Product performance, pricing and positioning, packaging and size portioning, brand positioning, in-store promotions and advertising are the levers a marketer regularly juggles to grow brands. Without too much doubt that the last two are the most talked about and controversial, going head to head in their fight for budgets. What should you choose to do: build long term association in people’s minds with the brand or sell the product at a discount now. How brands allocate their budgets between advertising and promotions is a management decision that reveals the short-term/ long-term thinking in the company, the balance of power between marketing and finance, and even the average tenure of senior management.
To me, advertising is the best marketing investment you can make to ensure your brand is noticed, remembered and understood in the long term. Assuming your creatives as great, advertising has a positive sales impact in both the short-term (year 1) and long-term (year 2-3). In-store promotions have a fantastic effect during the activity, but little (and most of the times negative) impact in the medium to long term. And this without considering the adverse effects on brand equity that price drops or multi-purchase can return. My point is clear, we mostly agree with it, but our behaviors diverge. As long as we will only focus on our year-end sales objectives, we will continue to prioritize promotions with their sales spike-like effect over everything else.
As a big believer in advertising, I am not able to defend properly in-store promotions. Maybe some of my readers can start a debate on their benefits. To me there is a role for promotions to play, but preferably a reduced one. One thing is certain, when you are running both at the same time, you are wasting money. Yes, it looks cool on your graphs when the advertising campaign has a spike in sales, but that’s just because of the 3for2 ran at the same time. A much more balanced approach of alternating promotions with advertising could work better, but it is very category dependent (expandable categories have an easy time here). A sizable promotional activity will cause stocking, and your next in line advertising campaign will suffer. There is no magic bullet; research can help. Using a robust insight generation program to test different hypotheses in a randomized control testing environment with store-level data is the way to go. But even with research, your decisions to prioritize promotions vs advertising might not be rational in the end.