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.
Drayton: yes, it's all about testing and these 'surveys' prove nothing in 'DM real' terms. Why didn't they just partner with a consumer product company and send test coupons out to people? Perhaps the IPM should partner with the IDM?
Hi Drayton, OK, so you’re saying not only to survey but also to TEST to see if what they wrote on their survey form really happens. I understand now, and thanks. As for SEARS, anything you’ve said about General Motors can also be said about sears. They’re fools and going out of business for their stupidity
Sears were an Ogilvy client. I went to Chicago to advise. I told the agency to stop relying so much on newspaper inserts and build a mailing list. The ad agency MD refused to pass my advice on. Obviously newspaper inserts were easy money, direct mail was not. Short term thinking. He later went to Sydney: he did a shit job there too, emasculating the direct agency.