Promotion Mix Strategies

Marketers can choose from two basic promotion mix strategies—push promotion or pull promotion. Ill Figure 14.4 contrasts the two strategies. The relative emphasis on the specific promotion tools differs for push and pull strategies. A push strategy involves "pushing" the product through marketing channels to final consumers. The producer directs its marketing activities (primarily personal selling and trade promotion) toward channel members to induce them to carry the product and to promote it to final consumers.

Using a pull Strategy, the producer directs its marketing activities (primarily advertising and consumer promotion) toward final consumers to induce them to buy the product. If the pull strategy is effective, consumers will then demand the product from channel members, who will in turn demand it from producers. Thus, under a pull strategy, consumer demand "pulls" the product through the channels.

Some industrial-goods companies use only push strategies; some direct-marketing companies use only pull. However, most large companies use some combination of both. For example, food maker Kraft uses mass-media advertising and consumer promotions to pull its products and a large sales force and trade promotions to push its products through the channels. In recent years, consumer-goods companies have been decreasing the pull portions of their mixes in favor of more push. This has caused concern that they may be driving short-run sales at the expense of long-term brand equity (see Real Marketing 14.2).

Companies consider many factors when designing their promotion mix strategies, including type of product/market and the product life-cycle stage. For example, the importance of different promotion tools varies between consumer and business markets. Business-to-consumer companies usually "pull" more, putting more of their funds into

#FIGURE I 14.4 Push versus Pull Promotion Strategy in a pull strategy, the company promotes directly to final consumers, creating a demand vacuum that "pulls" the product through the channel. Must companies use some combination of push and pull.

In a push strategy, the company "pushes" the product to resellers, who in turn "push" it to consumers.

In a push strategy, the company "pushes" the product to resellers, who in turn "push" it to consumers.

Producer marketing activities (personal selling, trade prornoii -n <>tI> r)

Retailers and wholesalers

Reseller marketing activities (personal selling, advertising, sales promotion, other)

Push strategy

Reseller marketing activities (personal selling, advertising, sales promotion, other)

Consumers

Consumers

Demand

Retailers and ^ wholesalers

Demand

Consumers

Producer marketing activities (consumer advertising, sales promotion, other)

Pulí strategy

Real

Marketing 14.2

Are Consumer Goods Companies Too Pushy?

Consumer packaged-goods companies such as Procter & Gamble, Kraft Foods, Kellogg, and General Mills grew into giants by using mostly pull promotion strategies. They used massive doses of national advertising to differentiate their products, gain market share, and build brand equity and customer loyalty. But during the past few decades, such companies have gotten more "pushy," deempha-sizing national advertising and putting more of their marketing budgets into trade and consumer sales promotions.

General trade promotions (trade allowances, displays, cooperative advertising, slotting fees aimed at retailers) now account for 60 percent of total marketing spending by consumer product companies. That represents a seven-percentage-point increase in trade spending in just the past six years. Consumer promotions (coupons, discounts, premiums) account for another 14 percent of the typical marketing budget. That leaves less than 26 percent of total marketing spending for advertising, down from 42 percent 20 years ago.

Why have these companies shifted so heavily toward push strategies? One reason is that mass-media campaigns have become more expensive and less effective in recent years. Network television costs have risen sharply while audiences have fallen off, making national advertising less cost effective. Companies are also tailoring their marketing programs more narrowly, making national advertising less suitable than localized retailer promotions. And in these days of brand extensions and near-duplicate products, companies sometimes have trouble finding meaningful product differences to feature in advertising. So they have differentiated their products through price reductions, premium offers, coupons, and other push techniques.

Another factor speeding the shift from pull to push has been the growing strength of retailers. Retail giants such as Wal-Mart, Carrefour, Kroger, and Tesco now have the power to demand and get what they want— and what they want Is more push. Whereas national advertising bypasses them on its way to the masses, push promotion benefits them directly. Thus, producers must often use push just to obtain good shelf space and other support from important retailers.

However, many marketers are concerned that the reckless use of push will lead to fierce price competition and a never-ending spiral of price slashing and deal making. If used improperly, push promotion can mortgage a brand's future for short-term gains. Sales promotion buys short-run reseller support and consumer sales, but advertising builds longrun brand equity and consumer preference. By robbing the media advertising budget to pay for more sales promotion, companies might win the battle for short-run earnings but lose the war for long-run brand equity, consumer loyalty, and market share. "If brands are built over years, why are they managed over quarters?" laments one analyst.

Of special concern is the overuse of short-term price promotions. The regular use of price as a selling tool can destroy brand equity by encouraging consumers to seek value though price rather than through the benefits of the brand. In fact, some analysts blame the surge in promotions for a recent two-decade-long drop in the percentage of consumers who buy only well-known brands. And according to one source, consumers are now 50 percent more price sensitive than they were 25 years ago. In recent surveys, consumer goods managers pointed to pricing pressures and declining shopper loyalty as their primary concerns.

In cases where price is a key part of the brand's positioning, featuring price makes sense. But for brands where price does not underlie value, "price promotions are really desperate acts by brands that have their backs against the wall," says one marketing executive. "Generally speaking, it is better to stick to your guns with price and invest in advertising to drive sales."

Jack Trout, a well-known marketing consultant, cautions that some categories tend to self-destruct by always being on sale. Furniture, automobile tires, airline tickets, and many other categories of goods are rarely sold at anything near list price. And when automakers get rebate happy, the market just sits back and waits for a deal while the car companies lose money on profit-eating incentives. For example, General Motors has chopped $1 billion out of its advertising budget over the past four years while doling out billions of dollars in sales incentives—discounted prices, rebates, low-cost financing, gas price guarantees—to move cars out of Its showrooms. Such promotion tactics have done little to win profits or customer loyalty over the years. Over the past three years alone, GM has lost a staggering $46 billion, and its domestic market share has dwindled to less than 25 percent, down from 44.5 percent in 1980.

Trout offers several "Commandments of Discounting," such as "Thou shalt not offer discounts because everyone else does," "Thou shalt be creative with your discounting," "Thou shalt put time limits on the deal," and "Thou shalt stop discounting as soon as you can."

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Too pushy? Some categories tend to self-destruct by always being on sale. For example, when automakers get promotion happy, the market just sits back and waits for a deal while the car companies lose money on profit-eating incentives.

Real

Marketing 14.2 Continued

Thus, many consumer companies are now rethinking their promotion strategies and reversing the trend by shifting their promotion budgets back toward advertising. They realize that it's not a question of sales promotion versus advertising, or of push versus pull. Success lies in finding the best mix of the two: consistent advertising to build long-run brand value and consumer preference, and sales promotion to create short-run trade support and consumer excitement. The company needs to blend both push and pull elements into an integrated marketing communications program that meets immediate consumer and retailer needs as well as long-run strategic needs.

Sources: Promotion spending statistics from Shopper-Centric Trade: The Future of Trade Promotion (Cannondale Associates: Wilton, CT, October 2007), p. 15. Other information and quotes from Jack Trout, "Prices: Simple Guidelines to Get Them Right," Journal of Business Strategy, November-December 1998, pp. 13-16; Jean Halllday, "GM Bleeds as Incentives Undermine Brand Value," Advertising Age, March 21, 2005, pp. 1, 37; Leonard M. Lodlsh and Carl F. Mela, "If Brands Are Built over Years, Why Are They Managed over Quarters?" Harvard Business Review, July-August 2007, pp. 107-112; John D. Stoll, "GM Is Still Facing Tricky Curves," Wall Street Journal, February 5, 2008, p. C3; and "General Motors Corporation," Hoover's Company Records, April 2008, p. 10640.

advertising, followed by sales promotion, personal selling, and then public relations. In contrast, business-to-business marketers tend to "push" more, putting more of their funds into personal selling, followed by sales promotion, advertising, and public relations. In general, personal selling is used more heavily with expensive and risky goods and in markets with fewer and larger sellers.

The effects of different promotion tools also vary with stages of the product life cycle. In the introduction stage, advertising and public relations are good for producing high awareness, and sales promotion is useful in promoting early trial. Personal selling must be used to get the trade to carry the product. In the growth stage, advertising and public relations continue to be powerful influences, whereas sales promotion can be reduced because fewer incentives are needed. In the mature stage, sales promotion again becomes important relative to advertising. Buyers know the brands, and advertising is needed only to remind them of the product. In the decline stage, advertising is kept at a reminder level, public relations is dropped, and salespeople give the product only a little attention. Sales promotion, however, might continue to be strong.

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