The Homa Files

Excerpted from AdAge, “Deal or No Deal? Cheap Prices Can Maim Your Brand” By Jack Neff, April 06, 2009

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Google searches for the term “coupons” last month for the first time surpassed those for “Britney Spears.”

That simple fact drives home what a lot of package-goods marketers already know: What consumers want now is promotion.

But as the industry increasingly gives in to that wish … the question becomes how much marketers can discount without doing permanent damage to their brands …

For sure, the recession  is creating a huge consumer appetite for deals … Package-goods companies seem to be complying. After relative restraint on trade spending in 2008, marketers appear to have stepped on the gas in February. The percentage of volume sold on promotion was up 5.6 percentage points to 38.4%  …

Much as consumers and retailers may want deals, conventional wisdom is they pose a threat to brand health. Numerous studies have shown price promotion erodes brand equity by permanently making consumers more price-sensitive.

Mmarketers will resist cutting prices permanently as long as possible in favor of stepped-up promotion, because temporary deals erode margins less than permanent price cuts.

Promotion can play a positive role for brands in a recession … Promotion that wins a place on retailers’ circulars becomes more important when more consumers are planning purchases at home, as they are now … Realistically, that usually comes at the expense of a temporary price reduction.

Circulars are used about 45% of the time to create shopping lists … “If I’m a marketer, I want to make sure I’m in context of where the list is being made, because right now about 11% of the shopping list is by brand name, and when it is, there’s an 85% chance [the shopper] is going to buy it.”

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135800

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This entry was posted on April 24, 2009 at 7:11 am and is filed under Mktg - Brands, Mktg - Pricing, Mktg - Promotion. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.