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Step One
Challenges and Opportunities

The Path to Loyalty

£90

“ A journey of a
thousand miles begins
with a single step”
Lao Tzu

The Path to Loyalty – Step One | The Institute of Promotional Marketing

The Institute of Promotional Marketing
The Institute of Promotional Marketing is the only trade association that truly represents the UK’s promoters,
agencies and service partners engaged in promotional marketing.
We represent the UK promotional marketing industry, and our mission is to protect, promote and progress
creative and effective promotional marketing across all media channels. We aim to achieve this through our
renowned education programme, our highly-regarded legal advice services, our annual awards scheme and a
range of other products and services, including research.
We used to be known as the Institute of Sales Promotion, but as of May 27th 2010, we officially changed our name
to the Institute of Promotional Marketing.
We changed because our industry has changed, driven by the current economic situation and by the
revolutionary impact that digital technology has had on how consumers live their lives and how marketers
communicate with them.
It became clear to us that while sales promotion remains a valid technique for promotional marketers, particularly
in FMCG sectors which sell predominantly through the retail channel, it is no longer the only technique our
members use, nor even the one which they necessarily use most often. It is just one of an ever-increasing
portfolio of techniques at their disposal.
By contrast, we established that the term promotional marketing far better represents the broader role that
promotional content plays in the strategic development and deployment of behaviour-changing communications
within the marketing communications industry.
Our definition of promotional marketing is: “Any marketing initiative, the purpose of which is to create a call to
action that has a direct and positive impact on the behaviour of a targeted audience by offering a demonstrable,
though not necessarily tangible, benefit.”
Promotions are executed by brands across all industries and in all media channels. Promotions are the
predominant creative content across all communication channels - from digital, direct and experiential through to
more traditional media such as press, TV and radio.
Research, incidentally, is hugely important to us and to our members. Our head of insight, Colin Harper, has
already produced some excellent work looking at how much branded goods manufacturers spend on promotions
through the retail channel. His research established that this total is £25.6 billion, of which £14.4 billion goes on
price promotions. Based on that, we have increased our estimate for the total spent on promotional marketing in
the UK to at least £36 billion.
Harper’s research has also shown that much of the money companies spend on price promotions harms brands
in the long-term, which has underpinned our argument that marketers should be investing in building brands
through value-added promotions that build brand value and real consumer loyalty.
This White Paper will further build on that ground-breaking work. Please help us build the case for added-value
promotions by reading it and coming back to us with your comments and any supporting evidence.
Annie Swift Chief Executive Officer, The Institute of Promotional Marketing

3

The Path to Loyalty – Step One Introduction

Introduction
If there has been an oversight in promotional trade associations over the years it has been that they have
not done enough research into their industry and particularly work into showing its value. Our trade cousins
in the traditional advertising associations have been excellent in demonstrating that ‘advertising works’.
Now the Institute of Promotional Marketing is putting research and insight high on its agenda with the
appointment of Colin Harper as Director of Insight and the production of thought-provoking research studies
such as Path to Loyalty.
I know we are playing ‘catch up’, but never has the industry been so rich in information and I know our
Insight team will translate this into powerful observations that show the return on investment that wellexecuted promotions, in all their forms, deliver through building brands and generating incremental sales.
It was our research into the impact of price promotions in supermarkets that led us to start advising our
members to avoid over-using them. Colin Harper’s study, published last year, established that £14.4 billion was being
spent by brand owners on price promotions through the retail channel which were almost without exception
damaging their brand values. The only people who seemed to be benefiting from them were the retailers.
Obviously, brands do need to keep retailers happy, and using price promotions is one way to do that. But
there needs to be a balance. Price is not the only technique, and we really would like to see marketers
investing more in other promotional techniques that add real value and drive long-term customer loyalty.
We also need solid research into the effects of promotional marketing activity on consumer behaviour, if
we are to stand any chance of convincing those organisations that are looking to cut back on discretionary
spending that value added promotions deliver a good return on investment and deserve to be protected
against pruning.
It is significant that although the new Coalition Government has announced that the COI’s advertising and
marketing budget will be slashed by £160 million, or roughly 50%, certain of its flagship campaigns that are
focused on behavioural change, notably Change4Life, will be protected.
It cannot be a coincidence that Change4Life was one of the big winners at our recent annual awards. It
delivered real results for less than 20% of the expected cost.
Promotional marketing does not need to be only about sales; the key is a call to action that results in a
change of behaviour. It is this recognition - that promotions have a broad reach - that made the Institute
change its name to focus more on promotional marketing and not just sales promotion.
Institute of Promotional Marketing members are no longer just creating content for marketing
communications that drive sales: Change4Life, for example, is trying to get people to cut back on their
consumption of unhealthy foods and take more exercise. Other promotional activity is aimed at getting
people to stop smoking or drink responsibly.
Our work is directed at getting a better understanding as to how promotional marketing affects people in the
way they behave and how it changes their purchasing patterns.
This study, of the Path to Loyalty, is the first important step.
Clive Mishon Chairman, Institute of Promotional Marketing

4

The Path to Loyalty – Step One | The Path to Loyalty

The Path to Loyalty
The first step on the path to both increased loyalty and increased sales now is to recognise that all the sales
and marketing investments a company makes must lead to the one simple goal — more loyal consumers
buying into the brand every day. It does not matter whether this is by actually putting their hands in their
pockets, or metaphorically, by reinforcing their commitment.
For many companies, the first step will be simply reviewing their price discount policy. This white paper
reinforces what many observers say. In general straight price discounts damage brands.
It is vital reading for anyone, in any company, committing company investment to cutting prices.
Step One in the Path to Loyalty is to appreciate that, if you feel you must do price discounts, you must set
objectives for this activity, and maximise profitably whatever benefit this brings to the brand. There are
suggestions for the fmcg industry in particular here.
Then against these objectives, you can then review the cost to see if you can get the same sales impact with
a similar budget across all channels, not just the one channel that a price discount typically addresses. And
not just an immediate impact, but a lasting loyalty benefit too.
To help you to take a balanced decision in this area there are a range of case studies and a review of
techniques. These case studies have been selected to give a view of a broad range of different approaches
that you might not necessarily consider. Often there is further information that we cannot publish — if you
need more on any of these case histories there are links for you to follow through on. Please quote this
publication as the source of your interest.
This is the first white paper in a series of steps looking at the key technologies and techniques in use and
is designed to assist companies to take better decisions in deciding where, and how, to invest behind the
journey promoted growth with loyalty.
We are keen to partner with companies and agencies wishing to understand the future by learning from the
past — as we are with the University of Westminster in developing a real theoretic as well as deeply practical
basis on which the Promotions Industry can move forward to an even more active future that the past insists
lies ahead.
Colin Harper Head of Insight

5

The Path to Loyalty – Step One | Contents

Contents
Page

7 The Promotion Challenge
9 What makes a good Promotion?
12 What does the future hold?
13 The challenge of Price Discounting
17 Turning your Price Discounts into Promotions
17 Objective 1 — Increase your trialists
18 Objective 2 — Measure and Maximise your Return on Investment
20 Objective 3 — One for the company — Measure and evaluate the alternatives before every promotion
23 1 Price Promotions
23
23
24
24
25
26
27

1.1 Coupons
1.2 Discounting
1.3 Extra Fill
1.4 Buy One Get One Free
Case Study — Energiser Power
Case Study — Cravendale
Case Study — Anglia Windows

28 2 Self-liquidating Promotions
29 Case Study — Kingsmill
30 3 ‘Free’ Promotions
32 Case Study — Marmite
33 4 Prize Promotions
35 Case Study — Tyrrells
36 5 Cause-related Promotions
37 Case Study — Jammie Dodgers
38 Appendix 1: Loyalty — The Transferable Benefit
40 Appendix 2: Measuring Attention and Engagement at the Moment of Truth
Inside out – getting to the heart of your customers anywhere they shop
42 Appendix 3: Bibliography
Where you see this symbol, you can click through
to the web site to get further explanation, or links
through to additional resources to help you to
deliver against the objectives. The links are also
available from the Insight home page on the IPM
web site www.theipm.org.uk
The web site is searchable for members so you
can get access to a broad range of reports.

6

The Path to Loyalty – Step One | The Promotion Challenge

The Promotion Challenge
Everyone is aware of the effectiveness of rewards on how we behave — we learn all about them from the cradle.
We get bought sweets when we are good, get reprimanded when bad. From experiences like these we learn how
to behave. Immediate reward or punishment is clearly very important in making us what we are in the long term.
Why should rewards or incentives not work just as well as we grow up and can choose what to buy as well as what to do?
Well opinions clearly vary on the role of immediate experience as a means of growing loyalty to a product or
service, the good habits that manufacturers would like to develop. Many models have been developed by the
advertising industry to describe how awareness and image building leads to loyal users. But why should not
accelerated trial in various ways also lead to the same end? And if so, how?
In part, the challenge lies in how you actually describe loyalty. You can take the pragmatic view, which is that
loyalty can be described by looking at what people do, at their repeat purchase pattern. But of course action
taken is historic, and what a model needs is a way of describing properly what will happen in the future.
Certainly DunnHumby, probably the main tracker of volume purchasing habits in the UK, have a measure for
loyalty based on purchase behaviour, as this relates to Tesco customers. However, they are unable to track
purchases elsewhere, and in Appendix 1 we have a case study showing that a product Tesco de-listed in August as
having low loyalty was associated with tripled sales in Morrisons in the following months. So in this case loyalty
needs to be seen in the broadest context. Loyalty, like energy, can obey a Law of Conservation.
Is attitude a reliable predictor of action? Many people compromise their attitudes for excellent reason; and of
course, if you do compromise because you like the price, what will you do when the price reverts? Many people
cope with this by buying in bulk on offer — and coasting between times. The effect of discounts is then to bring
forward a purchase, but lose revenue on the way. If people buy in bulk when offers are in place are they loyalists
taking advantage, or just privateers moving from offer to offer?
Until this approach matures into something that can predict the impact of particular appeals we are thrown back
on treating the shopper/potential customer/browser as a “Black Box” and actually measuring the impact of a
message, in a way that predicts the outcome. In this area the Institute is supporting an eye and emotion tracking
approach designed to predict response to creative/incentive statements. Initially we are using this approach
on the Award Winning entries to give a benchmark against which others can be measured. (See the Inside Out
section in the Appendix 2, page 41.)
In an environment where price cuts are an expected feature of a normal shop, is ‘loyalty’ to a product a dated concept?
Are people just loyal to a deal? Clearly that cannot be the whole picture or only products on deals would sell.
Relating, then, the various means of driving brands forward is not at all easy. Past sales analysis is not necessarily
a guide to future action, nor is a reliance on the fact that people would prefer to buy a product.
Which comes first then, the chicken of continued purchase behaviour, or the egg of the attitude that leads to it?
And in the modern environment, how many customers, who have their loyalty tested on every shop, really need
constant promotion to keep their purchases ‘loyal’?

7

The Path to Loyalty – Step One | The Promotion Challenge

Have any of the following promotional routes tempted you to do any of the following:
(please tick all that apply)





Buy product
you would not
have otherwise

Switch brands
during promo

Permanently
change brand

%

%

%

Coupon or voucher (however delivered)

55

32

4

In store tasting

50

16

4

In-store money-saving promotion

48

34

4

In-store sample

47

20

5

Sample given with other purchase

41

21

5

Sample attached to other product

40

21

4

Door-dropped sample

39

20

4

Offer promoted in newspaper/magazine etc.

37

21

4

On-pack offer

37

24

2

In-store demonstration

34

15

4

Magazine cover-mount sample

29

14

3

In-store TV presentation

24

11

3

On the horizon there are potential techniques looking at customer behaviour that may in the future help to sort
out this dilemma, in the form of behavioural economics. An approach to human behaviour that attempts to create
a view of the way that people decide based on an understanding of the way that they approach sub-conscious
problem solving. Until, however, this matures, a link between attitude and action is hard to develop.
For the moment, in promotion terms at least, action tracking is still king, as you can see from the case studies.
The question might then be which techniques are most likely to lead to loyal purchasers. Invest now so you don’t
need to keep on doing it.
We do have a comparative survey from fast.MAP and Promotional Marketing magazine ‘Which techniques are
most likely to lead to loyal purchasers?’ relating how customers report that they would behave, given various
types of incentive (above).
Of course, self-reported behaviour can sometimes be a long way away from what actually happens but if you bear
in mind that this limitation applies to all categories you can see that there is a very noticeable difference in the
way that people perceive they are moved after first trial. Certainly they have a basis on which they can define their
loyalty. And by this measure, store price discounts create most temporary brand switching. But, despite the heavy
per pack cost, the respondents felt they would be less likely to bring brand change than successful sampling.
Loyalty or a developing continuing positive attitude to the product or service has to be a key objective for all
marketing activity in a company. After all, if you want to grow you would hope not to need advertising and

8

The Path to Loyalty – Step One | The Promotion Challenge

marketing just to stay where you are. Over the next few months the Institute of Promotional Marketing will be
looking at the Path to Loyalty — what it can be defined as, and assessing the impact on this path of the various
available promotion types. This, of course, includes loyalty promotions, those that encourage the next purchase,
rather than the first.

What makes a good Promotion?
In producing this white paper we take the view that any one promotion technique cannot be viewed in isolation
from the rest of a company’s advertising and promotion strategy, to be considered a promotion.
The key elements of any good promotion shine out. You need to have an appropriate incentive, you need to
communicate this in a way that stands out from the environment in which the decision will be taken, and it needs to
be framed in such a way that it encourages repeat purchase, if this is available. Promotions for products that could be
bought often, but which have the effect of discouraging repeat purchase, are clearly not appropriate, or desirable.
Incorporating promotions within your strategy to hurry the purchaser along the path to loyalty needs to have
an appropriate reward. Sometimes no reward at all, but a clear statement of a benefit at the point of sale, can
be quite enough to get immediate change. Here, as an example are two pack flashes on the same product. Both
packs sold at 99p, and the one pointing out that simple fact loud and proud performed 25% better than the more
complex (and less easy to see at a glance) prize promotion.

A good creative hook presented as an incentive can even get people
to pay more. The Grocer Magazine pointed out that the new, and very
successful, £1 product range introduced by Asda contained a number of
products where the price had actually increased.
An incentive is definitely in the eye of the beholder, not of the promoter.
The core challenge for promotions is to develop prediction and measurement that will show how promotions can
not only develop instant sales - there is little to be proved here - but how the techniques used also develop long
term loyalty to a brand.

9

The Path to Loyalty – Step One | The Promotion Challenge

This white paper overviews techniques currently in use, and outlines some of the many alternatives designed to
deliver short and long term results.
One area, though, that we are able to focus closely on, since so much research has already been done, is the
use of product price and discounts, as ‘promotion’ techniques. Price is, as we have already seen, by far the most
prevalent of the techniques used to generate sales and develop new users. It is also, in our view, a core basis for
comparison that other techniques can usefully measure against — since so much current data is available. As an
example, a promotion could give the same uplift as a 50p price cut, but deliver a 10% improvement in long term sales.
The cost of either communication or creative might be more, but this is offset by the long term gains.
And all can be measured. This is why we are so pleased to introduce the BrandView report on-line.
This covers the Live Promotion Environment presented with The Institute of Promotional Marketing
web site www.theipm.org.uk — the most prevalent current and historic offers available at retail reported across
many stores and markets. Companies wanting to look in detail at their own brands can take advantage of our special
members prices. Using this information, merged with sales data much more can be learned about competitors and
the best level of discount. These are discussed in the section covering ‘Turning discounts into promotions’.
In this White Paper, Richard West from the University of Westminster reviews academic research into the whole area
of the use of price as a promotion technique (The Challenge of Price Discounting). As the then ISP market overview
outlined in 2009, this is a £14.4 billion investment in UK grocery retail alone. While a report from Moneysupermarket.
com published in April 2010 estimated that 2.4 million discount vouchers are redeemed every day — representing
£2.5 billon savings per month £30 billion per annum — these are in addition to retailer discounts.
In total that’s a staggering total c£45 billion of discounts against the normal price of the product or service. But,
while price is obviously important, getting the right price is critical.
The following conversation has been attributed to Winston Churchill:
Churchill: Madam, would you sleep with me for five million pounds?
Socialite: My goodness, Mr Churchill! Well, I suppose we would have to discuss terms, of course...
Churchill: Would you sleep with me for five pounds?
Socialite: Mr Churchill, what kind of woman do you think I am?!
Churchill: Madam, we’ve already established that. Now we are haggling about the price.
Recent research with fast.MAP and Promotional Marketing magazine shows the very positive impact of value
coupons in generating change for manufacturers (see opposite). This report, available in full on-line, shows that
you can get effective change in behaviour with relatively little incentive. They found that 25% or less coupon
value would motivate more than half of consumers to buy an alternative to their usual brand, whereas headline
retailer promotions focus on 50%. The same research also stressed the positive impact that people reported
from the use of coupons on their buying habits.
So it is in this area of retail price discounts where we need to put a stake in the ground as to what can usefully be
considered a promotion for the company investing in it. Price is by far the most important negotiable feature of a
product. It is the area that behavioural economists focus on most clearly as the key driver for action

10

The Path to Loyalty – Step One | The Promotion Challenge

If money-off coupons have ever tempted you to try different brands from your usual ones,
please tick all that apply to you below:
Switched brand for as long as you were able to use the
money-off coupons, then went back to your usual brand

61%

Remained loyal to the new brand because you preferred it

28%

Switched straight back to your old brand

21%

Money-off coupons have never tempted you to try
a different brand5

13%

1412 Responses Source: fast.MAP and Promotional Marketing magazine

Strong brands appear on the balance sheets of companies because their added value can be traded, and this
added value costs serious investment in one way or another to develop. Reducing the price of a product is
undeniably powerful. But, all the evidence suggests that unless this kind of incentive is allied to other means of
maintaining brand values, it is associated with their loss.
Of course, price discounting of various types are core to the positioning of the retailers. But they do not foot the
bill for the most part, according to manufacturer reports (see our previous report — 2009).
The true cost of many price discounts is loss of brand values and the converting of whole swathes of products into
commodity. Yes, there can be some compelling reasons to use price discounts: lowering the cost of trial for a new
product, establishing it on shelves, perhaps widening the distribution. But all too often the only reason it is done
is to feed the need for retailer volume. The first one or two will, of course, be very profitable, since at that point
the brand is relatively undamaged. But one promotion turns into two, and then into many.
We therefore advise our members and others to withhold using the word ‘promotions’ in the context of
indiscriminate price discounting. Promotions carry with them the connotations that you are going somewhere —
all to often in the case of price discounts this is far from the case. If, however, you are planning on using discounts,
you need to make sure that you set objectives that maximise the benefit for you. It is the presence of such
measured objectives benefiting the sponsor, that marks out a promotion.
Then, when you have set down the objectives, review the options, The first option you have covers ways of
maximising the return for you from a price discount. Improving against the objectives you have set down for the
promotion. There is a proven five point plan that we recommend, with web links helping you to understand them,
and perhaps take them forward. Then, why not browse through the successful case studies included within this
white paper? You may well find that you could do so much more with your budget than you thought.

11

The Path to Loyalty – Step One | The Promotion Challenge

What does the future hold?
Promotions, and advertising, exist within a planned environment leading to building brands. The Institute of
Promotional Marketing is in the business of representing companies practising the use of judged promotion
techniques to develop sales and brands. Increasingly promotions and advertising cannot survive apart. Why is
this? Simply because the audience now expect a benefit to reward changed behaviour. Meanwhile the ready
availability of direct media, such as affiliation web sites, makes spreading a message of benefit easier, and
cheaper, than ever.
Looking to the retail future as well, the increasing dominance of a few retailers with a focus on delivering value
messages funded by their suppliers makes it imperative that manufacturer suppliers create alternative quality
bridges to their customers.
The smart promoter will recognise that the better, and more relevant the communication, the less the incentive
needs to be.
If you hit the figurative nail on the head, you can even, as Asda showed, get a positive from a negative!!
To go this far you need to be sure that you are tapping direct into top of mind. Here you can check out
a tool from one of our members, Google, for a measure of what your words mean to your customers,
quantified.
Research is the key, research linking together the incentive and the communication in their dual impact on the
would-be purchaser. Here we use a common benchmark, the known impact of a price discount on short and long
term sales.
A lower incentive, coupled with better communication may well offer a smart way out from the current downward
price spiral, for most companies.
Over the next few months the Institute of Promotional Marketing expects to be:
Step 2 Selecting the Approach - Looks at the way that the various promotion techniques deliver for the shopper
and the promoter. The first one planned in the series is Couponing — Delivering Value without the Price?
Step 3 Communicating the Benefit - Looks directly at the shopper, and techniques for improving behaviour
change. The first of these explores ways of checking the relevance of an approach, as well as the way that
creative/incentive approaches deliver against this. (Look at Appendix 2 Measuring Attention and Engagement at
the Moment of Truth, page 40.)
Until these are developed, your best guide to successful use of promotion techniques is study of those that have
worked in the past.
Or, of course, joining the Institute of Promotional Marketing and working with member companies.

12

The Path to Loyalty – Step One | The Challenge of Price Discounting

The Challenge of Price Discounting by Richard West
Has there ever been a time when Sales Promotions were more
popular? In the last few years the industry has benefited from
a ‘perfect storm’, where a long recession has coincided with a
growing demand from both manufacturers and consumers for
special offers and other types of promotion.
Of course many would argue that the two things are linked;
traditionally sales promotions do well during times of economic
hardship as consumers become increasingly price sensitive and
both manufacturers and retailers pay greater attention to shifting
boxes rather than the more intangible aspects of brand-building.

Biography: Richard West
Richard West is a senior lecturer at
Westminster Business School, The University
of Westminster, London. His research interests
include customer loyalty, the impact of
creativity & media on promotional marketing,
and ‘place marketing’. He also teaches on the
MA Course in Marketing Communications at
Westminster and is studying for a Ph.D.

But the impressive growth of sales promotions isn’t just because we are going through a period of collective belt
tightening. De Palsmacker et al., (2007) observed that “…in the UK estimates suggest that promotion budgets
exceed advertising spends. Some sources claim, that advertising to sales promotion expenditure ratio has [gone]
from 60:40 in the mid 1980s to 30:70 in favour of sales promotions [today]”.
The truth is that British consumers have always had a soft spot for sales promotions — whether they be ‘value
Increasing’ offers such as price promotions, and discounts, or ‘value adding’, such as Loyalty programs that
involve the integration of long-term additional benefits (Fill, 2009). However, the explosive growth of promotions
in the last twenty years implies that the change is more deep rooted (Mullin and Cummins, 2009). So why has the
traditionally ‘poor-relation’ of marketing become so popular?
For one thing, consumers are far less brand loyal than ever (Lodish and Mela, 2007). They are also significantly
more price aware than they were 25 years ago and much more savvy when it comes to deconstructing marketing
messages compared to previous generations (Lodish and Mela, ibid), In short, there has been an internet-driven
shift in power from manufacturers to the consumer and the latter are increasingly flexing their muscles and
demanding more from brands.
Much has written about the way digital media and social networking are changing the way brands and consumers
interact, but somewhat less has been observed about the impact of promotions and price discounting on buyer
behaviour and longer-term brand loyalty.
In this white paper, ‘The Path to Loyalty’ argues that the impact of deep discounting on both purchasing decisions
and subsequent customer loyalty has a profound effect on the brand.
The trouble is, because it is such a crude method of promotion nobody really understands that subtleties of how
and why deep discounting works — let alone what the long term impacts upon the brand are likely to be. It is an
area that requires more research because all we can unequivocally say is that the practice is expensive and offers
a very unattractive ROI.
In a simple scenario, an economist might argue that if you discount the price of ‘Brand X’ against an otherwise
similar product ‘Brand Y’, shoppers are more likely to buy more of former - including some otherwise loyal
‘Brand Y’ consumers.
Marketers would counter that the outcome of such a price discount is seldom so predictable because the many
variables to consider — including the consumer’s cultural background, their preferences, the store location,
whether visits are made on foot or by car, whether they are every day or weekly visits, the shelf space, the
location in-store — and not forgetting the size of the shopping baskets and even the weather.

13

The Path to Loyalty – Step One | The Challenge of Price Discounting

The relationship between price discounts, consumer behaviour and brand ‘equity’ is subtle, complex and
constantly evolving. Creating good predictive models requires research and observation. Unfortunately when it
comes to academic research, ‘Sales Promotion’ has received relatively little attention which has left large gaps in
our knowledge.
For many years, price promotion research focused on consumers’ short-term behavioural reactions to price deals
and promotions (cf. Bawa & Shoemaker. 1987; Gupta, 1988; Kumar & Leone. 1988), as well as the psychological
reactions to prices and price promotions (cf Dickson & Sawyer, 1990; Fader & McAlister, 1990; Inman, McAlister, &
Hoyer, 1990; Kalwani, Yim, Rinne. & Sugita, 1990; Krishna. Currim, & Shoemaker, 1991).
Price-based promotions are most widely implemented in Fast Moving Consumer Goods (FMCGs) where impulsive
purchasing patterns usually take place. Observations from authors such as Liao et al (2009) that, “85% of
consumers are impulse buyers”, has helped to create a somewhat simplified view that “...price promotions are an
indispensible [marketing] tool”.
It is not disputed here that promotions based on price reductions can and do have an impact on short term
sales. Indeed in certain situations they can be very effective. However what the sales promotion industry doesn’t
have is clear understanding of how deep discounting works, the long term impact on the brand and therefore (to
misquote Lord Leverhulme) how much of the promotional budget is being wasted.
Dawes (2004), for example, examined the effects of a ‘..massively successful..’ price promotion on a particular
consumer goods category. He found that whilst the promotion didn’t have a long-term effect on the brand, it did
expand the total category for the retailer — albeit temporarily.
What also came out of the research was an observed tendency for shoppers to ‘stockpile’ in response to the
promotion. Dawes estimated that up to two thirds of the short term gains were cancelled out by the longer-term
negative effect on the category volume.
These findings have been supported by research elsewhere; although there may be some positive after-effects from a
price promotion if a promotion attracts some new users who repeatedly buy later, generally there are few or no longterm favourable effects for established brands (see e.g. Ehrenberg et al., 1994; Pauwels et al., 2002; Peckham, 1981).
Thus it would seem that the impact of a price promotion on a brand is generally short term and that the effect over
the longer term is marginal at best (Blattenberg and Neslin, 1989; Totten and Block, 1987). But let’s not get carried
away — as pointed out earlier conclusions are rarely so clear-cut because there are so many other things to consider.
Other researchers have attempted to identify the importance on buyer behaviour of these variables — including
the effect of frequency and depth of the discount, the way promotions are promoted and the effect of the store
environment (Kendrick, 1998).
Mazumdar, Raj, and Sinha (2005) reported that the way a company ‘frames’ a price offer strongly influences
a consumer’s decision to buy. This US-based research found that companies from a number of industries that
offered a series of price promotions before returning the price of a product to its original level, received a more
positive response from consumers than an ‘Every Day Low Price’ strategy or ‘high-to-low’ price discounts.
Sunil and Cooper (1992) examined consumers’ response to retailers’ price promotions, and found that consumers
will also tend to discount the price discounts (i.e. consumers’ perceptions of discounts are typically less than the
advertised discounts). However, the extent to which this discounting occurs depends on the discount level, the
store image, and whether the advertised product is a name brand or a store brand.
Using econometric models, these authors also found evidence to suggest that consumers do not change their
intentions to buy unless the promotional discount exceeds a threshold level.

14

The Path to Loyalty – Step One | The Challenge of Price Discounting

The significance of a ‘threshold point’ is that it differs for name brands and instore brands; the threshold for a
name brand is lower than that for an instore brand.
In other words, stores can attract consumers by offering a small discount on name brands while a larger discount
is needed for a similar effect for an instore brand. According to the study there is also a ‘promotion saturation’
point above which the effect of discounts on changes in consumers purchase intention is minimal.
The timing and frequency of a promotion is also known to be crucial. Alba et al (1999) examined the timing and
frequency of price promotions — comparing the difference in impact between shallow, frequent price discounts
and deep, infrequent promotions.
They questioned whether, in terms of image, it benefited the firm or store to have more, but smaller, competitive
price advantages or fewer, yet bigger, advantages. They concluded that stores, for example, generally wish to
create a low-price image whilst brands may wish to be perceived as higher priced should they desire to position
themselves in a premium category. Their results suggested that these disparate outcomes are each better served
by a frequency strategy.
Sales promotions have traditionally been associated with a negative long term impact due to the predominantly
price-orientated nature. Whilst much of the research in this area has focused on monetary promotions in the
consumer goods area, the effectiveness of promotions will undoubtedly vary according to the type of product
analysed (Peattie and Peattie, 1993).
Research has begun to consider long-term effects of price promotions on brand image (Dickson & Sawyer, 1990)
as well as the specific impact on categories such as telecommunications, consumer goods and durables. The key
findings of the impact of price promotion on different categories is summarised below in the table below.
Researchers

Category

Conclusions

Villarejo-Ramos
Durable Goods
& Sánchez-Franco,
2005


“...The higher the spending on advertising for the brand, the better the
quality of the product as perceived by the consumer ...price deals as
incentives to increase sales have been shown to have a negative effect
on brand equity.”

Palazon & Delgado,
Telecommunication
2005
services




“...non-monetary promotions are more effective than monetary
promotions in affecting brand equity positively. While non monetary
promotions raise the Satisfaction and Loyalty without decreasing any
other constructs, monetary promotions increase Satisfaction but lead
to lower Quality, Value and Prestige...”

Palazón-Vidal,
FMCGs
M & Delgado-Ballester,
Elena, 2005


“...promotions that are tightly linked to the product category (for
example, price promotions on laundry detergents) does not contribute
to create unique brand associations that give consumers a compelling
reason for buying a particular brand..”

Source: Compiled by author

So what of practical interest can be gained from academic research? Firstly looking at the complex interaction
between price and brand equity. Secondly addressing the whole area of the scale and nature of impact that the
type and size of an incentive and its presentation has on this building brand equity.

15

The Path to Loyalty – Step One | The Challenge of Price Discounting

Keller points out that brand knowledge is the source of brand equity. If brand knowledge includes various kinds of
information related to the brand such as attributes, benefits, feels, preferences and experiences, then it follows
that brand knowledge will be affected by the sales promotion experience.
Sales promotions won’t devalue a brand as long as consumers perceive the promotion has integrity. That does
not suggest price discounts should be avoided, but there is plenty of evidence that deep discounting is crude,
ineffective and ultimately wasteful. Price promotions can be effective, but they are risky and need to be carefully
planned. For example, this literature review has found that:
• The impact of a promotion will vary according to the category
• ‘Little and often’ price discounts are more effective and also more appealing to the consumer than infrequent,
deep price discounts and ‘Every Day Low Price’ strategies.
• Consumers have a natural threshold point when it comes to evaluating price promotions and making a decision
to buy.
• There is also a ‘promotion saturation’ point above which the size of the discounts has a minimal impact on the
consumers purchase intention.
• Price discounts can uplift sales in the short term — but any benefits are often largely outweighed by consumers
stockpiling.
• Consumers tend to discount the price discounts (i.e. consumers’ perceptions of discounts are typically less than
the advertised discounts).
• The extent to which this discounting occurs depends on the discount level, the store image, and whether the
advertised product is a name brand or a store brand.
One of the aims of ‘The Path to Loyalty’ is to highlight the importance of ‘value increasing’ and ‘value adding’
promotions in order to stimulate more research interest and fill the knowledge gaps. As well as the impact that
this has on future action.
It is an area that demands further investigation in order to gain a better understanding of the processes involved
from both a theoretical and practical perspective.
Executive Summary
Promotional marketing has undergone an explosive growth in popularity in the past twenty years, yet despite its success
there has been comparatively little academic research in this area — particularly when it comes to investigating the
impact of deep discounting on long term brand equity. A review of the literature indicates a need to explore in more
detail the mechanics of promotional marketing in order to refine our understanding of the way promotions influence
buyer behaviour.
In this review, the findings include:
• The impact of a promotion will vary according to the category
• ‘Little and often’ price discounts are more effective and also more appealing to the consumer than infrequent, deep
price discounts and ‘Every Day Low Price’ strategies.
• Consumers have a natural threshold point when it comes to evaluating price promotions and making a decision to buy.
We are looking to pioneer further research in these areas to enhance the understanding of how consumer behaviours
are influenced by the promotional media and how different categories respond to different types of promotion.

16

The Path to Loyalty – Step One | Turn your Price Discounts into Promotions

Turn your Price Discounts into Promotions
Promotions need to have objectives that relate to the purchaser — with channels of distribution as an important,
but not the most important, means of delivering against them.
Retailer discounts are primarily there to develop store traffic and loyalty for retailers. For most manufacturers
they do not increase profits, and for increasing numbers of manufacturers handling the lost loyalty outcome of
a few years of these activities is of major importance. Even for retailers, there is considerable concern over the
damage that price cuts have been doing to their own brand. So alternatives are high on the agenda all round.
Turning at least some of the cost to advantage has to be a prime objective for all manufacturers. There are a number
of proven techniques that will allow you to get the best return for your brand from the effects of price discounts.

Objective 1 Increase your trialists
For every new deep cut price promotion you run in the same store, the fewer are the people seeing and trialling it
for the first time.
Ask for increased store ranging for the promotion for any of your products that are not in full ranging. This is
also, of course, a benefit to the retailers, since offers bring increased profits to smaller stores (and manufacturers
often foot the entire bill for offer costs). The IGD say that most new people try on promotions. But of course, the
people who will stay are those who are prepared to pay full price. Reach these new people in fresh stores.
Get the right amount of stock in every store — and get every store selling
POPAI (Point of Purchase Advertising International) research showed that key issues faced by field teams
preventing them implementing agreed activity were mainly split between manager refusal for various reasons,
and lack of stock right at the start of a promotion. (POPAI online compliance questionnaire 2008). Stock issues
– not there, not enough, or unable to find, comprised 12% of the stores. Of course, no stock means no sales, a
position that is the most serious a promotion can face.

Volume Uplift

This issue of not having the right stock in place for a promotion is a direct result of poor forecasting of promotion
outcome, linked to the fact that store allocations are risk averse. No store group expecting to remain profitable
has excess stock in stores. This poor stock control was a major contributory factor to the demise of Woolworth.

5
4.5
4
3.5
3
2.5
2

The stores with a very
low stock in store
compared to sales at
the outset had nearly a
tenth the uplift of their
better supplied peers

Who is to say
that this is as
good as it gets?

1.5
1
0.5
0
Negligible
Stock Cover

Very Little
Stock Cover

Less Than
Average
Stock Cover

Average
Stock Cover

Greater Than
Average
Stock Cover

Significantly
Greater Than
Average

Highest
Pre-Stock
Ratio

Source: Storecheck

17

The Path to Loyalty – Step One | Turn your Price Discounts into Promotions

They allocated to stores based on previous year sales without real regard to store demand for particular types of
product. The last Christmas the liquidators presided over their best ever results selling off vast back stocks. More
stock in any one store can be a curse as much as a blessing unless very closely linked to that individual store needs.
On the other extreme the Office of Fair Trading have consulted with the Institute of Promotional Marketing
on an issue they call bait pricing. This is where an exciting offer is advertised, but so little stock is
available that only a very few can actually buy it. The OFT see this as a deliberate ploy to switch sell purchasers
from this, to another, worse value product from the inertia of being there with the intent of buying. You can, as
the Institute pointed out, get there as easily by accident, as on purpose.
The Institute are scoping out a project with the University of Westminster linking forecasting to predictive
measures making it easier to get the right amount in place at the right time.
The level of promotion uplift that is possible for any one store to achieve is proportional to the amount of stock
in the store on Day 1 of the promotion. This information is readily available from most of the major multiples. The
difference in performance that you can expect might be enough for you to lose one promotion a year and keep
the same volume, but, of course, with a better margin overall. Most companies will also find that, as a result of
supply chain glitches and in store errors, they are missing an amount of their distribution that could be as much
as 5%. Again, integrated sales data will uncover this. Many companies focus on just the top 200 stores for their
store by store investment. If your target is new users, the smaller stores have a real role to play. And the multiples
are all increasing their grip on smaller format outlets. Look on-line to get a view on how you can reach
these stores, and the new people they represent, profitably.

Objective 2 Measure and Maximise your Return on Investment

Number of Promotions per Brand

Ensure that you are not promoted at the same time as your closest competitors
Many companies don’t know their closest competitors, or only think they do. Now you can easily find out working
with a BrandView analysis of when your category is on promotion taken together with sales data from any of
your key multiples. The principle is simple—your sales will be most impacted by your closest competitors.
Follow this link to get a more in depth discussion.
120

100

80

60

40

20

0
Thursday
1st January
2009

Sunday
1st February
2009

Sunday
1st March
2009

Wednesday
1st April
2009

Friday
1st May
2009

Monday
1st June
2009

Key:
Source: Brandview

18

Wednesday
1st July
2009

Saturday
1st August
2009

Tuesday
1st September
2009

Thursday
1st October
2009

Sunday
1st November
2009

Wilkinson Sword

Own Label

Gillette

Own Label Budget

King of Shaves

Bic

The Path to Loyalty – Step One | Turn your Price Discounts into Promotions

% Uplift in Volume Sales

Of course retailers will typically not discuss with you when your close competitors are promoting, but they may
not know who your competitors are. If they did you would want to tell them that all they do if they promote you
both at the same time, is to drain value from the category.
200%
180%
On Display

160%

On Shelf

140%
120%
100%
80%
60%
40%
20%
0%
-12%

-25%

-29%

-33%

-38%

-44%

-48%

-49%

-50%

-50%

Depth of Promotion Discount
Weekly Manufacturer’s Profit (000’s of £)
On Display

£24

£9

On Shelf

£8

£2

(£23)
(£9)

(£17)

(£21)

(£32)

(£21)

(£25)

(£11)

(£17)

(£32)

(£34)

(£16)

(£35)

Source: Storecheck

Get the best level of discount to give you best ROI and aim low—research indicates that a little drop more
often is less damaging in the longer term. Here you need to measure your revenue increase against the level
of uncontested uplift from your back promotions. Again, looking back at the last two years promotions within the
category, and identifying the maximum return point gives you a view of where your discount level gives you the
best volume return. The chart above is typical in showing that there is not necessarily a direct line between the
size of a discount and the volume uplift you can expect. However, the level of discount is directly related to the
amount of profit made by the manufacturer. As the chart also makes clear.
It is also interesting that additional display – also necessarily linked to additional stock in store — shows that the
impact this alone can be worth, in this case, up to 35% percentage points in price cut. A direct parallel to the
standout impact of a better creative on the same discount (compare with the Scrappage Scheme case study).
Research in May this year by fast.MAP and Promotional Marketing magazine indicated that, for a £2 product 56%
of people in their sample would use a coupon valued at 50p or less. (25%). Moreover, in a broad band between
a coupon level of 15p to 75p there was no difference in the % of people who felt that they would feel they
might switch brands (around the 30% level). So why would you feel that you would want to give away more
than 25% in store?

19

The Path to Loyalty – Step One | Turn your Price Discounts into Promotions

Objective 3 One for the company — Measure and evaluate the alternatives before
every promotion
In the following case studies you will see that there are a wide range of options available to you designed to give
you immediate sales impact, combined with long term growth.
Promotion Alternative to Price Discounting
Promotional techniques fit into a number of broad categories, each of which is outlined in the following chapter,
along with examples from the Institute of Promotional Marketing archives to give a vision of how well-produced
promotions are carried through to a successful conclusion.
Technique

Mechanics include:

1 Price Promotions

(any offer where the customer

gets a reduced price but does not

get any other goods or services

as part of the deal)

End-user Proposition

Coupons
Discounts — Temporary Price Reductions (TPR)
Extra Free
Multibuys — Buy One / Two, Get One Free /
3 for £10 / etc., aka ‘Retailer Price Discounts’

SAVE

2 Self Liquidating Promotions
• Where branded merchandise is offered
(SLP) for sale to the consumer

SAVE

3 ‘Free’ Promotions











FREE

Delayed
• Application Offer
• Collection Scheme
Collector scheme Instant
In/On Pack
Banded Pack







With Purchase
Sample
Digital Reward
Reward for task
Giveaways

4 Prize Promotions




• Competitions
• Free Draws
• Instant Wins

WIN

5 Cause Related Promotions


• Donation
• Sponsorship

GIVE

The key elements for consideration when deciding on a promotional approach are:
1 Tailoring the incentive to the objective
2 Tapping into the customers psyche immediately with the creative
3 The long term AS WELL as the short term impact of the activity

20

The Path to Loyalty – Step One | Turn your Price Discounts into Promotions

Taking these in order:

1 Tailoring the incentive to the objective
Check how well your incentive delivery compares with cash via our Inside Out eye and emotion-tracker benchmarking.
It is possible, and very common, to over-incentivise people. This is particularly the case with ‘cash’ rewards as you
can see from the focus in this report. Cash incentives can be used right across the company from Sales through
to HR, where changed behaviour or improved performance can attract sometimes vast rewards (as witnessed
recently with banker’s bonuses). For the target market, however, a downloaded i-tune may have a much greater
perceived value compared to an affordable retail discount.
And ‘slippage’ (the difference between the number of people that buy a product to take advantage of an offer and
the number that actually do so) has the potential to magnify the promotional budget even further - according to
a recent ‘Which’ report only 8% of people who buy a product for an offer actually go on to claim it. And with an
‘instant win’ promotion, only a small percentage of the prizes available are claimed, so the potential prize fund
can be enormous and protected by insurance. With a price promotion, every single purchase costs money.
Often, however, when evaluating such promotions the cost and the benefit are often not even discussed. In
the case of the bankers it is ‘a price you have to pay to recruit’ (we are told). In the case of price discounts at
supermarkets a similar argument is also deployed - ‘it’s just the price of doing business’.
However, all incentives must have a purpose or an objective that can be questioned and evaluated. Every
company ought to know what options exist for alternate means of achieving that objective. Clear objectives are
listed in the table below and options for reaching them are legion.

2 Communicating the benefit — tapping into the customer’s current psyche
Check the impact of your message with Google.
Over the last few months, £1 has taken up the role that 99p used to have. Just advertising that you sell a product at
£1 seems to guarantee that it is a good deal, as Asda demonstrated when they launched their ‘£1 range’. The Grocer
reported that a good proportion of the products in the range had been increased in price to meet the price point.
Similarly a recent entry for the ISP Awards played on the ‘Scrappage Scheme’ to promote the window
replacement market. Would customers have responded to the approach so fast if the Government had not just
spent a fortune elevating it to the Zeitgeist?
Communication should be designed to reach a customer as rapidly and effectively as possible. A recent IPSOS
Mori report drawn from many markets, and thousands of adverts, nominated the creative approach as the one key
element in the success of a campaign. It is vital to recognise here that you have at most seconds to get someone’s
attention, so this area cannot be underestimated. It should be clear then that the most important part of any
promotion is the communication - and not necessarily just the value, since value is in the eye of the beholder.
Considering the longer term might lead, for example, to offering a Free branded item which may be more
expensive than a cash discount, but if it has ‘play value’ for children it could offer substantial additional
advertising to the target market.

21

The Path to Loyalty – Step One | Turn your Price Discounts into Promotions

You will probably be drawn to the conclusion, as you review the examples in the following categories, that the
creative presentation is inextricably linked to the perceived value of the offer, so that an improvement in the
communication, without any improvement in the actual value of the incentive, can result in much better results in
the long and short term, than a much more costly ‘cash’ alternative.

3 Looking after the loyalty
It is a moot point whether loyalty - repeat purchase - gained after stimulating trial is the same as that gained
after becoming convinced to try by advertising. But if it quacks in the current market you might well be excused
for thinking that it is a duck.
So if you feel the price for keeping customers loyal is an extended series of price reductions, then it may be
reassuring to know that there are techniques designed specifically to build customer loyalty. These may be a less
expensive option than price reductions.
If you feel that you need to offer more than just the standard product/price combination, then exploring
alternative ways of adding value, perhaps also persuading customers to recommend your product/service to
others, may be worth considering.
The following chart shows where promotion techniques can fit into marketing objectives:



Price






Prize Promotion








Coupon
On-p Off-p

Discount



1 pop


Multi-pop Sample



GWP


Comp


Free
draw

Instant
win

Generate trial purchase

L

H

H

M

H

L

H

H

L

M

M

L

Generate traffic
( retail / web / publication )

L

H

H

L

L

L

H

H

M

M

L

H

Generate response
( as opposed to purchase )

L

L

L

L

L

L

M

L

M

H

H

H

Increase frequency of purchase H

M

L

Increase weight of purchase

H

M

H

M

L

H

L

L ( H*)

L

L

M

M

M

L

H

L

L ( H*)

L

L

M

M

Increase frequency of visit
( retail / web / publication )

H

L

M

L

L

L

L

L ( H*)

L

L

M

H

Reinforce ATL campaign

L

Create interest

L

L

L

H

L

H

M

M

H

M

M

H

M

L

M

H

L

M

M

M

H

H

H

Create awareness

L

M

L

L

L

L

M

M

M

M

M

M

Obscure price
Increase / differential

H

H

H

L

H

M

L

H

L

M

M

M

Gain retailer support / display

M

M

H

L

H

M

M

H

L

H

M

M



SLP


Free Item
Delayed

Free Item
Immediate

Cause
Related

Trial



Loyalty



Awareness



Tactical

H = High M = Medium L = Low * If collectable

22

The Path to Loyalty – Step One | Price Promotions

1 Price Promotions
Making a product or service more attractive by means of a temporary reduction in the cost.

1.1 Coupons
Coupons are used by consumers to secure a discount, generally at point-of-purchase. Electronic couponing
technology now exists that can deliver a unique coupon to individual computers and also provide an insight into
consumer response and behaviour.
Coupons cost more, of course, than just their face value. There could be print, distribution, and the process of
getting the coupons back from the point of claim. If, of course, the retailer issues the coupons many of these costs
disappear. If the coupons are distributed via the web, then distribution costs are also significantly lower - one
reason for the massive growth in this approach.
Printed coupons back are redeemed by retailers, who then bundle them up and send them to a clearing house,
such as Valassis (www.valassis.co.uk). They reimburse the retailer for the face value of the coupons, their postage
and a trade handling allowance. The coupon clearing house then recovers this payment plus a service fee from
the issuer of the coupon.
Mis and Mal-redemption - Mis-redemption is when a consumer deliberately or by oversight uses a coupon to
secure a discount on their bill without buying the product. This practice is hard to prevent as the retailer typically
fails to check that the coupon is being used against the promoted product. Mal-redemption describes those
situations where retailers deliberately and fraudulently redeem coupons themselves without them ever having
reached the consumer and request reimbursement for the value of those coupons.
The Institute of Promotional Marketing has well-developed guidelines for coupon design covering minimum and
maximum size, size of lettering, consumer and retailer messages, etc. (See www.theipm.org.uk). All coupons that
are to be redeemed through the grocery trade should carry an EAN-13 barcode which identifies the promoter, the
brand, the coupon value, the campaign reference, etc.
Coupons can be a very cost effective way of attracting business. However, as with all price promotions, what
is absolutely vital is to target current non-users. And only use coupons in areas where your product is in high
distribution. Very sophisticated systems of targeting are now available and these must be used to avoid wastage.
Tesco, in particular, can arrange to send coupons out to lapsed or potential users based on their customer data.

1.2 Discounting
This is considered to be the most common form of Sales Promotion and is frequently over used, which can lead to
the devaluing of a brand and its eventual demise. It is at its best when used sparingly.
Unfortunately retailers like to force their suppliers into the wholesale use of this technique, and, even though
through initiatives such as the Government’s Grocery Supplier Code of Practise, the balance should swing in favour
of a more rational approach to the use of price discounting, current feedback is that most manufacturers are not
taking advantage of the opportunity this brings to re-evaluate their options for this very heavy area of investment.

23

The Path to Loyalty – Step One | Price Promotions

Our previous report in 2009 as the ISP reported that too often promotions did not produce any kind of profit.
And when taken with the brand devaluation that inevitably follows, it is hard to see why alternatives are not being
sought, particularly when alternative media approaches to a market are so readily available. We commented in
that report that deep cut price promotions have become ‘the drug of choice’ for the FMCG manufacturer, giving an
immediate good feeling, but dealing long term damage to the brand. Early in 2010 IRI reported that promotions in
the spring were at “Christmas levels” proving, if such were needed, that the situation is getting no better.
Also includes:
• Invoice discounts - trade discounts given at the time of purchase.
• Retrospective discounts - trade discounts won at the end of a time period (usually a year), where extra
discount is given on the year’s purchases if an agreed purchase volume is reached.

1.3 Extra Fill (e.g. 25% extra free)
This is where free extra product is included in the pack either in standard packaging or a larger pack.
The trade likes to give away free product and normally the free product costs less than the consumer’s perceived
value. Where possible use existing packs or the next size up.

1.4 Buy One Get One Free (BOGOF), etc.
This can involve packs being banded together but is more usually operated through the retailer’s Electronic Point
of Sales (EPOS) system. This is one of the retailer’s favourite mechanics and can be hugely expensive for the
supplier (who always has to pay for it).
It is worth printing off a copy of the government’s ‘Code of Practice for Traders on Price Indications’ and checking
it whenever communicating price, discounts or price comparisons in marketing material. The Code can be found
in pdf format at www.berr.gov.uk/files/file8127.pdf

24

The Path to Loyalty – Step One | Price Promotions

Case Study

Further Details: Loop Marketing 0161 743 3707

Energizer Power to the People Energizer Lithium and Rechargeable Product
What can you learn from this approach?
To get a coupon the claimant had to work quite hard. While this may have put off some of those claimants, by
the time they had followed this process through, the redemptions were high. Many companies feel that making
coupons easy to get is vital. The results from this case study show that making it harder, but making it relevant is
also an excellent option.
The Challenge
Batteries are a high penetration but very low interest category. Consumers find them complicated. Users are
not aware that Lithium is the world’s longest lasting AA battery format, and many users have never considered
rechargeable, despite their low usage cost.
Objective
• Increase market share of both variants by 1%
• Educate target consumers
The Campaign
Are you a Power Planner or a
Power Player? — a microsite with
the Power Determinator Quiz —
separates the Power Planners —
potent rechargeable users — from
the Power Users.
Those using the quiz got advice
on the right battery choice, and a
£1 coupon to use in store.
Consumers were driven to the
microsite by; Targeted Banner
Advertising, E shot to GM
TV database, Sponsorship of
the GMTV newsletter, E-shot
to existing database,Google
Keywords, 110,000 coupons were
available via online sources.
The Results
• Combined Market Share increase by 1% over the promotion period
• Coupon Redemption 42%
• 27,156 consumers participated in the Power Determinator
• 300% return on Investment

25

The Path to Loyalty – Step One | Price Promotions

Case Study

Further Details: Life 0121 200 7200

Cravendale Milk Doorstep Coupon
What can you learn from this approach?
Even the most heavily advertised brand can benefit from a promotion
to kick start immediate trial. Trial which, as can be seen, generated
very significant loyalty. Of course, having a high profile media campaign
helped in giving the creative treatment high standout on the mat. Less
top of mind brands would need to work harder in this area.
The advantage of this direct to the consumer approach is that, as with
the battery case study, another kind of targeting means a much higher
proportion of the right kind of people get the message.
While this is, of course a high budget activity, the very flexibility of the
doorstep coupon means that it could be considered for even relatively
small campaigns.
Market Background
Arla Foods UK produces some of the country’s leading dairy brands,
including Lurpak, Anchor and Cravendale, a milk brand that keeps for
longer in the fridge than other fresh milk.
The challenge Arla faced in driving sales for Cravendale is that milkbuying behaviour is very entrenched. Consumer tests show that once
people try Cravendale they are very likely to keep buying the brand,
but that most shoppers never consider switching from their existing
choices. Arla needed to encourage people to look for Cravendale on the
shelf and then provide them with the incentive to try it.
The Campaign
Arla regularly uses door drops to target its buyers’ shopping lists, and recognised that this was another opportunity
for a piece of well-timed activity. A heavyweight TV campaign featuring the three colourful characters — the cow, pirate
and cyclist — ensured that awareness of Cravendale was at its highest when the door drop landed three weeks later. The
incentive came in the guise of three coupons inside the leaflet offering money off a two litre bottle of Cravendale Milk.
To achieve standout on the doormat, the creative was simple but very distinctive. A die-cut front cover opened up to reveal
the cow, pirate and cyclist at the bar, along with some key benefits about Cravendale, and finally the money-off vouchers.
With a budget of £970,000, Arla sent a total of 2.6 million door drops to a carefully selected target audience of families
who were heavy consumers of milk but weren’t buying Cravendale. To achieve this, Arla used the Royal Mail doorstep
delivery service and the FMCG Model provided by specialist marketing agency Tangerine. This specialised door drop
planning system not only profiles the type of shoppers but forecasts where they are likely to go shopping. This allowed
Arla to predict where people would redeem coupons, and use this insight to cluster coupon activity around specific stores
The Results
he campaign delivered a very strong consumer response, with a higher than expected redemption rate of 5.8%.
T
More importantly, the response came from 40% greater than normal new customers rather than existing ones who
were buying their usual brand at a discount. This translated into 270,000 new buyers trialling the Cravendale brand.
And post-campaign analysis shows that the campaign had a long-lasting effect: households who received the leaflet
bought 14% more Cravendale for 6 months, than those that didn’t. These were sales at full price, to boot.

26

The Path to Loyalty – Step One | Price Promotions

Case Study

Further Details: Bstreet 0208 400 6111

Anglia Windows Scrappage Scheme
What can you learn from this approach?
There was nothing special about the benefit — basically another way of offering a discount. What was different about this
approach is that it tapped into a very top of mind issue in another market. The result of this is that you do not have to
work hard to get the reader’s attention — but you do have to make sure that the reader sees that the similarity is justified.
Which in this case was perfectly carried out.
A result of this tight link to customer top of mind the campaign took the industry by storm, and has been replicated by all
the major competitors.
Market Background
Britain’s 26 million homes leak heat through their windows, accounting for 27% of the UK’s man-made CO2. The link
between the car scrappage scheme, replacing old, less efficient cars with new, more efficient ones was easy to make.
Traditional offers would have related to savings, but expressed as 3 for 2’s free fitting, cash back and free gifts.
The Campaign
Homeowners received a £2,000 allowance when they traded in their old windows. This was communicated through
DRTV, national press, online, door drops and foot canvassing.
The Results
• Against a target of 2,150 leads - £1.7 million worth of business, the campaign delivered 9,867 leads
over the target period
• The campaign peaked with a cost per sale of 12% versus the same period the previous year of 21%
• Sales rose 126% year on year, and in December despite spend being 11% down on the previous year sales kept coming
and were 68% up on the previous year

27

The Path to Loyalty – Step One | Self-liquidating Promotions

2 Self-liquidating Promotions
This essentially involves the promoter selling the consumer an item (or
‘premium’) at an attractive price, either immediately or via application.
Consumers submit money and proofs of purchase to buy a unique item or one
at a lower than normal cost. SLPs can also operate in store where ‘Special
Offer Packs’ contain, or have attached, the item being offered. The overall
price of the pack is inflated to include the price of the premium.
They can be a premium (e.g. branded mug, specially branded tin, etc.) or nonpremium based (e.g. tickets to a concert). Whilst SLPs should, as their name
implies, end up costing very little they rarely do so. They can be planned so as
to make a profit, break even or to be subsidised by the promoter.
Most commonly the terms and conditions will need to comply with the
Distance Selling Regulations and offer a money-back facility.

28

The Path to Loyalty – Step One | Self-liquidating Promotions

Case Study

Further Details: Geoff Howe 0208 941 7575

Kingsmill Wallace and Gromit
What can you learn from this approach?
If you were to pick an area that had been more commoditised than most, bread would come high up the list. It is highly
promoted, and a brave decision by Kingsmill to look outside of price cuts helped to break the brand out from the mould.
The advantages of the approach are that the collectible items remained as a constant reminder to the redeemer of the
product. While making for massive standout on pack. Which is the first moment of truth for any fmcg brand.
Given the cost of collectibles, this approach made it accessible for even light users, by offering it as a self liquidating item
as well as free for the heavier users.
The brand reported that they were able to run fewer price discounts across the period as a direct result of this promotion.
Market Background
The bread and morning goods area is highly competitive and this was the first on pack promotion for the Kingsmill brand
for 7 years.
Strategy
To develop a partnership with Wallace and Grommit and their latest film, a matter of Loaf and Death.
Producing a range of exclusive branded collectibles linking bread to the unique world view of Wallace and Grommit making
a compelling feature on pack, as well as in the media.
To make this accessible to light medium and heavy users, by allowing coupon collectors to redeem early with some cash.
The Campaign
Develop a collector promotion that offers items that develop an unique image for the brand. Based on token collectibles
from the pack, the Wallace and Grommet characters translated into a short range of items:
A wind up Turbo-Matic Toast rack designed to replicate the Top Bun Aardman Animation delivery van.
Plus more practical items — Bake-O-Matic Oven Mitts, Keep-O-Safe Pencil Case, Stay-O-Fresh Lunchbox.
As well as on the pack, the campaign also appeared on POS material, retailer magazine advertising and an on-line
promotion hub.

29

The Path to Loyalty – Step One | ‘Free’ Promotions

3 ‘Free’ Promotions
This another large category of techniques and broadly divides into:
A: Delayed — Where the consumer has to collect proofs of purchase or perform a task in order to ‘apply’
for the free item.
B: Instant — The consumer is rewarded instantly for the performance of a task or the purchase of a product.

A: Delayed
3.1 Application Offer
Consumers collect proofs of purchase to apply for a free gift. The CAP Code stipulates that promoters can ask
only for delivery costs (postage or whatever other means is used). If they ask for more, to cover packaging or
more, it cannot be called Free and essentially becomes an SLP (Self Liquidating Premium).
The method of ‘applying’ has dramatically changed over the last few years and mail-in offers (known as Free Mailin’s previously) are now mainly replaced by web offers.
The types of items ‘applied for’ falls into three broad categories:
Premiums - a physical item, typically branded and of relevance to the product usage or the creative from the
advertising - e.g. The Vauxhall Corsa C’mon Dolls or a Bisto Gravy Boat.
Cash - Consumers are offered all or part of the purchase price back e.g. ‘Up to £5 Cash Back’. It can be presented
as a ‘Free Trial Offer’ or ‘Try Me Free’ where only one proof of purchase is required to recoup the total cost of
the item. This mechanic is very powerful but has been abused in the past, so is made specific reference to in the
CAP Code (Section 32.4) - consumers should not be mislead into thinking it is a cash back if what they receive is
vouchers or coupons.
‘Taste Challenge’ / ’Satisfaction or your money back’ - are similar to the above in that they offer the potential
for money back, but it is usually done on the basis of requiring the consumer to write in and state why they do
not like a product. Consequently redemption levels are very low but it does give the opportunity to make powerful
claims about the product.
Discount offer - Consumers are offered the opportunity to save money on another service or product - usually
involving claiming a voucher - eg ‘Kids Go Free to Alton Towers’, ‘Walkers Brit Trips’.
Share outs - Consumers are offered a share in a set sum of money in return for collecting a specific number
of proofs of purchase. We recommend you do not use this unless the budget allows a generous share to each
applicant. Usually requires a large budget. Rarely used nowadays.

3.2 Collection Schemes
Consumers (or the trade) are encouraged to collect free items at the time of purchase - the items will have a
collection value in their own right (e.g. commemorative coins).

3.3 Collector Schemes
Consumers (or the Trade) collect points when making purchases and can redeem those points for rewards
(e.g. Nectar, Airmiles, etc.).

30

The Path to Loyalty – Step One | ‘Free’ Promotions

B: Instant
3.4 Free Gift With / In / On Pack
Banded Packs - where two or more packs of the same or related products are banded together
Gift with Purchase (GWP) - can be either a gift attached to the product, or where the consumer can select a
gift at the time of purchase. (such as McDonald gifts with children’s meals)
Re-usable Container Premium - product sold in a container that can be used for another purpose when empty.
May be run as a ‘Gift with purchase’, or the price may be added to the cost of the product, in which case it
becomes an SLP.
There are a number of key points that need to be covered for any on-pack item. These are:
• Ensure the item cannot be removed without purchase. Or most of your goods will end up minus the gift
• Pre- test the item’s desirability
• E
nsure the packaging is acceptable for trade facings. If you add something to the top it may prevent a
product stacking or, be too high for the normal shelves
• Check to see if VAT is incurred

3.5 Sampling
A very commonly used mechanic in Experiential Marketing, sampling is any means of getting product samples to
the target market, at home, in the store, at work, or on the ‘street’. Most often used on less established brands
that need ‘Trial’. The concept of ‘sampling’ can also be stretched to include such things as test drives.
Be sure to design the sampling activity so that the consumer enjoys the sample in the best possible environment,
so that the experience is positive and most likely to result in a future or immediate purchase. Test in a small run
first to check administration details are perfect.

3.6 Reward (for task completed)
Consumers (or trade) receive a gift for completing a task, e.g. taking a test drive, visiting an exhibition stand.

3.7 Digital reward
Consumers claim ‘instant’ rewards for completing a task, e.g. downloading software, ipoints, itunes, etc.

31

The Path to Loyalty – Step One | ‘Free’ Promotions

Case Study

Further Details: IRIS London 0207 654 7900

Marmite Free Horrid Henry audiobook download
What can you learn from this approach?
It has to be hard making a promotion benefit out of the fact that many people hate your product. And also communicating
this in a way that will get children to try, and then to use more. So the seeming improbability of getting a match at all
shows that good, creative searching is vital to generate a sound basis for a profitable mutual link. In fact the major benefit
was not necessarily the giveaway, but the media opportunities that the existing graphics delivered to the target market.
This identifies as in other cases, that researching the market, and getting a creative best fit is of paramount importance.
And of course, being on-pack had a major impact in the store.
Market Background
Marmite is an iconic British Brand with an honest take on how it is received by the public. You either love it, or hate it. The
critical audience is mums with growing families. Children fed on Marmite are likely to become the Marmite buyers of the future.
Strategy
Their children are the number one priority for Marmite Mums. So giving them the best start in life is hugely important.
Working with the Department for Children, Schools and Families and their “Reading for life” initiative, which aimed to get
children into reading, Horrid Henry was identified as the best fit for the brand and the children.
Over 14 million Horrid Henry books and audiobooks have been sold, the series has been translated into 25 languages, and
the cartoon based on the books has quickly become one of CITV’s most successful ever.
The campaign centred around linking the two main characters in the Horrid Henry series, Horrid Henry and Perfect Peter
with Marmite’s traditional ‘you either love it or hate it’ dichotomy and was supported via national press and radio. In press
fake ads and articles were defaced in Marmite by Horrid Henry and Perfect Peter. The message to mums was that Marmite
will help keep your kids out of trouble, as well as giving away free audiobooks that would help them to get into reading.
Radio ads aired during the school run told the story about how Scheming Suzy and Shrewd Shaun plotted to get through
their jars more rapidly so they could get all of the downloads faster.
This creative approach may well have been represented in the much
heavier than average rate of usage experienced.
The consumers were directed to a scratch off panel at
the back of the pack, redeemed through a site where the
audiobook could be downloaded. 5 could be collected, one
with each unique code.
The Results
1 Driving sales and frequency of purchase
• 1 0% redeemed between two and five jars in the first
4 months.


• A
considerable increase on the standard rate of
purchase of a jar every four months.

2 17,269 audiobooks downloaded from 2 million packs
• Website results showed a 0.86% redemption rate.
The majority of the budget was devoted to the media with
no cost for the downloads in exchange for the publicity.

32

The Path to Loyalty – Step One | Prize Promotions

4 Prize Promotions
There are two types of Prize Promotion. Those where you win by having some skill (competitions) or those where
winning is a matter of pure chance (a lottery).

4.1 Competitions
Within this area there are two approaches typically taken:
Compete with other entrants - This is by far the most common format and usually takes the form of a series of
questions with a tie-breaker usually skill based to select the ultimate winner.
Compete to reach a pre-decided result - This is typically a ranking mechanic (e.g. rank the following attributes
of the product as relevant to a particular type of person) or a ‘Spot the Ball’ type of mechanic where the entrant
estimates where an object is that has been removed from a picture. They have to get as close as possible to
where a panel of judges has estimated it to be OR where it was before removal.
In both cases a competition linked to purchase is unlawful if it involves forecasting the result of a future event or
if success does not depend to a ‘substantial degree on skill’.
The Gambling Act 2005 for the first time defined what is meant by ‘a substantial degree of skill’. It essentially
says that it must be sufficient to either prevent a significant proportion of people who take part from winning or
put off a significant proportion of people from entering
Unfortunately there is no definition of what a ‘significant proportion’ is and this will vary according to the target
audience of one brand from another. Essentially this was included to prevent companies running illegal lotteries
hiding behind ridiculously easy questions and to a large extent is irrelevant from a Promotional Marketing
perspective. However, the Institutes legal consultants can advise on how to stay on the right side of the line.
One of the advantages of a competition is that it can be designed to get a customer more involved in the brand
proposition. Current good examples of this would be the Tyrrells Crisps “Win a Tractor”. Stressing the back to the
farm credentials of the brand, in a form that is designed to catch the eye on the shelf. A poor example of the
same was the Bahlsen Biscuit quoted in the introduction. The design was confusing to the eye, and the German
heritage of the biscuit was not likely to be enhanced by the French prize.
As with any form of promotion is needs to be reviewed for impact in the context in which it will be viewed. On the
face of it, Win a Tractor was not likely to appeal as a prize to anyone living in the town — or even in a village. But
the sheer novelty of the approach, combined with the strong colour of the tractor demanding attention on the
shelf, and carried it through.

4.2 Free Prize Draws, Instant Wins and Games
Here winning is entirely down to chance. If a ‘contribution’ is involved, this technique becomes a lottery and these
are illegal (except in special cases - the National Lottery is established under a special Act of Parliament).
Free Prize Draws (or Free Draws) involve participants being chosen at random - typically they supply their details
and a winner (or winners) is picked.
The ease of entry and the appeal of large or exciting prizes make this a very popular mechanic with consumers.
On the face of it, as well, a very attractive proposition for the promoter. However, this needs to be treated with
real care as the area is hedged round with legislation that it takes and expert to navigate properly.

33

The Path to Loyalty – Step One | Prize Promotions

Instant Wins are a form of Free Prize Draw where winning packs are distributed randomly and the consumer
simply has to check to see if they have won (and what they have won) - by opening, peeling, scratching, phoning,
texting or visiting an outlet or website.
Until September 2007 the law considered the purchase of a product to constitute a ‘consideration’ (like paying
to enter the National Lottery) and to overcome this legal hurdle an on-pack instant win or on-pack Free Draw
required a ‘no purchase necessary’ route (NPN).
An NPN or Plain Paper Entry (PPE) route means offering a way of the customer entering without paying, if they
choose to. Typically this involves supplying their name and address on a blank sheet of paper (hence PPE) but in the
case of say a broadcaster running a premium rate phone in, the NPN route might be via a website. You can’t hide this
approach in small print — it must be clear and easy to see. Moreover, people entering in this way must not be second
class citizens. They must be treated the same in all respects as other entrants - with the same chances of winning.
When the Gambling Act 2005 came into force on 1st September 2007, it redefined the concept of ‘contribution’ so
that so long as the price of the product is not inflated, or charge the consumer in any other way there is no need
to offer a free entry alternative. The chance of winning then sits as an appropriate incentive to purchase.
If, however, the means of entry has a charge attached such as a premium rate line/text then an alternative free
route must be included.
Games are usually a form of free prize draw where the draw element is extended to make the promotion last
a long time. Newspaper Bingo is a good example. (N.B games can also involve the use of skill and judgment).
Usually the term ‘game’ is used to refer to promotions that have ‘playability’ built in to them, not to be confused
with the legal term ‘gaming’ or ‘gambling’ which is still illegal in sales promotion sense.

Special Considerations
When the Gambling Act 2005 was enacted it was not extended to Northern Ireland, which means that promoters
will need to consider whether to:
1 E
xclude Northern Ireland from U.K. prize promotions based on chance in order to take advantage of the
new definition of ‘Lottery’ in the 2005 Gambling Act which allows games of chance linked to product /
service purchase at their normal price, or
2 Continue to offer a free entry (NPN) facility to Northern Ireland participants, or
3 Offer a free entry route for participants across the whole of the U.K., Channel Islands & IOM
The Institute cautions against offering a single prize in an on-pack instant win, as once that prize is known to have
won it could be held that all remaining packs are featuring something which the promoter knows can no longer
be won. It is possible that the authorities could insist that all remaining packs be removed from sale. By the same
token, winning packs should be inserted into the supply chain at intervals so that there is a chance of winning
right up to the end.
With most types of prize promotion it is advisable to take legal advice at an early stage, to avoid breaching any
of the many pitfalls the Acts throw up. Use the Institute experts at every stage - logistics, print, distribution, prize
delivery, etc.
Use an independent supervisor to oversee all draws and judging. If the budget is open-ended, seriously consider
taking promotional insurance.

34

The Path to Loyalty – Step One | Prize Promotions

Case Study

Further Details: Toucan 0208 544 1770

Tyrrells Win a Tractor
What can you learn from this approach?
The difference between a pack based promotion and a price discount is that the packs appear in all the stores, and the
impact can last much longer than a price discount. The budget for this promotion was less than that for many price
discounts in a single multiple retailer. Even a small budget can benefit from a standout creative. And the fact that the
Further Details: Toucan 0208 544 1770
tractor was red did not hurt shelf visibility either.
Market Background
Tyrrells were a distant third in the premium crisp market behind Walkers Sensations (44%) and Kettle Chips (42%).
Tyrrells had never promoted on pack before.
• The Brand was based on the efforts of one farmer — and the product
• Strategy needed to stress the fact that Tyrrells were in touch with their roots — right from seed to chip
• On pack was the obvious route and as they were not a huge brand, every part of the budget had to work as hard as possible
The Campaign
Featuring on 1 million packs across 4 varieties consumers visited a website and entered a batch code. This generated an
unique number which translated into a winner or a loser.
The main prize was a Massey Ferguson 5455 tractor (or £25,000 in cash!), with second prizes of 1,000 pairs of Aigle
Wellies and 2,000 Tyrrells goodie boxes.
The promotion was supported by ads in Good Food Magazine, Waitrose Food Illustrated and Observer Food Monthly.
Alongside a Youtube site stressing the life changing properties of winning the tractor.
The Results
• 36.5% Sales increase with no major listings across 5 month period July — December 2009.
• 46.541 entries (4.65% of packs in circulation)
• The promotion appealed both to loyalists and new users.
• Bolster Trade Relations
• Buyers comments ranged from ‘completely on-brand’, ‘Perfectly Tyrrells’, ‘Absolutely love it — made me smile’
• ROI 220%

35

The Path to Loyalty – Step One | Cause Related Promotions

5 Cause Related Promotions
This involves a tie-in with a good cause, usually to raise funds for them.
The objective is to gain a halo effect for the brand, as well as appeal to the
supporters of the charity. Often charities are very careful about a too close
linking with a commercial proposition, so it is very important to examine all
the details, and ensure that there is not an over-reliance on the extent of the
support that a charity can bring to bear.
The link can involve either a charity or organisation (like a school) and the
mechanic usually requires consumers to respond in order that the cause
benefits in some way (cash or kind). This can be an incredibly strong motivator
in certain situations and can result in considerable participation levels. There is
a specific section in the CAP code relating to Charity-linked promotions — most
importantly, there should be no capping of donations triggered by consumer
responses. Despite stating a ‘target’ figure budget allowance should be made
for over-achieving the target as well as under-achieving it.
This should not be seen as being a ‘cheap’ option, since it is legislation bound,
and can impact badly on the brand in the case of poor publicity, and on the
charity if it is seen to be ‘selling out’. However, a carefully considered promotion
can be very beneficial on many levels for both parties.
For a host of information on cause related marketing issues, visit Business in
the Community www.bitc.org.uk (tel: 0870 600 2482).

36

The Path to Loyalty – Step One | Cause Related Promotions

Case Study

Further Details: Savvy Marketing 0113 237 6500

Jammie Dodgers and Comic Relief — ‘Give us a Giggle’
What can you learn from this approach?
Selecting Good Causes can be a difficult decision, but if you choose right the benefit can be massive publicity. As with
bread, the biscuit area is very competitive, and it is not easy to get instant uplift — so a brave choice. But along with it
comes the opportunity to get free PR worth many times the budget.
And alongside this publicity, and in-store standout came excellent sales uplifts over an extended period.
Market Background
The Number one kids brand in the UK, but also loved by adults, the brand position is for the “child in all of us""“.
The Campaign
In Store — 8 million Jammie Dodger packs carried the promotion, and this was carried through to 9 separate point of sale
campaigns. It extended right through to product shippers, shelf material and instore posters.
Store Radio — Broadcasts and other store media.
On-line — Jammie Dodgers ‘Give us a giggle’ website — Direct link from retailer pages — Online competitions
with individual retailers.
Gigglebooth tour — Bespoke standalone units with footage uploaded to giveusagiggle.com — 27 stores and town centres —
13,500 customers taking part.
The Results
• PR reached more than 143,000 people with a value in excess of £720,000
• More than 10 million joke impressions
• 24,000 individual hits on the web site during the 3 week campaign
• 800,000 customers purchased during the period — selling through ahead of the target
• Sales of Jammie Dodgers increased by 21%
• Market share rose by 3 points to 26%
• Raised more than £160,000 for charity
• For a budget total of £750,000

37

The Path to Loyalty – Step One | Appendix 1: Loyalty – the Transferable Benefit

Appendix 1:

Loyalty — the Transferable Benefit
It is sometimes hard to track loyalty from purchases. Or indeed to predict it. Only under unusual circumstances
can it be seen. A circumstance where, as an example, a well-liked product in distribution mainly in major groups is
de-listed so that sales can be tracked outside of that group from the day that it stopped selling.
Such was the case for Ultima cat food, a product produced by the third largest manufacturer in Europe, but with a
low profile in the UK.
In August 2009 this product was de-listed by Tesco. The reason give at the time of the de-list was a lower loyalty
than the rest of the category.
In advance of this, however, Storecheck had been asked to look at the product, identify the strengths and
weaknesses with a view to recommending on support action. Price discounts had not lead to adequate growth in
the past, and clearly more appropriate action was needed.
Storecheck used their site www.yousay.org to collect responses from new and existing users of the product, exploring
their attitude to it, and thus being able to recommend on the impact on sales of various promotion options.
100 users replied using the unique pack codes. The picture they painted was in stark contrast to that presented by
DunnHumby for Tesco.
Here, 85% of the users said that they would be very or quite likely to recommend to their friend. While 12% of them
said that if they could not get the product from one shop, they would make a special trip to purchase elsewhere.
Meanwhile 37.3% said that they would intend to purchase from a store on another shop.

38

Sales

The Path to Loyalty – Step One | Appendix 2: Loyalty – the Transferable Benefit

2008
2009 & January 2010
August

September

October

November

December

January 2010

Source: Retailer Sales Data

The product was actually delisted in August 2009. Shortly afterwards, Storecheck sent an e-mail out to the
respondents advising them of their nearest stockist. In the two, unpromoted, months that followed, sales in the
next largest retailer sprang into life, vindicating the research.
The loyalty in action can also be gauged by the creativity of the letters of complaint sent in at the time.
There are a few learnings to be gained from this experience:
• People are loyal to products as well as the outlet that they buy in. So that brand experiences gained in
one can be transferred. This will, however, depend on the level of approval gained as a result of the trial.
• Shopper research is always likely to be more accurate about intentions than that derived from sales. For
more details of the research methodology as it applies to packs, sampling and experiential follow the link.
• Extended distribution accompanying price discount actions will not necessarily be wasted provided that
the level of approval is high enough, and other stores are available nearby.
• De-listing from one store does not have to be the end of the world.

Dear Sir/Madam,
I am the oldest of the 4 felines living at the above address,
together with our human slave. I am 5 years old. As such I have been asked to
write a letter to you on behalf of the 4 of us – just as well I can type then,
isn’t it? Lately, we have be appalled to see our human slave arriving home
from a shopping trip to Tescos of Trowbridge WITHOUT our Ultima Dry Cat
food, saying that she was unable to get any of it. Having made enquiries at the
Customer Service desk, she was told that there was none on the shelves and
none on order. This was also the case at other Tesco shops in this area.
Well, to put it bluntly, this SIMPLY ISN’T GOOD ENOUGH.
We are four PEDIGREE felines and as such, we need PEDIGREE food
– i.e. Ultima/Affinity

39

The Path to Loyalty – Step One | Appendix 2: Measuring Attention and Engagement at the Moment of Truth

Appendix 2:

Measuring Attention and Engagement at the Moment of Truth
What are they thinking when they look at your Promotion?
Sales Promotion Techniques really work, but in the current climate, and even more into the future, manufacturers
and retailers are demanding proof, not simply assurances.
To cater for this need, the Institute for Promotional Marketing are developing and benchmarking an unique
combination of eye-tracking and pupil dilation measurement. Independently, they have their place. Eyetracking
will tell you what people notice first. And it will tell you how long they dwell on your messages. But only measuring
their reaction will tell you is whether they spent 3 seconds because they were interested. Or because they were
puzzled and trying hard to work out what you actually meant. And where they totally lost interest.

The Thought is Father to the Deed
Increasingly it is recognized that much of the decision making processes that lead to the purchase are not only
subconscious, but they cannot be de-constructed and explained consciously.
If you want to understand and track the decision process, you need to be able to track what goes through the
mind of the shopper looking not just with their eyes, but through their eyes.
Using iMotion software, the Institute propose to track activity from the literal gleam in the eye of the shopper,
through to the eventual sales result on roll out. The aim is to be able to distinguish between different creative
approaches to the same incentive, or to different incentives. We would expect to have as a control, a straight cash
discount in all cases. Any promotion has to perform well on two levels. Firstly the initial impact—and here, as we
know, cash is king. But secondly on the impact on the image of the brand. Where cash is the knave.

EMOTIONAL ACTIVATION

ORIGINAL RESEARCH ARTICLE

Pupil dilation betrays the timing of
decisions
Wolfgang Einhäuser 1, Christof Koch
1
2
3

2

and Olivia L. Carter 3*

Department of Neurophysics, Philipps-Universität Marburg, Germany
Division of Biology and Division of Engineering and Applied Science, California Instituite of
Technology, USA
Psychological Sciences, University of Melbourne, Australia

The notion of “mind-reading” by carefully observing another individual’s physiological
responses has recently become commonplace in popular culture, particularly in the
context of brain imaging. The question remains, however, whether outwardly
accessible physiological signals indeed betray a decision before a person voluntarily
under a psycological

40

The Path to Loyalty – Step One | Appendix 2: Inside out – getting to the heart of your customers anywhere they shop

Inside out — getting to the heart of your customers
anywhere they shop
A metric to be of any value must be transferable across a number of potential
media and presentations
Screen or projector based means that you can cover commercials, press, web sites, posters, leaflets, flyers or
coupons as well as the facing in store.

Do only what your customers tell you
Research questionnaires and focus groups can’t get to the heart of what your customers will do in that first
moment of truth, wherever they may find it. Inside Out is the Institute of Promotional Marketing benchmark to
let you see how your approach measures up in cutting through below the surface. So you can understand exactly
how your creative and incentive combination will play to your market..

Make absolutely sure they get the message
The cost of media is going down since more and more use is made of social sites. As a result, more and more
investment is going into the incentives and the creative approach. Research needs to keep pace with this change,
and companies investing ever more into these sensitive areas need to insulate themselves against loss, and target
gains. Those who remember ‘You’re Never alone with a Strand’ cigarettes, Typhoo scratch cards, Hoover Free
Flights know there is a world of disaster beyond even bland.

Lay a single, consistent, proven Path to Loyalty
EMOTIONAL METRICS

Emotional Activation

?
EYE TRACKING METRICS

Spotlight

Highlight

Questionaire

To be kept in touch with progress, or register an interest e-mail Colin Harper colinh@theipm.org.uk

41

The Path to Loyalty – Step One Appendix 3: Bibliography

Appendix 3:

Bibliography
Alvarez, B.A. & Casielles R.V., 2005. Consumer evaluations of sales promotion: the effect on brand choice.
European Journal of Marketing; Feb., 39 (1/2), pp.54-70.
Bawa,K. and Shoemaker, R.W. (1987) “The effects of a direct mails coupon on brand choice behaviour”.
Journal of Marketing Research; Vol. 24 No.4, pp. 370-376.
Blattberg, R.C., Neslin, S.A. (1990).
Sales Promotion — Concepts, Methods and Strategies; Prentice-Hall, Inc., Englewood Cliffs, NJ.
Dawes, J. (2004). Assessing the impact of a very successful price promotion on brand, category and competitor sales.
Journal of Product & Brand Management; 13(5), 303-314.
De Pelsmacker, P., Geuens, M. & Bergh, J. V. (2007).
Marketing Communications; A European Prespective; 3rd Edition, Harlow, Pearson Education.
Dickson, P.R., Sawyer, A.G. (1990), “The price knowledge and search of supermarket shoppers”.
Journal of Marketing; Vol. 54 pp.42-53.
Cummins, J. & Mullins, R., 2008.
Sales Promotion — How to create & implement campaigns that really work; 4th ed. UK: Korgan Page.
Davis, S., Inman, J.J., McAlister, L. (1992), “Promotion has a negative effect on brand evaluations — or does it? Additional
disconfirming evidence”.
Journal of Marketing Research; Vol. 29 pp.143-8.
Ehrenberg, A.S.C.. Hammond, K., and Goodhardt, G.J. (1994), “The after-effects of price related consumer promotions”.
Journal of Advertising Research; Vol.34 No.4, July / August, pp.11-21.
Ehrenberg, A.S.C. (2000), “Repeat buying — facts, theory and applications”.
Journal of Empirical Generalisations in Marketing Science; Vol. 5 pp.392-770.
Fill, C. (2009)
Marketing Communications; 5th Edition, Harlow, Pearson Education.
Gupta, S. (1988), “The impact of sales promotion on when, what and how much to buy”.
Journal of Marketing Research; Vol. 25, No.4, pp.342-355.
Kendrick, A. (1998) Promotional products vs price promotion in fostering customer loyalty: a report of two controlled field
experiments.
The Journal of Services Marketing; Vol. 12 No.4 pp.312-326.
Kumar, V., Leone, R.P. (1988), “Measuring the effect of retail store promotions on brand and store substitution”.
Journal of Marketing Research; Vol. 25 pp.178-185.
Liao, S., Shen, Y. & Chu, C. (2009) The Effects of Sales Promotion Strategy, Product Appeal and Consumer Traits on Reminder
Impulse Buying Behaviour.
International Journal of Consumer Studies; 33 (3) pp.274-284.
Lodish, L.M. & Mela, C.F. (2007) If Brands Are Built over Years, Why Are They Managed over Quarters?
Harvard Business Review; 85 (7/8) pp.104-112.

42

The Path to Loyalty – Step One Appendix 3: Bibliography

Palazón-vidal, M., Delgado-Ballester, E. (2005) “Sales promotions effects on consumer-based brand equity.”
International Journal of Market Research; Quarter 2, Vol. 47 Issue 2, pp.179-204.
Pauwels, K., Hanssens, D.M., & Siddarth S., 2002. The Long-Term Effects of Price Promotions on Category Incidence, Brand
Choice, and Purchase Quantity.
Journal of Marketing Research (JMR); Nov., 39 (4), pp.421-439.
Peattie, S., & Peattie, K. (1993). Sales Promotion Competitions--A Survey.
Journal of Marketing Management; 9(3), pp.271-286.
Sriram,S.,Balachander, Subramanian K., Manohar U. (2007) “Monitoring the Dynamics of Brand Equity Using Store-Level Data”.
Journal of Marketing; Vol. 71 Issue 2.
Gupta, S., & Cooper, L. (1992). The Discounting of Discounts and Promotion Thresholds.
Journal of Consumer Research; 19(3), pp.401-411.
Totten, J.C and Bloch, M.P. (1987), “Patterns of store choice: new text and cases”.
Commerce Communication, Inc.
Villarejo-Ramos, A.F. and Sánchez-Franco, M.J. (2005) Theimpact of marketing communication and price promotion on brand
equity.
Journal of Brand Management.

43

The Institute of Promotional Marketing Ltd
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Telephone: 020 7291 7730
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