Brand marketers are applying more national marketing dollars toward retailer electronic marketing programs, and ceding more control over those activities to their sales forces, according to a new Supermarket News-Brand Marketing survey on electronic marketing.
These linked trends underscore a general industry movement toward more localized control of national brand spending as brand marketers embrace more targeted and account-specific programs.
For brand marketers, the story of electronic marketing is increasingly about where the money comes from, and who holds the purse strings.
Manufacturer funding is also of high interest to supermarket retailers, who responded to a separate, parallel survey. Retailers also control participation trends, since manufacturers can only do electronic marketing in stores where the programs or systems have been adopted or installed. This calls for account-by-account decision-making -- traditionally the domain of the sales force.
From an organizational perspective, brand marketers say the sales function now shares control with brand managers on decisions about the use of electronic marketing. While brand managers controlled decision-making at 58% of respondents to the 1995 survey, in 1996 that figure fell to 40%
Promotion managers ceded even more control, dropping from 32% of decision-making in the 1995 survey to 6% this year. Even trade marketing saw its influence slip, from 16% in 1995 to 4% in 1996.
The big gainer was sales, which controlled 10% of electronic marketing decisions in the 1995 survey --
a proportion which has jumped to 42% in 1996. That puts sales managers and brand managers virtually on par with each other when it comes to controlling in electronic marketing programs.
This shift has taken place against a backdrop of generally increasing spending. Asked to describe their spending levels for electronic marketing year to year, 42% of brand marketers said they anticipated an increase in 1996 vs. 1995. Most of the remainder -- 49% -- said they would hold spending steady year-to-year. Only 10% said they anticipated a decline in outlays for this activity.
Based on responses from both groups, 1996 appears to be shaping up as a year that will see moderate levels of growth in electronic marketing activity by brand marketers and supermarket retailers. The survey had 101 respondents, reflecting an estimated 16% of the grocery all-commodities volume.
WHO IS DOING WHAT?
The surveys asked about participation in five major activities: at-shelf coupon distribution (like ActMedia's Instant Coupon Machine); purchase-triggered coupons (like Catalina Marketing's Checkout Coupons); frequent shopper card programs; electronic kiosks, and data-base marketing.
For 1996, 55% of retailers said they are currently involved in at-shelf distributed coupons. Another 11% said they had definite plans to do so this year.
Among brand marketers, 31% report use of at-shelf coupon distribution. Another 5% said they had definite plans to get involved in 1996.
Asked about purchase-triggered coupons, 40% of retailers responding said they are currently involved. The number of retailers with definite plans to participate this year is 17%.
One in four responding brand marketers (24%) report participating in purchase-triggered coupons. Another 12% report definite plans to get involved.
This year, 32% of retailers reported offering electronic card-based (frequent-shopper) marketing programs. Brand marketers reported 37% participation. In addition, 17% of retailers and 19% of brand marketers said they have plans to begin participating this year.
Retailer participation in data-base marketing is at 33%. Another 31% said they plan to get started this year.
Brand marketer participation in data-base marketing this year is also a robust 30%. An additional 23% said they are committed to participate. In a related activity, a strong minority of brand marketers (40%) said they are currently supporting retailer direct mail programs. Another 43% said "not yet," but only 18% ruled out any participation.
Electronic kiosks drew the weakest responses from both surveyed groups. Only 6% of retailers reported current participation. Another 14% said they had definite plans for the activity.
Brand marketer participation is at 10%, but only 5% said they had firm plans to jump into this activity.
HOW DO THEY PAY FOR IT?
To pay for all these in-store electronic marketing activities, brand marketers continued to dip into their various marketing budgets. This year, 36% said they diverted TV advertising funds for this purpose, a sharp jump from 15% a year ago.
Budgets for freestanding inserts, which were tapped for this purpose by 65% of respondents a year ago, were hit again in 1996, when 42% of brand marketers say they are using those funds for electronic marketing.
Funds formerly allocated to off-invoice allowances and co-op advertising each were tapped by 45% of brand marketers in 1996, up from 40% of respondents in 1995.
Co-op advertising budgets were similarly treated, with 45% of respondents saying they have used funds from these budgets to help pay for electronic marketing activities. A year ago the figure was 40%.
Another useful way to understand the reallocation of dollars into electronic marketing is to look at the classic breakdown of consumer promotion vs. trade promotion vs. advertising spending. The survey asked brand marketers about funding sources for three key electronic marketing activities.
Their responses indicated that purchase-triggered coupons are, on average, 61% funded from the consumer promotion budgets. Another 21% of funding comes from trade promotion, and 18% from advertising. In 1995, by comparison, 84% came from consumer promotion, 8% from trade promotion and 8% from advertising.
At-shelf distributed coupons showed a similar shift. This year an average of 71% of their cost was paid for by brand marketers' consumer promotion budgets. Of the balance, 11% came from trade promotion, 10% from advertising and 8% from research lines.
A year ago 85% of at-shelf coupons were paid for with consumer promotion funds, and all of the balance, 15%, with trade promotion dollars.
Card-based marketing programs have a different profile. They are 68% funded, on average, from trade promotion budgets. Another 13% comes from consumer promotions. The balance, 19%, is advertising money.
These results show an interesting movement toward using more advertising dollars to help fund in-store electronic marketing activities. This coincides with a general rise in account-specific marketing, and a shift in marketing spending influence to account business managers. The net effect: more local and account-specific influence over national marketing dollars.
HOW WELL IS IT WORKING?
The above spending trends are expressions of retailers' and brand marketers' beliefs about the effectiveness of the various electronic marketing activities. Both groups were asked to rate each activity as either "very effective," "effective," "not at all effective" or "too soon to tell."
Brand marketers give purchase-triggered coupons top marks for effectiveness, with 21% of participating respondents calling them "very effective" and another 57% calling them "effective." Retailers were only slightly less enthusiastic, with 11% of them rating them as "very effective" and another 68% as "effective."
At-shelf coupons are brand marketers' second favorite among electronic marketing techniques, with 13% rating them as "very effective" and 60% as "effective." Retailers gave the method 6% and 73% ratings, respectively.
But supermarket retailers reserved their highest enthusiasm for card-based programs, which 36% said merited a "very effective" rating, and another 36% said were "effective."
Brand marketers were more cautious in their praise for this technique, with just 5% rating card programs as "very effective" and 46% as "effective." This may be interpreted as a positive outlook, however, since another 46% said it was "too soon to tell," reflecting their limited experience in this area.
Electronic kiosks got the least enthusiastic response, drawing no ratings of "very effective" from either group and "effective" ratings from 40% of brand marketers and 25% of retailers. But equal numbers -- 40% of brand marketers and 25% of retailers -- called kiosks "not at all effective," suggesting at best a mixed outlook for this activity.
CONCLUSIONS
Electronic marketing remains an area of high interest among brand marketers and supermarket retailers. While in-store programs provided by third parties -- at-shelf and purchase-triggered coupons, and kiosks -- have drawn most of the spending and attention so far, retailers' enthusiasm for frequent shopper card programs, which they control, is suggestive of the future.
The movement toward account-specific programs and co-marketing is integral to the trends in electronic marketing.
Points of Decision
Brand marketers say the sales function now shares control with brand managers on decisions about the use of electronic marketing. (Multiple responses allowed.)
Brand Managers
1994 58%
1995 40%
Promotion Managers
1994 32%
1995 6%
Trade Marketing
1994 16%
1995 4%
Sales
1994 10%
1995 42%
Market Research
1994 7%
1995 2%
Other
1994 3%
1995 8%
Electronic Marketing Spending
Most brand marketers maintained their overall spending levels last year. For 1996, more are increasing spending.
% Brand Marketers Responding
INCREASE
1995 vs 1994 32%
1996 vs 1995 42%
STAY THE SAME
1995 vs 1994 63%
1996 vs 1995 49%
DECREASE
1995 vs 1994 5%
1996 vs 1995 10%
Electronic Marketing -- Brand Marketers
Brand marketers anticipate greater participation in card-based marketing and data-base marketing programs.
Card-based marketing program
Currently 37%
No, but plan 19%
At-shelf distributed coupons
Currently 31%
No, but plan 5%
Data-base marketing
Currently 30%
No, but plan 23%
Purchase-triggered coupons
Currently 24%
No, but plan 12%
Electronic kiosks
Currently 10%
No, but plan 5%
Electronic Marketing -- Supermarket Retailers
Retailers favor at-shelf couponing, but they plan more data-base marketing.
At-shelf distributed coupons
Currently 55%
No, but plan 11%
Purchase-triggered coupons
Currently 40%
No, but plan 17%
Data-base marketing
Currently 33%
No, but plan 31%
Card-based marketing program
Currently 32%
No, but plan 17%
Electronic kiosks
Currently 6%
No, but plan 14%
Where the Money Comes From
Brand marketers tapped more TV advertising funds to pay for their electronic marketing activities this year, while FSIs were hit less hard.
Freestanding inserts
1995 65%
1996 42%
Off-Invoice allowances
1995 40%
1996 45%
Co-op advertising
1995 40%
1996 45%
Television advertising
1995 15%
1996 36%
Other budgets
1995 25%
1996 19%
Sources of Funding
Brand marketers are dipping more heavily into advertising budgets to fund electronic marketing activities. While purchase-triggered coupons and at-shelf coupons draw mainly from consumer promotion funds, card-based programs continue to attract trade dollars.
