Promotions Effectiveness Management

Our PEM service is designed to ensure you get the maximum sales and profit return from your promotional budget. But our service is not a simple audit of promotional costs to ensure you are getting the best deal on your widgets. Our service looks at the connection your promotional activity is having with your target audience and determines whether you are building your brand as well as driving volume sales.

Consider Figure 1 below. Some well-known promotions - like the famous Hoover Free Flights promotion in 1992 - drive fantastic sales uplifts but are very unprofitable and we have to decide whether their cost justifies the investment. If the level of brand engagement we get as a result of the activity is as good as or better than we get from other marketing activities then the investment may be deemed worthwhile. If it isn't, and we are merely subsidising the purchases of existing loyal customers - there is, for example, no long term increase in sales that pays for the initial investment - then we may question why we are doing the activity.

In addition, over time a previously successful activity may lose its shine - the audience no longer engages with the promotion as well as they used to. Examples we have seen are repeated 'Free Glass' promotions for a whisky brand to repeated versions of the 'Monopoly' promotion for a major hamburger restaurant chain. Being able to track the returns from each iteration of the activity on a chart like Figure 1 gives clear action standards on when changes are needed to regain fresh impetus.

Our service provides both one-off assessments and/or on-going reviews of promotional returns so you always have a sound control of your promotional spend. Knowing why you are doing it, what return you are getting from it, and how those returns - both long and short term - compare with your other marketing activities.

How It Works

As indicated in the diagram below, promotional success is a numbers game. The more people you can make aware of the promotion, the more you will have who will consider taking part, and the more who consider taking part, the more there will be who actually take part. And then if enough of the response you get is incremental, the bigger the return on investment will be.

Our view is that response can be summarised as the product of two components: the logistical effort behind the promotion; and the structural design of the promotion.

The logistical part is more easily measurable and controllable. How much distribution the promotion gets; whether it is supported by advertising; how visible it is in-store and so on. All of these help multiply awareness, promotional participation and sales success. The better they are done, and the more they are done, the better the result.

By contrast, the structural component is much harder both to measure and to control. We define the structural component as the mix of the promotional idea and its actual manifestation. If the underlying promotional idea is poor, or the idea is not well-enough developed, the conversion from awareness into participation will be much lower than otherwise, meaning the benefits from even the very best performance on the logistical side will be diminished, and overall ROI reduced.

So we need the means to manage the structural component as well as the logistical one if we are to maximise promotional effectiveness. It was for this purpose that we developed the PromoDriver questionnaire.

Assessing Promotional Engagement

Every promotion is, of course, unique and so measuring the likely response to any new promotion will never be an exact science. What we can do, though, is get shoppers, customers, and/or consumers to give us their opinions about promotional concepts and tell us which ones appear to them to be more/less appealing.

By doing this both for proposed promotions that have not yet been run and for promotions which have been run in the past, we can benchmark opinions about the new promotion against things we have already seen in action. As explained further below, our research has shown that measuring the overall level of "interest" or "engagement" that is stirred by a promotional concept is a good indicator of the number of people that ultimately, other things being equal, take part in it.

But just measuring overall interest in a promotional idea is not enough to tell us if the promotion will be anything more than just adequate however. To truly judge its strength we need to understand how it performs on each of 5 key criteria that determine promotional engagement. Only by doing so can we compare it objectively with past promotions and see why each is stronger or weaker than another.

These 5 key criteria are explained below and our proprietary PromoDriver questionnaire measures the strength of the promotion across each one of them on a series of suitable attributes. For the rationale behind the use of these criteria, please see the next section on Rationale.

Relevancy

to how many people is the promotion relevant / likely to be of potential interest?

Identification

how well-known / well-liked is the promoted brand and any partner brand?

Accessibility

how much effort will be involved in taking part in the promotion?

Value

what is the monetary and emotional value of the reward and how easy is it to win/obtain?

Risk

how big is the downside risk to taking part in the promotion - ie if I change my brand to take part in it, what's the risk I'll have to throw it all away unused etc?

To measure the strength of a specific promotion we use our standardised pro-forma questionnaire tailored as required. The target promotion is included within a set of 3 to 5 alternatives, of which one, two or three will be concepts that have either actually been run in the past and/or ones that are specifically used for benchmarking purposes. The benchmarks used are ones suggested as being relevant either by the client or by RRI or sometimes both.

Once the data have been collected they are suitably grouped and weighted together to summarise the strength of the promotion on two key dimensions: Functional and Emotional. The product of the promotion's performance on each of these two key dimensions determines the promotion's overall Promotional Engagement Index (PEI).

The higher the PEI score the higher is the level of engagement and, other things being equal, the higher will be the number of people who are therefore likely to participate. Calibration to expected participation rates is achieved by comparing the PEI score for the new promotion with the scores for the benchmark promotions run in the past.
For more information and insights about PEI scores please visit our PromoDriver web page at LINK.

Benefits

The direct benefits from using our service are typically equivalent to increasing the size of your promotions budget by between 15% and 25% but that is only part of the reward. Increased profits from increased sales and increased buyer/user loyalty produce returns for our clients that are typically at least ten times the fees for the service.

For example, in a study undertaken for a major UK tea company we were able to measure the impacts of more than 70 non-price promotions run in the past by various brands within the UK teabag category. As well as being able to research the consumer's opinions of the various promotions we were also able to measure the impacts of those promotions on brand market shares, net of other factors, by a detailed econometric model of share performance. Data from a well-known national customer panel also provided reliable confirmatory estimates of shopper purchase-switching rates, uplifts and repeat rates.

The benefit to the client from undertaking this work was an increase in the effectiveness of their promotional budget by c. 15% per annum, paying back the cost of the research by in excess of a factor of 30 times the project fees.

Process

Our Promotions Effectiveness Management service usually begins with an assessment phase where we understand the nature of the promotional campaigns you are running, review your available data sources and estimate the potential 'size of prize' from undertaking an improvement project. This assessment is at low cost.

The second step is a detailed analytical study, measuring promotional response and understanding differences across the market. If required, new market research will be undertaken to be able to calibrate the level of promotional engagement differing types of promotion have with the target group. The analysis phase results in easy-to-understand guidelines on what to do to maximise the returns from your promotional budget. This stage often also provides "what if...?" spreadsheet models that enable you to evaluate and plan future promotional activity. An example of a free-to-use generic version of such a model can be found on our Apps site, myredroute.com.

Finally our on-going support service then provides an update of the learnings once a year or more frequently as required.

For more information, visit our PromoDriver web page.