Earlier this year, some 1,500 media advertising execs gathered at the AAAA conference to discuss how to stem the outgoing tide. The day the conference kicked off, an article in the Wall Street Journal cited the pressures being felt by the attendees to address new technologies and fragmenting audiences at a time when marketers are demanding better measurement of the effectiveness of their programs. Charlie Rutman, the CEO of Havas’ MPG North America was quoted as saying, “The overarching goal is to try to find the cause-and-effect relationship between a marketing act and some kind of consumer action.”
The problem for the attendees is that their clients have caught on. After all, “promotion,” according to the definition in the PROMO Primer, is “…any marketing communication containing a reward, either economic or experiential, which motivates a specific action by a specific audience, during a defined time period.”
The marketers and agency executives who took part in the 2006 PROMO Industry Trends Report understand that definition. Whether they are relying on promotions to drive sales within a specific timetable, or help build loyalty and brand equity over the longer term, more and more marketers are building in promotion elements into the DNA of their branding efforts.
Of the brand execs polled, 64% say they develop promotion as part of an overall marketing strategy — compared to 55% last year or 52% two years ago. This year, 14% say it was mapped out separately, but with equal weight as other marketing disciplines (a number nearly identical to last year). And 22% say they developed promotions after other marketing disciplines were confirmed — the percentage has continually dropped over the last few years, from 29% last year and from 31% in 2002.
As noted in prior years, pushing the ROI agenda are more senior management within companies who are rolling up their sleeves and making decisions about marketing strategies and even tactics.
Three of four respondents (76%) told us that their CEO/President/Owner is involved in making marketing decisions, while 48% of them say that such top-level execs are deciding specifically what happens with promotions. Just 20% of those in this year’s survey say the top level management stays out of such decision-making altogether.
If not the CEO, at 71% of brands surveyed, the vice president or other executive level management is involved in developing promotional strategy.
Further, within the survey we simultaneously conducted among the agencies in the PROMO audience, we found that at least 25% of the time, their clients’ chief financial officers are regulating the marketing budget.
While 35% of marketing executives polled say their Agency of Record roster remained unchanged in 2005, and 12% added agencies to their rosters, many agencies are having a tougher and tougher time establishing those relationships. While a relatively small number of companies in the poll (8%) say they cut shops from the AOR list, procurement is becoming more entrenched in the RFP process.
But don’t feel sorry for the agencies: More than half of those executives (56%) saw revenue increase, while 29% say 2005 was flat and 14% recorded a drop in revenue for the year. Cumulatively, they saw revenue increases in 2005 over the prior year — an average 23.5%
Brands told us they are looking for service, quality of creative and strategic work and competitive prices for services. The challenge for agencies (and brands that indeed want to find the best service suppliers) is convincing procurement gatekeepers of the creative and strategic quality of the work. Nearly a quarter of the brands surveyed (24%) say they outsourced more work to agencies in 2005 compared to 2004; 45% say outsourcing was about the same year-over-year, while 29% say they cut back the outflow while doing more promotional work in-house.
Part of the reason brands covered so much of the work this past year was healthier headcount: 30% increase staffing in marketing departments; 55% kept staff levels steady; 11% had a decrease in headcount in the marketing group.
More than two-thirds of the agency executives we polled (69%) told us that their clients are asking for greater integration of their marketing communications. Just 16% of them say clients weren’t looking for higher levels of integration.
The marketers themselves say that they are developing promotions in conjunction with a range of marketing disciplines. However, as marketing disciplines become more integrated, the “buckets” or line item definitions applied within companies tend to become more porous. Promotional marketing often happens in line with media ads that often support a specific promotion. How a given company defines its media spending vs. its promotional ad spending has an impact on the numbers reported as “slices of the pie.” Our data reflects the internal definitions of the companies we poll. This year’s survey stressed specific spending definitions. Even though the “above the line/below-the-line” definitions are breaking down, we prompted participants to consider trade promotion not simply as in-store marketing — which has become a much more significant chunk of a CPG brand’s budget — but specifically as non-consumer targeted marketing in retail and distribution channels.
The integration of marketing efforts drives this. For example, of work assigned by brands to promotional marketing agencies in 2005, an average 20% included promotional advertising, 18% included direct marketing, and 12% included p.r. In 2005, 24.5% of the advertising budget funded promotion-related ads.In 2006, marketers expect 26.7% of the advertising budget will fund promotion-related adertising.
Two-in-five (43%) of the marketers we surveyed say they plan to pair up with other brands more often for mutually beneficial promotions in 2006; 49% say they will keep their brand “buddy programs” at levels on par with 2005, and just 3% say they are pulling back.
Overall, 23% of those in our poll say they expect to increase their consumer promotion budgets this year over last; 60% are keeping them flat and 8% say they expect to decrease.
Cumulatively, that translates to brands increasing their consumer promotion budgets by an average 4% in 2006 over last year.
On the trade promotion side, 22% of those in our poll say they expect to increase their budgets this year over last; 63% are keeping them flat and 9% say they expect to decrease.
Cumulatively, that means trade promotion budgets should grow by an average 5% in 2006 over last year.
|TACTIC||2005||2004||% CHANGE||% TOTAL|
|Premiums & incentives||47.6||46.5||2.5||13.9|
|Games, contests, sweeps||1.8||1.8||0||0.5|
|Dollars expressed in billions. Source: PROMO Industry Trends Report ©|
Brands spent most in 2005 on
|Percentage indicates brand marketers who cited tactic as a highest spending priority.
*Indicates offline programs, exclusive from Internet or other digital programs.
Source: PROMO Industry Trends Report ©
|DISCIPLINE||% MARKETING BUDGET|
|BRANDS RELY ON AGENCIES||% REPORTING|
|More work outsourced in ’05||24.3%|
|About the same outsourced as in ’04||45.3|
|Less work outsourced in ’05||29.1|
|Source: PROMO Industry Trends Report ©|
|YEAR||NET REVENUE||% GROWTH|
|Dollars expressed as billions.
*Included event marketing for first time. **Included direct and loyalty marketing for first time. *** Included product placement in branded entertainment
Source: PROMO Industry Trends Report ©
In February 2006, the research group of Prism Business Media e-mailed two surveys to PROMO readers and members of the Promotional Marketing Association. Brand marketers completed one set of questions and agency executives completed another. The results were then compiled for PROMO’s editors, who weighed the findings with their own reporting among industry sources.