Should you fix fee your promotion?

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As all FMCG brand owners will know far too well, the Great Recession has had a profound and fundamental effect on the Irish shopper. Shoppers now understand what a budget really is, paying full price for something is nearly inconceivable, conspicuous consumption seems almost vulgar and fiscal discipline remains very much in vogue. The Retail Ireland Shopper Attitude Survey (September 2014) found that shoppers are optimistic, but remain cautious.

While the economy may be improving, we have fundamentally changed the way we purchase and consume. It has changed our perception of what we feel we deserve from a brand. So we’re left with a price-conscious consumer, actively looking for another reason to purchase one brand over another. While brands have adjusted to this now well-entrenched behaviour, now is the time to look at other ways of giving the shopper what they want without sacrificing margin or messing with sales projections.

Feet On Wooden Bridge With Sharp Drop Below Representing Risk In Fix Fee Promotion

On-pack promotions where ‘Everyone’s a Winner’ are now more influential on buying decisions than ever but most of the time, they fail to have any real impact, generally because brands ‘play it safe’ by offering that low-level prize they can afford. Nobody really wants that branded tea-towel. The real opportunity lies in finding that reward that shoppers find irresistible and creating a simple, authentic and transparent mechanic for them to claim their prize. The benefits are huge. Your product stands out (an overcrowded category needs extraordinary creative promotional ideas); Your headlines can be amplified (one prize will not prove to be the motivator to most because we are now shrewd in assessing our chances of winning); Your sales objectives are achieved (shoppers have real encouragement to buy your product at the point of purchase) and you’ve created a bunch of happy customers (they must receive their reward, no exceptions. We all remember the bad ones!).

“Something for everyone, that sounds expensive,” I hear you say. Concerns about the prize budget and fears of over-redemptions can mean that brand teams exercise too much caution and their vision for the promotion is lost. Taking a fixed fee approach addresses these fears and enables marketers to offer prizes that far outweigh their budget. A fixed fee approach means the promotional risk is assessed from the outset and a price is agreed in advance. Then, if a promotion subsequently over-redeems, the responsibility to honour every valid entrant is covered ensuring that the brand is protected.

So should you fix fee your promotion? There are a number of factors to be considered when assessing your promotional risk which will help you decide if a fixed fee promotion is best for your brand:

  • Outreach – You must think about how many people will be eligible to participate. We know there will always be a significant percentage of those who never will but none the less, the outreach figure is crucial and must remain the same throughout the promotion.
  • Brand Appeal – Certain brands will have more appeal than others and we tend to engage with those brands more. An on-pack promotion from Tayto for example would appeal more to me than one from Mister Muscle for example.
  • Value of Reward – Everyone remembers Hoover and the free flights disaster. It’s important to make sure the value of the reward doesn’t outweigh the cost of eligibility.
  • Proof of Purchase – For many FMCG brands, this does mean some sort of unique code or token on the packaging but don’t let those packaging challenges stand in your way. There are plenty of ways around it.
  • Redemption Mechanic – It’s important to strike a good balance when determining what the customer has to do to enter a promotion. Making it too difficult will negatively impact the promotion. Nobody wants to be disappointed. Keeping it simple and transparent is always the best approach.
  • Product Information – How often do people purchase your product? Is it seasonal? Is it a frequent purchase? Who are your customers? Where it is sold/how available is it? What price is it? How often does your customer use your product? These are all factors that need to be considered when assessing the risk.
  • Previous Promotions – Looking at the results of previous promotions is invaluable in predicting redemptions. Caution needs to be exercised here though as what happened yesterday isn’t necessarily going to happen again today.
  • Promotional Period – The longer your promotional period, the more opportunity you’re giving people to enter and that will have an impact on the number of redemptions you have.
  • Supporting Comms – If you’re planning on putting a big media budget behind the on-pack promotion, that will no doubt generate an uplift in participation. Careful attention needs to be given to supporting comms as there’s a balance between driving awareness of your promotion and driving redemptions through the roof.

Taking a fixed fee approach allows marketers to go out on a limb creatively with their promotions, to take a risk without taking the risk. This approach will help brands get the very most out of their budget, not just with prizes but with everything from mechanics and message to creative and legal considerations. When asking yourself should you fix fee your promotion, remember that shoppers now have a savvy streak. As a result, the industry is expecting more and more on-pack promotions to lure these shoppers. After all, offering an additional value add to a product has now become the norm and consumers don’t expect less. So we must feed the beast.

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