If anyone knows about promotions, it's our own Alan Gerson. Currently executive vice president of iMedia Communications, Gerson has served as vice president, program marketing and administrations for NBC Television Network, executive vice president for the Home Shopping Network Inc. (HSN), senior VP, business development and direct marketing for Ticketmaster Corp., and president, Ronco Inventions, LLC. and Popeil Inventions, Inc. to name just some of his experience.
Gerson recently shared with me how he believes interactive media boosts promotion opportunities:
iMedia: How popular are promotions?
Alan Gerson: Promotions are actually a huge part of the overall worldwide marketing spend. If you compared advertising to promotion budgets, promotion budgets, overall, are four times larger.
In fact, media properties have been long jealous of this "black bag" of promotional dollars, which generally are not measurable, yet represent a large budget opportunity. Promotional budgets in traditional media are thought of as "soft dollars" because they constitute a more emotional buy for the sponsor while at the same time help create a potentially more immersive brand or product experience for the consumer.
iMedia: How does "promotion" differ from "advertising"?
Gerson: Promotion has typically included, on the traditional side, trade discounts, volume allowances, end of aisle displays, price incentives, events, contest marketing and premium giveaways.
Promotion is about "giving to get." You give a discount to get a sale; you give information or a service to promote retention; you send a special offer to reacquire a customer who has not purchased recently.
The major job of advertising is to acquire customers. There is a cost model for customer acquisition that most companies employ that is based on the lifetime value of the customer. If I spend $100 to acquire a customer, they buy $300 worth of my product in the next 18 months, and I have a gross margin of 35 percent, then I make money.
Promotions help both acquire and retain customers. Selling something else to a customer you have identified and can communicate with is more cost effective than acquiring that customer in the first place.
At Ronco, we spent up to $100 to acquire a customer. After we acquired them, we communicated to them by phone, postcards and email on a regular basis, to increase the lifetime value and to keep them active. The margin in the subsequent sales was geometrically larger than in the initial sale.
iMedia: I think Kraft Foods does a fantastic job with its promos. The company sends me weekly emails (that I've opted-in for) with recipes, and quarterly "cookbooks" in the mail. I get a lot of value, and the company promotes its products that are included in the recipes.
Gerson: Kraft is looking to create a broader, deeper relationship with its customer, to increase brand loyalty, and to extend brand awareness to an ever wider circle of Kraft products. Kraft does an excellent job providing information and assistance that makes cooking an event, increases the self esteem of its customer -- and sells product.
Promotions, in sum, can acquire customers, incent a broader brand/product customer relationship, bootstrap brand equities and customer loyalties between "brands," and reacquire customers efficiently to keep them active.
iMedia: So there's good reason for their budgets to be high!
Gerson: Yes. The big dollars go to the retailers for trade promotions -- brands pay Wal-Mart, for example, for shelf space by discounts and other incentives. But consumer-focused promotions are also huge -- and bigger than advertising budgets in many cases as well.
The line blurs a bit with the retailers' promos because the consumer often gets a rebate at the point of sale that the vendor pays for… Fry's does this constantly. The product is "free" if you redeem the rebate. In many cases, fallout in redemption rates is counted on to make many such promotions work. They put out a million discounts, or money-back guarantees, hoping and praying, based on experience, that only a small percentage will be redeemed.
iMedia: A large proportion of promotions are carried out through partnerships with other companies/brands, aren't they?
Gerson: Yes, promotions enable two companies to share brand values and brand awareness for their mutual benefit.
iMedia: Such as how Warner Bros. and Procter & Gamble recently partnered for promotion of "The Sisterhood of the Traveling Pants" film and the Tampax site beinggirl.com?
Gerson: Yes, exactly. When I was at NBC, we did a cross promotion for our fall schedule with McDonald's. It involved creating an NBC program environment at 3,000 restaurants with banners and posters, creating "pro-mercials," which were a combination McDonald's promotion and NBC show promotion. We also had a contest element, giving away a million dollars a day for 30 days though a lottery ticket you got at the restaurants and then checked for the winning number by watching a different NBC show each night.
At HSN, we did on-package promotions with Sara Lee. That company's female consumer was a great fit with our audience. We put discounts on HSN purchases on Sara Lee products, which both drove sales at Sara Lee and viewership and sales at HSN.
The idea in cross promotion is that there is a shared audience, or shared brand values, and that a positive halo effect can be created that can help both partners promote their products and services.
iMedia: So there are many benefits of doing promotions. What are some of the disadvantages of traditional (read: offline media) promotions?
Gerson: Again, in traditional media promotions, the measurement is usually "softer" than is the case in advertising spends. If you sponsor an event, for example, and lots of people attend and have a great time, or you sponsor a rock concert and fans hopefully transfer their passion and their loyalties from the band to the product, that's good. Exactly how that works, though, is an after-the-fact analysis that is hard to quantify to any degree of exactness. A rise in sales may be indicative that it worked but, to be truthful, even flat sales or lower sales could have been flatter, or lower, if not for the promotion. Also, perhaps the rise in sales was only partially -- or even not at all -- due to the promotion, but rather to the totality of the marketing communications of the company.
Also, in the traditional world, couponing or other price discounts can be a dicey thing. If you are unable to target the recipient, that can be a problem. Giving a discount to a customer who is going to buy your product anyway is a useless and costly exercise. You are just giving away margin.
The real value in promotions would be to incent a non-customer to become a customer, at least from the couponing or discount perspective. The key for effective couponing or discounting offline is to be database driven, which is something inherent in online promotions.
At HSN, we had a regular couponing program that went out to our best customers. However, we versioned the couponing so that if you were a jewelry buyer, you didn't get a coupon to buy jewelry, but rather one to buy soft goods. We could do this because we had an extensive database of customer histories and purchases.
In that way, we could generate incremental sales that we could track -- and make sure the coupon program paid for itself.
Interactive media allows for the most efficient and targeted form of promotional marketing. Interactive marketing companies using database-driven profiles of customer behaviors and cost-effective communications channels such as email can be incredibly efficient and successful in creating profitable promotions.
Making sure you are not simply giving away margin to a customer who is going to buy the product anyway saves huge dollars for a brand. Also, avoiding the cost of paper, printing and postage by doing a targeted email campaign is potentially always more cost effective.
Using effective "permission marketing" and opt-in practices helps cut through clutter, and makes sure the recipient will value and read the communication.
iMedia: You mentioned that interactive enables better targeting. What type of targeting works best for promotions? Geo-targeting? Behavioral-based targeting? Or … ?
Gerson: Geo-targeting is very valuable because many brands have regional focus. They are not in 100 percent of the DMAs, so they only want to reach consumers who have a likelihood of being able to see their products in stores.
Geo-targeting can also be very valuable for testing. Doing a promotion that is limited to Pittsburgh, for example, allows a company to test its value and benefit without having to commit to a nationally scaled program. Online can be a great help in this kind of testing, even if the promotion itself is both online and offline.
As geo-targeting techniques get more sophisticated, promotional offers can be targeted by parts of town, providing different offers and incentives based on demography.
iMedia: What about behavioral targeting?
Gerson: I believe that past behavior is the most important indicator of future consumer conduct. If you have visited sport sites, auto sites and outdoor sites, that might tell me you could be a customer for a truck or an SUV. If you buy one of my products regularly, I may be able to get you to try another product. But I have to know your past behavior to do this.
When I was at Ticketmaster, we wanted to know if rock concert buyers also bought other events, and in what percentage of correlation. If there was a connection between rock concert ticket buying and sporting events, to a 45 percent correlation, then, that identified how we could market and effectively cross promote both kinds of tickets to that audience.
iMedia: Other advantages of online promos?
Gerson: Online media can also offer immediacy to the consumer. This is a big advantage. They can take advantage of the promotional offer with a click -- they often don't have to call or visit a store. The medium has that powerful two-way transactional capability already built in.
Word-of-mouth is also an important part of promotions facilitated by interactive media. The best promotions have a viral element -- people talk about them and that obviously increases the impact of the promotion exponentially. Testimonials and the opinions of friends and persons with influence is a huge win if the promotional marketer can engender conversation and create evangelists.
Additional resources:
Read Alan Gerson's 10 tips on how to create customers the QVC way.
Dawn Anfuso is editor of iMedia Connection.
