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How to take sales promotions risks that pay off

How to take sales promotions risks that pay off

Philip Penlington is Director of Fotorama, one of the UK’s leading and longest established fixed fee promotions companies who work with many leading brands and agencies on all types of promotions. He warns promoters to be wary of increasing risks created by the recession.  

The consequences of the credit crunch over the last 12 months will continue to have a lasting effect on consumer attitudes towards promotions for the foreseeable future.
Brands are now having to work harder than ever before to ensure consumer attention and are frequently promoting their products with the help of giveaways, money off coupons and price promotions. Consumers are responding more than ever before.

Although many brand managers are aware of this when planning promotions, they are being ‘Risk Blind’ to the potential dangers that lie ahead.

In today’s uncertain times, not even the most experienced fixed fee expert can guarantee whether a promotion will over or under redeem. Response rates are, at best, unpredictable. In 2008 we ran a ‘cash back’ promotion with a top brand electrical manufacturer. In 2009 we ran the same campaign with a lower value cash back and yet we still saw a redemption increase of 20 per cent.
Yet, many marketing managers seem to be blinkered to the greater risks that they are taking when they do not consult risk experts before proceeding with a promotion.

Far too often brands are bravely relying on historical data to gauge an idea on how a promotion will run. This might have worked in years gone by but, in 2010, brands need to be more careful with their marketing budgets. Consumer behaviour has changed forever and brands shouldn’t be predicting response rates on a wing and a prayer.  

The impact of an unexpectedly high-redeeming promotion will be felt right across the company. Extra budget will have to be found urgently for more rewards that may have to be bought and shipped at short notice and premium prices. Additional handling, fulfilment and delivery will be incurred along with extra demands on management time in arranging all of this.

A promotion that over redeems would not only cause problems for those working for the business but can also damage the brand’s long-term image and reputation. The brand’s consumers might not be so happy to forgive and forget if the company fails or substantially delays delivery of rewards to those that have participated in the promotion. 

Rather than becoming embroiled in a nightmare situation it’s best to speak to redemption experts while planning a promotion and considering the benefits that a fixed fee company can provide; not only taking over the financial obligation if the promotion does over redeem but responsibility for sourcing products, handling, fulfilment and logistics. 

But it’s not just the dangers of over-redemption to which many are ‘risk blind’. They are also taking a blinkered approach to the dangers of selecting insecure agencies. It’s essential to review their credentials, experience, time spent in the industry and whether, and most importantly, the agency has the financial backing if anything does goes wrong.

Marketers that do not carry out complete full due diligence on fixed fee suppliers before employing their services are also being risk blind and putting their brands’ reputations on the line. The unfortunate reality is that some of these so-called ‘experts’ don’t have sufficient financial backing or resources if a promotion over redeems nor any real expertise or knowledge of the market.

2009 was a difficult year for everyone and we still aren’t out of the woods yet. Brands need to complete full risk assessments before embarking on any type of promotional work rather than being risk blind and hoping that the promotion will run the way it has done in previous years.

Consumer response levels to promotions are at an all time high and the risk of over redemption is far greater than ever before. Brands need to work closely with redemption level experts who will identify and eliminate the risk factor involved in promotions. Whilst some are now doing this for the first time many still have their blinkers on.

A summary: running a Fixed Fee promotion

1. Set manageable objectives
2. Understand your target audience
3. Choose rewards or prizes with care
4. Evaluate the opportunities and risks of a potential promotion
5. Only seek quotes from Fixed Fee companies that are financially stable, have long-term credentials and deep resources and experience
6. Decide on how much, or how little of the promotion and risk you want to handle yourself
7. Agree what data collection and analysis will be required later for CRM or review
8. Provide a clear brief and as much information as possible about this and previous promotions
9. Ensure that all communication is clear
10. Check legality with the ISP before running the promotion

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