P-O-P Gains, But Girds for Tobacco Withdrawal

Posted on by Chief Marketer Staff

Marketers last year spent $13.1 billion on point-of-purchase displays, an increase of 5 percent above 1996.

Some segments had growth rates that exceeded the industry norm. For example, P-O-P revenues for the fresh/frozen/refrigerated food category grew 15 percent, while P-O-P for the professional services industry (including such fields as personal finance) expanded by 14 percent.

Grocery P-O-P shot up by 8 percent, according to the Food Marketing Institute. Even restaurant and foodservice P-O-P went up by 8 percent last year. The apparel/footwear category grew by 12 percent, and the candy/snacks/cookies and crackers segment by 7 percent. Pre-recorded music and videos, always a strong point-of-sale performer, increased 8 percent last year.

The biggest shadow thrown over the continued growth of the P-O-P industry is government limitations on tobacco advertising. When tobacco ads were banned from the airwaves in 1971, the industry turned to P-O-P, premium incentives, and couponing to promote. But last year, the U.S. District Court of Greensboro, NC, upheld a 1996 decision by the FDA to prohibit the advertising of tobacco products in self-service displays. Instead, tobacco products must be purchased at checkout with proof of age. But such displays account for a significant portion of the estimated $700 million spent annually on tobacco P-O-P.

The FDA’s new rules would cut tobacco displays to almost nothing. For example, if upheld, tobacco signage would be black-on-white, small, and limited in most cases to one sign per brand per store. They also could not be located within two feet of any fixture on which candy is offered for sale.

The Point-of-Purchase Advertising Institute (POPAI) immediately appealed the decision, arguing that the FDA regulations “clearly threaten commercial speech,” which is protected under the First Amendment. POPAI President Richard Blatt also argues that if “clients want to surrender self-displays voluntarily, that’s one thing,” but POPAI cannot support “the erosion of legal protections for truthful advertising” even if it’s for tobacco. Further, Blatt says that enacting these regulations into law would harm the P-O-P industry and set a dangerous precedent for regulating alcohol, caffeine, fatty foods, and other widely used ingredients.

The case is currently being reheard at a federal court in West Virginia. A decision is expected in August or September.

The FDA issue has been further complicated by recent proposals in Congress to repeal deductibility of the costs of tobacco advertising for those companies that are not in compliance with the new (and court-contested) FDA P-O-P restrictions. The deductibility is worth an estimated $1.5 billion annually in federal revenue, POPAI officials say.

The new proposals, being pushed in the Senate by Jack Reed (D- RI) and in the House by Deborah Price ( R-Ohio) are being resisted by POPAI on the grounds that “tax policy cannot play favorites among industries,” according to an association official.

For the point-of-purchase industry, hundreds of millions of dollars hinge on the court’s decision, and industry officials are understandably nervous. According to one, “There could be a possibility of a domino effect” – industry-wide spending cuts as high as 10 percent. But POPAI officials say that many P-O-P companies are already out of tobacco.

Pairing for profit Co-marketing initiatives continue to play a critical role in P-O-P. More and more retailers are contributing to the purchase of branded store fixturing, POPAI officials say. This is most apparent in the apparel category among department stores looking to add panache to floor layouts with fashion brands. The St. Louis-based Waylon agency, for instance, is assisting Nike in placing fixturing, since it allows the company to “access the local market and give it more local flavor,” according to Waylon print group manager, Dave Zinn. Anheuser-Busch was another mega-marketer on a P-O-P tear last year, looking to increase alternate channel distribution with new displays in Walgreen’s drug stores and 7-Elevens.

More retailers are getting in on the P-O-P design and execution process from the start. A past focus on price has been replaced by an emphasis on consumer marketing strategies. One effect is to increase the compliance level of stores in promotion programs. Jeff McElnea, ceo of the Paramus, NJ-based Einson Freeman agency, notes that retailers make more efficient use of trade promotion funds given to them by manufacturers while having more flexibility in decision-making.

Marketers are also spending more on new technology to give displays a boost, all with an eye towards future market growth. Audio chips, motion displays, and more lighting are all gaining increasing favor in attracting customers and increasing P-O-P expenditures.

Color heightening technologies are being used to ensure that P-O-P displays capture consumer interest. Efforts are being made to bring a much higher intensity of color within the four-color process while avoiding the large costs associated with the older high-fidelity process.

Marketers are working with “computer two-plate technology” which eliminates the middle step of creating film for ads and makes cost-effective the notion of individualized displays. It’s an account-specific account exec’s dream.

* Point-of-purchase got a modest 5 percent boost from marketers.

* Fast-growing segments included fresh/frozen/refrigerated food (up 15%) and professional services (up 14%).

* POPAI continues appeal of tobacco advertising regulations that would reduce in-store tobacco signage.

* Co-marketing initiatives continue to play a critical and growing role in point-of-purchase.

* Increased interest in technological options such as audio chips and digitizing could raise per-display spending in coming years.

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by Patty Odell

Damon Swenson, Brand Activation Manager at Dr Pepper, on crafting a retail program using custom labels tied to Millennials’ passion points and lifestyle interests like fashion, music and pop-culture. He presented his case study at Marketing to Millennials 2017.



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