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Monday, 14 June 2010

Bribery works in mysterious ways - a £200 million total waste

Many years ago I went to Chicago to try and persuade Sears they were wasting God knows how many million on untargeted newspaper inserts - offers I thought would do a lot better if carefully aimed via direct mail.

I had no luck because the man who handled the Sears account at their advertising agency - allegedly a partner of ours - stopped me even meeting the client.

There is an ocean of research showing that indiscriminate promotion doesn't pay as it degrades your brand, but a new report by research firm FastMap reveals a surprising twist.

A survey among over 1,400 shoppers commissioned by the Institute of Promotional Marketing suggests that discounts over 25% do little to get shoppers to try a new product, have no influence on subsequent loyalty, and "could be costing the industry nearly £200m a year".

Discounts work, of course - especially when times get tough. Nearly 90% of people said they had tried a different brand because of a money-off coupon and coupon redemption has shot up 70% in the last two years, with £813m redeemed in 2009.

The surprise is that a coupon with a lower discount value created greater loyalty than the reverse. Three in ten who had used a coupon worth 15p to 20p stayed with the new product afterwards but only 25% who redeemed a coupon for £1 or more kept buying it.

Over half those surveyed said they would try a different brand when given a money-off coupon worth 5p to 50p if both the rival product and their usual brand cost £2. Just 27% said the discount would have to be at least £1. This is far less than the current average discount of 48%.

One major dairy brand managed to achieve a 26.8% cost saving by reducing its coupon face value by 25%, according to Valassis MD Charles D'Oyly. This was achieved at the cost of only a 0.66% reduction in redemptions compared with past campaigns.

Research is interesting - but what is amazing to me is that these people don't test.

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