advertising effectiveness
As advertising effectiveness has been falling in the last three decades, companies have shifted heavily towards push-based promotion strategies. Discuss push-based promotion strategies and comment on the drawbacks these strategies may have.
Paper instructions:
At the basic level, answers will describe push-based strategies. Better answers may make use of Kotler and Armstrong to highlight push-based promotion strategies. Due to the uncertain economic environment and its effects on overall profitability, marketers are being forced to move towards shorter term but more measurable ways of increasing product uptake and sales. Answers may highlight four overall
factors that may be negatively impacted:
• Consumer learning: Price promotions can lead people to increase their expectations that an ensuing deal is forthcoming. As a result, consumers learn to lie in wait for a discount. This behaviour leads to lower baseline sales in the long run, and a higher apparent promotional lift over that baseline as people buy more exclusively on deal. From a short-term perspective, the greater promotional lift makes deals look even more profitable, leading to more discounts. Eventually, the bulk of product moves off-invoice and margins decrease.
• Brand purchase attributions: By focusing consumer attention on extrinsic brand cues such as price instead of extrinsic cues such as quality, promotions make brands appear more similar. This results in increased price sensitivity as products become more commoditised.
• Stockpiling behaviour: Consumers are prone to forward buying. Thus, much of the responsiveness to deals is simply the shifting of purchases over time. This again amplifies the effect of deal response by simply borrowing sales from the future.
• Competitive response: When one firm increases its discounts (because the apparent historical lift in sales is large), it is not uncommon for others to respond. As a result, promotions increase but sales do not, again lowering margins.
Other good answers may also make use of the ‘Are consumer goods companies too pushy?’ discussion on pp.443–44 of Kotler and Armstrong to substantiate and
support their arguments.
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