping season, according to journalists and analysts, was an avalanche of promotional offers that would grab John Q. Public by the collar and “make him an offer he can’t refuse,” to quote Mario Puzo (by way of Marlon Brando).
Retailers complied in spades. The promotions came fast and furiously, and intensified as Thanksgiving turned into Christmas, and Christmas turned into New Year’s Day.
But John Q. Public refused the offer.
Reuters reported that Charming Shoppes, Inc. had posted a same-store sales increase of one percent in December “driven by strong promotional activity.” But the news service also reported that those “heavy promotions” would cause the chain to take a fourth-quarter loss.
Live by the discount, die by the discount.
According to other news items, promotion not only “failed to increase customer traffic at Kmart stores,” but it “failed to spur the interest of wary consumers” overall.
Does promotion have to take all the blame? Didn’t the recession have anything to do with it?
The most flattering news report I could find was about The Gap, for which “intense promotional activity” helped same-store sales post an 11-percent decline in the holiday period. To quote another homegrown American pundit, NBA basketball star Derrick Coleman, “Whoop-de-damn-do.”
Meanwhile, in a Reuters story about the competition between Circuit City and Best Buy, the former’s 10-percent growth in December was noted, but then immediately dismissed because “analysts have said Circuit City’s sales growth may have been due to promotions, which in turn may stifle gross margins.”
Sales growth was caused by promotions? Say it ain’t so. That’s like putting your kids through college with drug money.
On the other hand, there was no discussion in that story about Best Buy’s new emphasis on promotion (something we examined in our December cover story). That chain’s six-percent sales growth — which allowed it to increase fourth-quarter earnings estimates — was attributed to astute inventory planning.
Now, we all know why promotion took it on the chin so hard. Because what all those reports were discussing was “price promotion.” Discounts. Fifty-percent-off sales. Not loyalty programs. Or events. Or in-store marketing.
This industry needs either a new word or a new definition very soon — before promotion gets blamed for the whole recession.
The Federal Accounting Standards Board rules that kicked in last month aren’t helping the term’s reputation any either: Want to devote money to trade promotion? Go right ahead. But subtract that figure from your sales total.
So, now promotion is going to hurt the top line and the bottom line. Bully for us.
Obviously, those within the marketing industry know that the word “promotion” has never really been synonymous with “discount.” But we need to tell Wall Street. And the business press. And, while we’re at it, consumers.
After all, “the fault lies not in our stars, but in ourselves.”
That’s from Shakespeare. It really isn’t the most appropriate way to end this column, but I wanted to quote someone who commanded a little more respect than Homer Simpson, Derrick Coleman, and Vito Corleone.
OK, I confess: I learned that quote from a rerun of The Odd Couple.
But I’ll tell you one thing: Shakespeare wouldn’t have been caught dead running a price promotion.
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