Question

Sales Promotion and Brand Image

Context: Sales promotion is incentive manufacturers, retailers, and even non-profit organizations use to attract consumers. It changes the brand’s perceived price or value temporarily.

Inquiry: What are some reasons brand managers are allocating more of their promotional budgets to sales promotion rather than media advertising?

Follow-up: Do you agree with the critics who argue that the increased use of sale promotion is undermining brand equity for many once powerful brands?

Answer 1

There are many reasons why sales promotion has become so important and is receiving a great deal of marketers’ promotional budgets. These include the growing power of retailers; the decline in consumers’ brand loyalty and their increasing sensitivity to sale promotion offers; brand proliferation in the consumer market as many product categories have experienced a flurry of new brand introductions; fragmentation of the consumer market and trend toward increased market segmentation and regional marketing; pressure for increased accountability for promotional expenditures from companies and the resulting focus on short-term sales results; reliance on sales promotion as a way of gaining competitive advantage; and finally the increasing problem of advertising clutter which has led many advertisers to turn to consumer promotions as a way of attracting attention and interest to their advertisements.

Many brand managers are allocating more of their promotional budgets to sales promotion because they become enamored by the sales spike that often results from some type of promotion such as a sale, discount coupon or some other form of promotion. The impact of media advertising, on the other hand, is rarely immediate and plays out over a longer time period. Since many brand managers stay in their positions for a short time and often end up using promotional tactics that can have more of an immediate impact. Also, the investment community is very focused on short term results as publicly traded companies are judged on quarterly sales results. Thus it is easy for brand managers to turn to sales promotion tools that can generate a more immediate impact rather than patiently waiting for the long-term results that come from media advertising or other programs such as new product development or building channel stronger channel relations.

Critics argue that a reliance on short-term sales promotion can undermine the equity of a brand as consumers will become dependent on these promotions and may decide that they will only purchase a brand if it is on sale, they have a coupon for it, or some other type of promotion is available. Consumers are much more price sensitive than they were years ago as they have come to recognize that many marketers will offer some type of promotion or discount for their brand and they will not purchase it until it becomes available. The temptation to look for the quick fix and sales spike that can be generated by using some form of sales promotion will always be there. However, marketing managers must be very careful with regard to the use of sales promotion tactics as it does not take long to find that the brand can no longer be sold at full price. Once brand equity has been lost through the overuse of sales promotion, it can be very difficult to regain. Marketers are also concerned that the large sums of money they are spending on trade promotions are not being passed through to consumers and thus they are attempting to cut back in this area.

Some experts argue that the reallocation of marketing budgets from media advertising to sales promotion is reasonable as many companies are now using the various promotional tools in a more strategic way that contribute to brand equity. The allocation trend toward sales promotion is unlikely to go too much further as many marketers recognize that they are sacrificing brand equity by spending promotional dollars on sales promotion rather than advertising. It is unlikely, however, that we will see a return to the good old days when media advertising accounted for the largest portion of the promotional budget. The sales promotion area is becoming too sophisticated and consumers have learned to expect some type of promotional deal when making a purchase. Thus marketers are likely to continue to provide them with sales promotion incentives in one form or another.