Promo strategy can make, break an intro

June 13, 2018By Industry Intuition, Views


By Megan Moyer as seen in Chain Drug Review, May 4, 2018

For new products, clinching sales hinges on consumer awareness of the brand and its benefits. With so many marketing channels as possible avenues of promotion, brand marketers must optimize budget dollars to reach their target market by choosing the right message for each one they utilize.

Promotion, or lack thereof, can make or break a new item in its first year. That’s why the analysts at Hamacher Resource Group (HRG), like many retail buyers, consider promotional plans and associated dollars when making new product decisions for the shelf. Other factors include innovation, category growth, product orientation and earnings potential
Consider the variety of tactics brand managers have when deciding how to allocate their budget. Between business-to-business and consumer outreach, there’s television and radio advertising, print and online advertising, freestanding inserts (FSIs), public relations, social media, couponing, professional detailing, direct marketing, digital marketing, and trade and consumer events.

“Manufacturers are moving away from traditional promotional tactics like print ads and displays,” notes Scott Hanslip, senior vice president at Competitive Promotion Report (CPR). This is corroborated by HRG’s new item review process, which revealed that newer channels, including social and digital media, stand out for their upward trend over the last few years. In 2017, three-quarters of the new items HRG reviewed had promotion dollars that were allocated to social and digital media.

Manufacturers use these newer channels to not only promote their product but also build the brand through demonstration of corporate culture and values, community outreach, production and ingredient transparency, and other qualities consumers are increasingly interested in. With relatively low entry costs, these channels are prime options for those brands with a smaller budget.

When deciding where to devote promotional dollars, companies must consider the importance of convincing the consumer to try the product. “Brands must utilize promotions that will get consumers to try their item,” comments CPR’s Hanslip. “Then they can focus on spending to drive repeat purchases. Quality is more important than quantity in these decisions.”

Steve Choate, business development manager at HRG and a former category buyer for over 30 years, says: “Manufacturers also have to set aside trade funds for the wholesalers and retailers to cover the various fees to get on the shelf, be setup in their system, etc. These costs can add up quickly, which is why many smaller brands may start in just one or two retailers to manage these expenses until the product is making steady profits.”

The recommended spend for promotional activities varies by category and number of competitors in that space, and is often determined by the size of the company. Smaller companies and startups may not have extensive dollars to devote to promotions, while larger, established brands can take advantage of consumer familiarity with the company and other products in their portfolio. However, manufacturers still have to find the right promotional support to establish the new product’s own identity and differentiators.

Manufacturers can use a variety of media channel combinations to reach their targeted audiences, but choosing just the right mix can be tricky. “Beauty categories, for instance, spend more to advertise directly to the consumer because they are selling hope and depend on fads, while manufacturers in a category such as eye care don’t have to spend as much in this media channel,” states Michele Feldner, category analyst at HRG. “For instance, OcuSOFT doesn’t do a lot of consumer advertising, but devotes a good portion of their promotional funds to doctor detailing, and they do very well in the independent pharmacy segment.”

If a product is truly unique, the manufacturer often has to work harder to educate consumers about why they need it. Thinking outside the box is necessary to get shoppers’ attention for something they normally wouldn’t buy. In these cases, point-of-purchase promotions are one option to stand out and get shoppers to take notice.

Whichever promotional media marketers select, they need to be mindful of their message. No matter where a company devotes its budget, if their story isn’t compelling to their target audience it will have little impact. Presenting a consistent message across all media is also important. With most consumers investigating brands in multiple outlets, it’s instrumental in building a strong brand to have a consistent message across the omnichannel.

Manufacturers need to keep a long-range plan in mind for their promotional dollars as well. It’s important to devote as much as possible in the launch year, but it’s equally important to continue an appropriate spend in years two, three and beyond.

HRG reviewed data of new items introduced in a three-year time period and found that while many new entries exited the market in their first 12 months, greater staying power was achieved in years two and three after the launch when companies had the means to continue to promote the item. Thus it’s necessary for manufacturers to have a promotional plan beyond the first year to continue building interest and raising awareness. Even if a brand does well in its first year, the company has to continue investing to grow share, sales and recognition.