Case Game: The Case Of Co-Promotion

CASE GAME
The Case Of Co-Promotion
Contd.

THE DISCUSSION

WALTER VIEIRA
Chairman, MAS

There is no conflict between advertising and sales promotion. Every marketing professional uses the five tools-advertising, sales promotion, public relations, sales force, and direct marketing-in a mix that is appropriate to get the best results. All the five tools are complementary.

Total has done an excellent job of sales promotion for refrigerators, as is evident from the financials. The tie-up with Kitchenaid was good. The final user of Total refrigerators would find Kitchenaid cookware useful. The usage is at the same point for both-the kitchen. Obviously, Kitchenaid also had a solid brand image, which matched the good image of Total.

Therefore, the tie-up with Kitchenaid would not impact the brand equity of Total-provided the co-marketing of the two products is not done repeatedly.

When the market is sluggish, there is little point in arguing about the semantics of growing or maturing markets. Something has to be done, and done fast. Either the company has to find more frequent use (not in refrigerators), new markets (expensive rural penetration), new uses or product modification (frost-free water nozzle).

Sales promotion is no substitute for a good product, attractive packaging, the right price, the appropriate distribution; enthusiastic and knowledgeable selling, and good after-sales service. However, when differentiators between competitors get blurred and the general market growth is low, there is need to go beyond 'cognition' to 'effect', which together contribute to 'memory'. Total, therefore, did the right thing. It created 'excitement'. These are short bursts of great activity that help to create a favourable attitude and generate sales. If this activity is carried on for too long (as in the case of Bournvita), then it descends into the realm of the routine, and is as good as a price reduction. If it is done without good distribution and sales back-up, the scheme will fail at the ultimate point of customer contact. If the activity is done too often and at an expenditure that constitutes too high a proportion of the total promotion expenditure, then there will be short-term gains, which would come at the cost of long-term brand-building.

It is advertising, public relations, sales force, and direct marketing that help to build brand equity. Sales promotion gives the nudge at the point of purchase. If you try to substitute the latter for all the other four, it can spell disaster-sometimes in the short run, definitely in the long run.

AVINANDAN MUKHERJEE
Professor, IIM-Calcutta

The short-term measure of a sales promotion scheme is sales. However, there are no easy, defensible ways to measure the long-term effects on brand equity. This is exactly where the problem with Total lies. Kumar has no mechanism to evaluate the impact of the co-marketing promotion upon the brand.

Total should develop a core identity for its refrigerator brand, bearing in mind the perspectives of the brand-as-person, brand-as-organisation, and brand-as-symbol, as well as brand-as-product. Further, Total needs to find out the value proposition for its brand, considering emotional and self-expressive benefits as well as functional benefits.

A decision in co-marketing tie-up with another brand can be taken properly only after the brand identity, value proposition, and brand position of Total are analysed. The promotion was selected without determining these factors. Total should develop co-marketing schemes only if the brand identity will be both used and reinforced in the co-marketing exercise. Total also needs to take care to manage the integrity of the resulting brand identities. The brand manager should track the brand equity over time, including awareness, preference, perceived quality, and especially brand associations.

There seems to be general agreement among many researchers that, in contrast to advertising, promotions do not generally build up a long-term consumer franchise. However, they do affect immediate sales.

Most of the immediate sales increase comes from switching of brand preference within the evoked set. Promotions also seem to induce purchase acceleration for durables like refrigerators, thus altering the timing of their purchases. Further, promotional elasticities are asymmetric. If promotional effects come from preference-switching, the effects of promotional competition are likely to be borne disproportionately by some brands relative to others. Therefore, the promotion campaign of Total has worked far better than those of its competitors.

Promotional elasticities are generally greater than price elasticities. Total needs to put into place a reliable way to measure promotional profitability. Promotions interact with other elements of the marketing mix (advertising, in particular). Promotional results interact with production and distribution, affecting inventory levels in a rapid and dramatic manner.

Total needs to formulate a long-term strategy for the refrigerator brand. The following questions about the brand environment five or ten years into the future need to be addressed now: What associations should the brand have? In what product classes should the brand be competing? What mental image should the brand stimulate in the future? Kumar is absolutely right. Total should continue investing in brands even when the financial goals are not being met.

A.G. WAREY
MD, VIP Industries

Advertising and sales promotion serve the same larger objective-to ensure sales growth. The difference lies in the way companies deploy them to meet the overall objective. If advertising provides the reason to buy over a longer time-horizon, sales promotion provides an incentive to buy in a short time span. The role of management lies in ensuring that, given the business imperatives, they are in the right proportion.

The relevance of any promotion campaign is linked to the objective it sets out to meet. In this case, the objective was to prop up sales in an inert market. As Srikant Suresh believes that the promotion has helped Total hold on to its 20 per cent marketshare, one of the realised objectives may be seen as offsetting the impact of competitive promotions, as four other companies were also running promotions during this period.

While the team deserves to be complimented for running a promo better than its competitors, the cost of retaining marketshare and its impact on the bottomline needs to be assessed.

It is also noteworthy that it is always the smaller players who find it advantageous to use promotions as they cannot match the advertising spend of the market leader. In the absence of the ability to create long-term buyers, promotions only serve to attract the deal-prone consumers who could switch brands.

For a leader like Total, the danger is that continuous promotions could dilute its brand equity. Or force even its loyal customers to wait for a good deal from the company. These are risks that have to be factored in while deciding on the advertising-co-marketing mix.

Indeed, diverting money from the advertising budget to run promotions could have a long-term negative impact. In a market with just 8 per cent penetration, Kumar should focus on strengthening Total's brand equity, product differentiation, and extending distribution to untapped markets. In the context of the research findings, he should also focus on technical support to the retailers and salesmen so that they could be solution providers to the customers.

All this, however, does not mean an end to promotions in any way. Total's desire to promote its other products would have to be based on an understanding of those markets, customers, and competitors. The refrigerator experience cannot be the benchmark for the company in deciding co-marketing initiatives for its other products. Each should be viewed in isolation.