ACCOUNT-SPECIFIC PROMOS ON RISE, SURVEY SHOWS

JAMES TENSER

OAKBROOK TERRACE, Ill. -- Account-specific trade promotions and targeted consumer promotions are on the rise among brand marketers, who expect to use those techniques even more in the coming year.

Meanwhile, trends in promotional spending, which throughout the 1980s shifted steadily in the direction of trade and consumer promotion, have clearly plateaued in the 1990s, according to the 16th Donnelly Survey of Promotional Practices, released this month.

Account-specific promotion retains its position as the leading trade strategy for the second straight year, and brand marketers say they expect it to increase even further in the coming year.

"The continued emphasis on account-specific trade activities points to the steady importance of the retail trade in brand marketing decisions," said Peter Vlahakos, director of research for Donnelly Marketing here.

The survey indicates that brand marketers are increasingly engaged in trade-direct activities, which are more customized and more based on performance and profitability, said Bethany Stanley, manager of product research for Donnelly, who coordinated the study.

At the same time, media advertising is staging a minor comeback among brand marketers determined to shore up brand equity, while trade promotional spending has leveled off. In the period from 1991 to 1993 media advertising and consumer promotion both gained share of the total promotional budget at the expense of trade promotion, which declined 1.7 percentage points.

The survey called the decrease in trade share allocation "further evidence of a pullback from the recent high level of trade allocation."

"It looks as though in the 1990s we have reached a plateau somewhere near high forties [percent] level," said Stanley. She noted that the majority of respondents expect trade promotion spending to decrease as a fraction of total budgets in the coming year.

However, the outlook for promotional

allocations indicates that marketers expect to rechannel trade dollars into advertising and account-specific consumer promotions in support of their brands, the survey said.

The Donnelly survey was sent to 131 executives who manage promotional expenditures at national packaged goods companies. A total of 50 usable responses was returned, making the results comparable to prior years. Larger firms ($1 billion or more) and smaller firms were equally represented in the sample.

Among the key survey findings:

Trade promotion still accounts for the largest share of the promotional pie (46.9%), but consumer promotion (27.9%) and media advertising (25.2%) are increasing slightly in relative importance.

The outlook for promotional allocations indicates a further shift toward media advertising in the coming year, with 65% of respondents predicting increases. In contrast, 52% predict decreases in trade promotion spending. The outlook for consumer promotion was split evenly between increases and decreases.

For brand building, media advertising is clearly identified as the most effective marketing activity in 1993, with 71% of respondents reporting it as their first choice. But consumer promotions are a strong second with a 24% first-choice rating. Trade promotions were top-rated by 4% of respondents.

Account-specific trade promotions were identified as the "most important" trade practice in 1993 by 56% of participants, up from 48% a year ago.

Freestanding insert couponing was the only consumer promotion practice that showed a marked decline in importance (- 11%) for the coming year. However, 98% of brand marketers expect to use FSIs this year.

Product sampling, which for the purposes of this survey may encompass in-store and targeted direct-mail distribution, shows a surge of interest. While 92% of respondents currently use and plan to use sampling next year, 43% say it will be very important in the coming year, compared with 15% in 1993.

All larger companies (defined as those with gross sales of $1 billion or more) use and plan to use in-store promotions to market their brands, compared with 85% of smaller companies. However, the importance rating of in-store promotions is surging among both groups.

More than half of brand marketers (57%) used continuity programs for data base marketing in 1993, and 82% expect to use them in 1994. Other data base applications with strong outlooks include consumer research (61% expect to use it in 1994), prospecting (57%) and customer communications (54%).

For purposes of this survey, definitions of media, consumer and trade promotion were not provided for respondents. Consequently, certain activities, such as the product sampling or in-store promotions may cross boundaries dividing trade and consumer activities.

"The greater use of integrated marketing makes it harder to sort that out," Stanley said.

She noted that differences in spending allocations between smaller and larger firms appear to be narrowing in the latest survey. Smaller firms' percentage of media advertising was 25.1% in 1993, up sharply from 22.7% in 1991, for example.

"Large and small firms look pretty much alike but with a slightly higher degree of consumer promotions among the larger," she said. She speculated that the difference could be financially driven, since large companies can leverage certain scale advantages.

Trade promotion practices and consumer promotion practices were special topics that appear in the survey for the first time this year, so no historical baseline is available. However, increases in data base marketing, targeted consumer promotions and account-specific promotions, accompanied by decreases in broadscale FSIs, indicate a pronounced trend toward greater targeting of promotional spending on the part of brand marketers.

When promotions are more targeted, advantages of scale decline in importance. That can give smaller companies a fighting chance to compete for consumer interest.

Stanley stressed that the FSI and other forms of couponing are not dead, but likely to be modified through the use of data bases to target the consumers most likely to use the product, by zip code, store trading area, even by individual household.

She noted that the overall trend for couponing was steady.

Marketing Spending at Equilibrium in the '90s

Percentage of total dollar spending (3-year moving average)

Media Advertising Trade Promotion Consumer Promotion

1983 37% 37% 26%

1984 35% 37% 28%

1985 35% 38% 27%

1986 34% 40% 26%

1987 33% 41% 26%

1988 32% 42% 25%

1989 31% 44% 26%

1990 28% 47% 25%

1991 25% 48% 27%

1992 26% 47% 28%

1993 25% 47% 28%

Trade Promotion Practices

% Rating It Total % Using

Highly Important Now or in Future

Account-specific 1993 54 96

trade promotions 1994 78 98

Strict proof of 1993 34 94

performance 1994 51 96

Value pricing 1993 30 90

(EDLP) 1994 40 94

Spending based on 1993 28 88

account profit. 1994 60 90

ECR 1993 20 86

1994 38 98

Contract pricing 1993 16 74

1994 28 74

Consumer Promotion Practices

% Rating It Total % Using

Highly Important Now or in Future

FSI couponing 1993 74 98

1994 64 98

Targeted coupon 1993 14 90

promotions 1994 28 94

Product sampling 1993 14 92

1994 40 92

In-store promos 1993 34 92

1994 52 92

Direct mail 1993 9 84