The supermarket is the manufacturer's best friend.
So says Part II of SN's 2004 Survey of Manufacturer Promotional Practices, which points to growth of account-specific promotional activities.
A whopping 86% of respondents said they participated in retailer account-specific consumer promotions this year. Plus, more than one-third of respondents (38%) said the percentage of their company's or division's trade promotion dollars directed toward such programs will increase in 2005.
Paul Kramer, president, Ryan Partnership, Wilton, Conn., a marketing services firm, agreed with the findings, saying big companies like Procter & Gamble and Kraft are placing much more emphasis on building brand equity at retail, where 70% of consumer decisions are made.
"If manufacturers don't manage their brands at retail, then the retailer will. If that happens, God help the manufacturer," Kramer stressed, saying the results most likely will be price markdowns and the resulting loss of brand equity.
When it comes to the types of account-specific activities manufacturers used this year, the bulk of responses was split between in-store sampling/demonstrations (67%) and joint-manufacturer-retailer promotions (67%).
ABOUT THE SURVEY
Results are based on an online poll conducted via SN's Web site, www.supermarketnews.com, in September and October. SN received about 25 responses. The first part of the survey, published in the Oct. 4 issue of SN, highlighted results of a poll in which 100 primary shoppers were asked to comment on various manufacturer promotional tactics.
The majority of respondents represented companies that market food (71%) and beverages (29%). Sixty-two percent answered for their entire company, while 38% spoke on behalf of a division. Participants included company presidents, marketing directors and business development directors.
Most respondents reported increased spending this year compared to 2003 in the three major promotional areas: trade, consumer and media. Still, consumer promotions received the strongest support. More than half (57%) said consumer promotion spending increased, while 33% said it remained the same; 10% said it decreased.
In comparison, 43% said the budget for trade promotions increased; 24% said it remained the same; and 33% said it decreased.
As for media advertising, 43% said spending increased; 33% said it remained the same; and 24% said it decreased.
Despite continued redemption decreases, manufacturer commitment to couponing remains strong, with 43% reporting an increase in spending in 2004 vs. 2003. Internet couponing also remains a viable promotional tactic, with the majority of respondents reporting that spending in this area has increased (24%) or remained the same (52%). About one-quarter (24%) said spending will decrease. Those that cut spending cited a number of reasons why, including concerns about coupon fraud (33%), effectiveness (29%) and budgetary reasons (19%).
Among other results, 100% of respondents said they plan to use direct mail to deliver coupons in 2005, up from 77% who said they used this method this year, and 62% who said they relied on it in 2003.
This was the largest increase cited for nearly 10 coupon distribution tools provided. Respondents said they will also focus more heavily on several areas, although the increases were not as high as that for direct mail. These included freestanding inserts, in/on-pack, in-store/electronic and the Internet.
Meanwhile, manufacturers plan to reduce reliance on several delivery methods, including coupons distributed with samples. More than half (56%) said they will use this tool next year, down from 78% who said they use it this year. In-store, non-electronic distribution was another vehicle respondents said they will not use as much next year (78% next year vs. 89% this year).
More than one-quarter (29%) said they participated in ethnic marketing this year. Forty-three percent did so by using people of multiple countries of origin in advertising. The next frequently used tool was bilingual or multi-language packaging (38%). One-third (33%) provided customer service support in the United States in multiple languages. More than one-quarter (28%) have separate consumer marketing initiatives targeted at ethnic shoppers.
Nearly one-quarter (23%) have a dedicated Hispanic marketing group.
Most manufacturers (95%) have corporate Web sites, and more than half (52%) have separate sites for some or all brands.
The vast majority of respondents are leveraging their Web sites to provide information about the products they offer. Nearly all (95%) said their sites provide product information. Manufacturers use their Web sites for plenty of other promotional tools, including sweepstakes/contests (48%), coupons (38%), recipes (38%), games (24%) and samples (10%).
Nearly half (43%) said Web sites allow consumers to sign up for e-newsletters. In doing so, they collect valuable consumer data. Of those that solicit information from Web site users, 71% said they plan to use this information to create a database to send targeted e-mail promotions to consumers.
A strong majority (86%) reported using sampling as part of their consumer promotion activities. Over 80% of respondents said such sampling efforts focus on in-store activities, vs. sampling outside the store at festivals, in malls and in other places.
When it comes to the types of sampling, respondents showed growing interest in direct mail. While three-quarters of respondents (75%) said they're currently using direct-mail sampling this year, 88% said they plan to use this method next year.
FREQUENT SHOPPER DATA
Results show that while progress is being made in the area of retail loyalty card data, hurdles still remain in terms of its price tag.
Nearly one-quarter (24%) said retailers are more likely to share information with manufacturers than in the past. Still, an equal amount (24%) said retailers are less likely to share information. "Frequent shopper data is the most dynamic tool available to retailers and manufacturers," said Kramer of Ryan Partnership. "Unfortunately, retailers are still underutilizing that tool. Increasingly, however, retailers are beginning to realize the power of consumer segmentation."
More than one-quarter (29%) are using loyalty card information to distribute targeted consumer promotions.
Nearly half (48%) said the biggest hurdle to using the data is the amount that retailers charge for it. Just 15% said obtaining frequent shopper data is worth the cost that retailers charge because of effectiveness of communicating one-on-one with consumers.
PREMIUMS The use of premiums will change slightly next year in that respondents said they will rely more on multiple-purchase requirements. For instance, 92% said they plan to distribute premiums with multiple purchases next year, up from 77% who said they're doing so this year. Similarly, 63% of respondents said they plan to offer premiums with just one product purchase, down from 87% who said they're doing so this year.
More than one-third of respondents will increase spending on account-specific activities next year
Will the percentage of your company's or division's trade promotion dollars directed toward retailer account-specific programs increase, decrease or remain the same in 2005?
Remain the Same: 43%
The Direct Route
Manufacturers plan to rely more heavily on direct-mail sampling next year
Discuss your company's use of direct mail as a distribution tool for samples
Used in 2003: 63%
Used in 2004: 75%
Plan to use in 2005: 88%
Coupon support continues to be strong, with 43% of respondents reporting an increase in spending this year
Overall, how has your company's or division's spending on coupons changed this year, compared to last year?