The Marketing Mix (Up)

Marketers have three primary tools to sell product: Advertising, Trade Promotion, and Consumer Promotion. Collectively known as the “Marketing Mix,” these tools are defined as follows:

Advertising

Monies spent to deliver messages to the consumer via media intended to increase long-term equity and, eventually, sales.

Consumer Promotion

Monies spent directly against the consumer to spur short-term sales and/or long-term equity.

Trade Promotion

Monies given to retailers to provide incentives to consumers, resulting in short-term sales lifts.

Problem is, marketers have only one budget to cover all three tools. So at planning time, and throughout the year, there’s a struggle to determine how that budget will be spent.

Not so many years ago, the majority of a brand’s marketing budget was spent on Advertising, with only a small portion spent on Consumer and Trade promotion. Now, spending percentages have flipped, and Trade takes up the majority of a marketer’s budget. In many cases, Consumer Promotion manages to stay funded, but barely. Advertising, meanwhile, often receives no dollars at all, so underfunded Consumer Promotion — or the product itself — is relied upon to build brand equity.

Driven by a need to make quarterly or yearly volume goals, and by the shift in power from manufacturers to retailers, marketers often slug it out in short-term volume wars. This calls for tools that move immediate volume — namely, Consumer or Trade promotion.

Not too long ago, retailers felt dependent upon manufacturers to provide them with products that their customers wanted. The tables have turned, and manufacturers are now dependent upon retailers for distribution. Marketers’ increased dependence on retailers as a conduit to their consumers has shaped today’s spending mix.

Since retailers face the same profit pressures as manufacturers, they are not interested in helping manufacturers reduce Trade spending. Instead, a retailer wants additional Trade support to move more volume and increase profit vs. the prior year. A brand’s sales force, whose pay is typically based on volume rather than profit, is also more interested in volume, not profit.

In contrast, marketers would prefer that dollars be spent against equity-building programs — especially Advertising. In these days of multiple parity products, it’s harder and harder to add value to a brand. In lieu of Advertising, Consumer Promotion can at least do part of the job, because added-value promotions build equity as well as move volume.

The Hundred Years War

The tug of war for money goes on.

“Marketing Mix” research is conducted to determine which tool provides the most effective or efficient spend. These analyses are important, because some information is better than none, but there are issues with this research. To begin with, the final analysis is dependant upon the input of accurate information into the model. (We all know the phrase, “Garbage in, garbage out.”)

Each mix element presents its own difficulties. Often, Trade spending (so difficult to determine) is understated while trade volume can be overstated (depending upon the source of the data). Consumer Promotion volume is understated, since non-coupon promotions are generally not measured. Advertising effect is toughest of all to measure because it “assumes” to know what has reached the consumer.

In a nutshell, it’s tough to get a 100-percent accurate answer on which tool is most effective and efficient. It often comes down to which department, or even which employee, has the “strongest voice” or the most “research” to support his position.

So, who wants what? The sales force wants more Trade Promotion dollars. Management wants more Advertising. Marketing wants more Advertising. Retailers want more manufacturer dollars, Trade or Consumer. And consumers want more Consumer Promotion.

At least somebody does. When a company has no Consumer Promotion department, there are few “champions” requesting that the budget be spent there. Advertising and Trade Promotion will have their champions, but only a few people focus on the marketing element in between.

Consumer Promotion can’t do everything for a brand. But if given its due — and a budget — it can do a lot: It can help brands build buy rate (purchase frequency and purchases per occasion). And it is critical to the launch, or relaunch, of a brand (to name a couple).

So how do you spend your one budget on three tools? Think about what you would like each to do. Step back and look at the bigger picture. Try to quiet the biased voices (wherever they reside) asking for more dollars for their piece of the pie, and do what’s right for the brand.

Sara Owens spent more than a decade at Kraft Foods and ConAgra Frozen Foods, and is currently president of Promo Pros, St. Louis. Reach her at [email protected].