Bellwether reaction: Is sales promotion killing brands?

New figures from this week’s IPA Bellwether Report reveal that marketers across the UK are ditching main media spend to plough their budgets into sales promotion to help consumers navigate the cost of living crisis, with direct marketing and events also witnessing growth.

While the report draws its own conclusions, Decision Marketing quizzes industry chiefs to gauge the mood of the wider marketing nation.

First up is Reputation head of EMEA marketing Camille Flores-Kilfoyle, who maintains that the increase in sales promotion budgets is a positive reaction by marketers, arguing that, as consumers are feeling the pinch, businesses are hyper focused on ways to attract and retain their customers and keep them engaged.

Flores-Kilfoyle added: “Businesses need to be aware of the importance of marketing in a difficult economic climate and adjust their strategies to focus on meeting customers where they are.

“Brand reputation and customer loyalty are important factors to consider when making marketing decisions. Businesses that focus on building these are more likely to be successful and promotions are a great tool for this. However, it more important than ever for marketers not to overspend and to ensure any promotions are targeted to the right audiences for the maximum ROI. This in turn leads to a positive brand reputation and enhanced retention.”

Blackhawk Network EMEA regional lead for commerce Anna Uprichard, meanwhile, reckons the fact that sales promotion budgets have been increased by their highest margin in the 23-year history of the IPA Bellwether Report is a sign that marketers are listening and acting on what their customers want.

She continued: “Sales promotions can take many forms but a strong strategy can really help to build loyalty and help with customer acquisition. It’s great to see a more positive outlook on the market but we can’t get complacent. Times are tough for business and creative ways to keep customers engaged can be the difference in surviving or not.”

And Kantar Media TGI managing director Sarah Sanderson insists that marketers are simply responding to the fact that more and more consumers are on the hunt for deals.

She continued: “Our TGI data shows the proportion of people who say they look out for food and drink promotions has crept up from 77% in 2020 to 82% today. It’s important for brands to demonstrate to customers that they’re alive to the issues they face, although we know from our wider Kantar research that cutting prices by too much and for too long can damage the value of a brand in customers’ eyes so marketers should be wary of sustained discounting.”

For Wavemaker UK chief strategy and planning officer Elliott Millard, it is clear marketers are playing it safe and pulling short term levers to maintain sales volumes and to satisfy shareholders.

However, as is so often the case, there is a tension between marketing belief and consumer behaviour, Millard reckons.

He explained: “Around half of the country (and this number rises to nearly 60% among key, desirable youth audiences) say that they are sticking to well known brands despite the cost of living crisis. And for many categories the number of people who place sales promotion as a key purchase influencer is actually in decline when comparing current behaviours to pre-Covid. Food, drinks, alcohol and toiletries all show declines in the importance of price promotion despite the rush from brand marketers to invest in this space.

“This is also where the division and nuance comes through. With 20% of marketers increasing budgets and 15% cutting, there is clearly a complexity to the current situation – not all brands are the same and not all brands should simply follow old ‘invest in brand rules’ mantra.

“Brands operating in categories like AV, home furnishings, appliance and clothing should probably be following the trend for sales promotion – all those categories are seeing increases in the importance of that touchpoint. The division here is particularly interesting. Buyers of non negotiable items (food, booze, toiletries etc) look to be more resilient and less price sensitive, whereas buyers of more ‘delayable’ items (clothing, home items) are seeking price promotion. Understanding that nuance, as well as your own brand situation is critical – simply following the trend could erode profitability unnecessarily.”

However, Kepler EMEA managing partner of consultancy James Coulson calls the move a necessary short-term tactic, but warns that advertisers must keep one eye on the future.

He commented: “We’re seeing glimmers of hope that the cost of living crisis is easing, some category inflation looking to have peaked, and the economic canary – adspend – is picking up, so keeping on investing in brand building strategies now is imperative to thrive in the future.

“Price will not always be the primary decision factor for advertiser’s customers, so keeping the brand and its values alive and well now will pay dividends in the future. The future also holds many opportunities that need investing in now to keep a competitive advantage – unlocking opportunities in the retail media space and upskilling in line with the latest advancements in AI to name a few. Those who can upskill efficiently and react quickly will be ready to take advantage of the slightly more optimistic picture that 2024 currently promises.”

Another sector which has witnessed a resurgence is events, and for Imagination group CEO Patrick Reid the Bellwether reflects what his business is witnessing across its client portfolio, with expanding budgets for brand experiences.

He added: “Marketers’ continued investment in experiences demonstrates a deepening recognition of the power of in-person and hybrid experiences to connect with customers. Something that will become increasingly important as the uncertain economic climate and cost of living crisis continue and brands are focussed on value and ROI.”

Fuse partner Victoria Chew concurs, insisting that organisations are continuing to invest marketing spend in face-to-face interactions and in-person experiences, an area which is likely to see further expansion during the global summer of sport.

She added: “With the FIFA Women’s World Cup starting this week, we can expect to see more events and brand activations. Particularly, as retailers and hospitality venues are expected to cash in on £84.5m as consumers tune in to England’s opening fixture, which is expected to rake in 5.4million in audiences across the UK,.

“Sporting events are proving to be an attractive opportunity for all brands big and small looking to build out their marketing strategy.”

Meanwhile, Medialab head of marketing effectiveness Anthony Pey reckons that proceeding cautiously is still important.

He explained: “Many measurement and econometrics studies typically prove that across many sectors, marketing investment is typically the biggest driver of growth, outside of discounting/promotions, which alone can erode brand value over time.

“This growth in marketing budgets signifies that brands which continue to invest during difficult times will capture more of the market, compared to those which don’t, and ultimately they will come out stronger.

“Concerns about economic challenges will no doubt continue, but with inflation starting to slowly decline, and consumer confidence back on the rise, now is a crucial time to invest and maintain momentum. More importantly, using the right data signals and measurement technology to optimise campaign returns will ensure marketing spend allocation supports and aligns with overall long-term strategies.”

Finally, Joint founder Richard Exon’s take on it all is that another quarter of solid growth in marketing budgets proves that brands are maintaining a resilient outlook despite a period of double-digit inflation and rising mortgage rates. While the UK still faces huge challenges, over the past few years it is clear marketers have become experts in navigating disruption from economic and political uncertainty, he believes.

Exon concluded: “Brands, such as those in the retail space, have experienced the most success supporting their customers through high inflation with sales promotions. But with the Bank of England set to raise interest rates even further, albeit not as sharply as recently envisaged and higher borrowing costs unsettling consumers, this could quickly change. These brands are going to have to get even smarter to maintain consumer spending and tackle a potential raft of new challenges as we head into the coming quarter.”

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