webinar the most effective promotion
DESCRIPTION
Companies are often pressed to do more with less, managing frugal operations with ever tightening budgets. Marketing managers are requested to allocate their marketing dollars more efficiently to instigate change in consumers and gain incremental users to their brands; however, the available body of knowledge on promotion effectiveness is often incomplete, disaggregate, and sometimes anecdotal. SKIM takes on the challenge of systematically measuring and comparing the effectiveness of 20+ types of promotions across 4 countries, for two CPG product categories. To add a fundamental layer to our understanding of what works and doesn't work across markets, we aim to identify key underlying behavioral economic principles driving the success of certain promotions. For more information about SKIM's webinars, visit http://www.skimgroup.com/webinars.TRANSCRIPT
The Most Effective Promotion
#SKIMwebinar
Share your thoughts online:
Abigail Joffre
Today’s webinar host
Ellen Lueb
Senior Research Analyst
Juan Andrés Tello
Senior Director Americas
The most effective promotionA competitive study
across LATAM markets
Up to 60% of purchase
decisions are made in front of
the shelf
And only 5% of human
decision making is rational
SKIM Webinar “The Most Effective Promotion”3
Yet, customers attention is very limited… lost in context
Assimilate max 5
pieces of information
at once
Shoppers “chunk”
information to simplify
the task
SKIM Webinar “The Most Effective Promotion”4
Promotions are
becoming an
important asset to
deliver brand
strategy for most
companies and
capture customer’s
attention
5 SKIM Webinar “The Most Effective Promotion”
Powerful insights
driving promotional
strategy
Top promos in Colombia according to Shopper Study 2013:• Packaging trade,• Cinema tickets• Musical events and concerts• Cell phone minutes (77%
prepaid)Design a
promotion easily accessible
by shoppers
6 SKIM Webinar “The Most Effective Promotion”
Role of promotions
varies depending on
the brand’s position
in the market
LeaderChallenger VS
7 SKIM Webinar “The Most Effective Promotion”
Improve Gross
Margins
Wise
marketing
trade
investments
Improve
profitability of
stocks of
retailers/
distributors
Companies should be selective in order to
Find right level
of promotion for
the category
Improve ROI
Max.
incremental
sales and
reduce
cannibalization
Productivity has become the name of the game
Find the sweet spot
between incremental
sales and value – fuel
sustainable growth
8 SKIM Webinar “The Most Effective Promotion”
Lower ROI
Beware the loss of
promotion
sensitivity if abused
over time
9 SKIM Webinar “The Most Effective Promotion”
Promotion effectiveness
Incomplete Disaggregate
Anecdotal
Scattered
10 SKIM Webinar “The Most Effective Promotion”
4 Countries
Mexico
Colombia
BrazilArgentina
Laundry Detergent
Breakfast Cereal2
Productcategories
11 SKIM Webinar “The Most Effective Promotion”
21 Types of
PromotionDiscounts by volume
Buy 3
packs for a
20%
discount
Buy One
Get One
Free
(BOGOF)
Buy two
Get One
Free (3x2)
Coupons/rebates
Coupons
inside
Rebates
(get 20%
back)
Store
rewards points
Bonus
points on
loyalty card
Price reduction
Price
From-To
(10% & 20%
reduction)
Absolute
saving $
amount
(10% & 20%
reduction)
Relative %
saving
(10% & 20%
reduction)
Satisfaction guaranteed
100%
satisfaction
guaranteed
($ refund)
100%
satisfaction
guaranteed
(product
replacement)
Sweepstakes
Instant
prize on the
inside of the
label
Sweeps-
takes
(register)
Charity
Charitable
Cause
Bundles
Comple-
mentary
Bundle
Free gift
with
purchase
Sampling
Free
sample
Same price,
more product
20% more
for same
$ deal
12 SKIM Webinar “The Most Effective Promotion”
21Types of
Promotion
2metrics
PersuasionReach
13 SKIM Webinar “The Most Effective Promotion”
2metrics
The Most Effective PromotionsBased on promo effectiveness
Buy 1 get 1 free
3 for the price of 2
Freesamp
FreegiftBuy3Get20%Bundle
20% more
RelSav–20%
Charity 20%
Instant Trip
Refund 100%
Replace 100%
SweepTripRebate 20%
AbsSav-10%
AbsSav-20%
F->T 20%
F->10% LoyalCard30%
RelSav10%
Coupons20%
14 SKIM Webinar “The Most Effective Promotion”
Economical alternatives
to BOGOF & 3x2
Free GiftBuy3Get20% +
Freesamp
-FreeGift
Buy3Get20%, Freesamp
+ InstantTrip
Buy3Get20%, Freesamp, Insta
ntTrip
+ FreeGift
44% 50% 52% 54%
The Most Effective Promotions
An Extra ItemAn Uncertain
PromotionA Price
DiscountFree Sample
Optimal Quartet of Promotions
1 promo 2 promos 3 promos 4 promos
15 SKIM Webinar “The Most Effective Promotion”
Buy3Get20%, Freesamp, InstantTrip
+ FreeGift
Relative Results
Laundry Detergent
Breakfast Cereal
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
1 2 10 3 4 5 7 9 6 8 11 16 12 15 13 19 17 14 18 20 21
Differences by product category
Correlation of 0.99
BO
GO
F
3x
2
Fre
eG
ift
Fre
eS
am
p
Bu
nd
le
20
% m
ore
Bu
y2
Ge
t20
%
F >
T 2
0%
Ab
sS
av
–2
0%
RelS
av
–2
0%
Ins
tan
t T
rip
Refu
nd
10
0%
Ch
ari
ty 2
0%
F >
T 1
0%
RelS
av
–1
0%
Rep
lac
e10
0%
Lo
ya
lCa
rd3
0%
Co
up
on
s 2
0%
Ab
sS
av
–1
0%
Reb
ate
20
%
Ch
ari
ty 2
0%
16 SKIM Webinar “The Most Effective Promotion”
Relative ResultsQuality of the GIFT matters
17 SKIM Webinar “The Most Effective Promotion”
Locally Effective AlternativesTop Promotions
Argentina
Free Samples
Free Gifts
More for same price
Bundles
Brazil
Free Samples
Instant prizes
Sweepstakes
10% discounts
Loyalty Card Points
Rebates
Replacements
Colombia
Instant Prizes
Bundles
More for same price
Free Gifts
Free Samples
Loyalty Card Points
Coupons
Sweepstakes
Mexico
Free Gifts
Free Samples
Bundles
From-to discounts
Sweepstakes
Instant prizes
Coupons
What to do
What NOT to do
Sweepstakes
Rebates
Coupons
Replacements
Refunds
18 SKIM Webinar “The Most Effective Promotion”
ARE THE MOST CHARITABLEDOESN’T ENJOY A GOOD GAMBLEARE MORE MATHEMATICALLY MINDED
19 SKIM Webinar “The Most Effective Promotion”
ARE THE MOST CHARITABLEDOESN’T ENJOY A GOOD GAMBLEARE MORE MATHEMATICALLY MINDED
Promotion Specific Insights
Cause Related
Uncertain Rewards
Same Discount, Differe
nt Wording
20 SKIM Webinar “The Most Effective Promotion”
HOW TOEFFECTIVELY
COMMUNICATEA
PRICE REDUCTION21 SKIM Webinar “The Most Effective Promotion”
HOW TOEFFECTIVELY
COMMUNICATEA
PRICE REDUCTION
3Different Ways
The effectiveness of each wording depends on…Starting base price Magnitude of discount Currency denomination
Relative % Discount
Absolute Savings
From –To Pricing
A psychological barrier has been crossed
YES NO
Currency denominations
are high
Absolute Savings
YES
NO
-20%Save $2From $ 11
to $ 9Save $2
22 SKIM Webinar “The Most Effective Promotion”
Effective alternative
>4=$
“More product for the same price”
More palatable financial
proposition
ImproveBrand loyalty
outperforms a straight % reduction
Involves pack & manufacturing
changes
23 SKIM Webinar “The Most Effective Promotion”
Engagement
Loss aversion Salience Format
Affect-
reciprocityPriming Free Anchoring
Scepticism ProspectProminence /
orderEndowment
The more
the merrier
Effective alternative
>4=$
11BehavioralEconomic Principles
The power of “free” can make people consume what they wouldn't under normal circumstances
Promos with a bigger visual impact offering more product do show higher effectiveness levels
Mixed results. Lack of immediate or compelling enough rewards which overcome scepticism, leads to subpar promos
Mixed results. Promos shielding shoppers from a potential buyers’ regret. Refunds and replacements take a defensive position while product sampling is more proactive
SKIM Webinar “The Most Effective Promotion”24
Format
Priming Free
Scepticism Prospect
Key Behavioral Economic Principles
Most Effective Promos
Promo Pitfalls
LOSS OF PROMOTION
SENSITIVITY IF ABUSED OVER TIME
LOWER ROI
Free SampleA price discount
An uncertain promotionAn extra item
Alternative promos:
25 SKIM Webinar “The Most Effective Promotion”
Go to www.skimgroup.com/webinars
for today’s presentation slides and more!
Abigail Joffre
+31 10 282 3535
@SKIMgroup
#SKIMwebinar
Share your thoughts online:
Ellen Lueb
+31 10 282 3581
Juan Andrés Tello
+506 4052 7272
+1 201 349 2522