NEW YORK -- Spending on consumer promotions, including point-of-purchase and in-store promotions, will grow at a healthy rate in 2001, SN has learned, despite a sharp economic downturn that has sent the consumer advertising market into a tailspin.
Such spending will grow 3.6% to $36.5 billion this year, according to Veronis Suhler here, one of the nation's leading media investment banks. Although growth will be slower than in 2000, when spending rose 8.9%, all six categories of consumer promotions -- which also includes coupons, product sampling, promotional licensing and premiums -- will expand by year's end, Veronis Suhler states in its annual Communications Industry Forecast, which will be released later this month.
Meanwhile, expenditures on consumer advertising, including television and newspapers, will decline for the first time in 10 years, due to the slower-growing economy, the evaporation of dot-com money and the absence of election-year ad spending. Consumer advertising expenditures will drop 0.8% to $167.6 billion in 2001, according to Veronis Suhler.
Consumer advertising will also be hampered this year by the trend of brand marketers shifting money from advertising to promotions in slower economic times. Marketers tend to make this shift in a soft economy because promotions are often cheaper than advertising, they reach consumers at the point of purchase and their results are more easily tracked, according to Leo Kivijarv, director of publications at Veronis Suhler.
"In slower economic times, consumers are making fewer purchases and are looking to save money. At the same time, marketers are trying to make as many sales as possible, even at reduced margins. So, marketers will try to drive immediate and measurable sales through promotions and incentives like point-of-purchase displays, sampling and coupons," Kivijarv said.
Lisa Allen, director of communication for the Grocery Manufacturers of America, Washington, agreed, saying that marketers in general are trying to develop more targeted promotions to reach customers where they buy.
"You're talking about driving up volume at the point of purchase. You can see immediate returns on your investment by store, day and hour," Allen said.
However, Kivijarv and Allen noted that it is becoming harder to separate advertising from promotion, which makes it more difficult to gauge one segment's impact on the other. "Advertising and promotion have become increasingly intertwined as media has become more fragmented and marketers have begun to formulate overall marketing strategies, rather than separate advertising and promotion strategies," Kivijarv said.
According to Veronis Suhler, spending on point-of-purchase promotions, the largest consumer promotions category, will rise 3% this year, while expenditures in the second-largest category, coupons, will increase 7.5%. The other two supermarket-related categories, product sampling and in-store marketing, will grow 6.5% and 3.5%, respectively.
By comparison, spending on television advertising, the largest consumer advertising category, will decline 0.7% this year, while expenditures on newspaper advertising will drop 1.3% and spending on radio advertising will fall 0.7%.
