Buying Sales by Bribing Consumers

The Economic Times - 23 May 2005

I was reading a very absorbing leaflet about what seemed to be a very good health supplement. It explained what the supplement contained, how totally natural and safe it was, how exactly it worked, why, the research evidence available; it was totally honest and completely professional in tone - all in all it was a great product and a superb piece of branding. Then, suddenly, it said on the last page "lucky draw - win a holiday to Goa". Made me wonder about everything I had read and thought so far. A potential-to-win brand with a totally un confident brand owner!

There is a disturbing trend of marketers of all hues, across all categories, to offer all manner of sops, almost all of the time, to get consumers to buy their products. Disturbing, because the dominant marketing logic of the day seems to be that when there is a slow growing top line, nuke the consumer with offers he cannot refuse, and buy sales. At what cost? How sustainable is this? Is there any fundamental strengthening of the bond with the consumer or of the company's sales getting ability as a result of this? Or is it about "meet this quarter's target and we shall see about tomorrow"? Is that why it is really hard to shut off promotional freebies to consumers? Because the sales graph will drop? So which is better, and for whom? Growth on the top line, but with lower effective margins, and worse still with a disproportionate emphasis of management time and energy on things that do not strengthen sales getting ability for the future? Or very slow growth on the top line, confronting of reality on why this is so, and figuring out how to deal with it?

There is another disconnect. CEOs spend a lot of time talking about the brand, and brand building, in hallowed tones. Why then do they reward "purchased sales"? And approve budgets for the same, without asking what the end game is? The unstated view seems to be that brand building is a nice, comforting ritual to indulge in, a bit like prayer; but it would be foolish to assume that brand power can and will result in sales. Sales, it seems, march to the beat of their own drummer. So consumers, in this scheme of management thinking, do not choose between the performance or personality of your brand over your competitor; they choose between the tickets to Singapore and the gold coins in the pack. The logical question is "why bother with striving for superior products and brand building at all"? Strong brands are supposed to be able to command or demand price premiums from consumers. If marketers believe that they cannot even sustain their marked prices and be attractive to consumers, what is the logic for brand building effort and expenditure? Why not shut off the advertising budget altogether? What purpose is it serving, if the battleground is not about brand appeal?

It is even more disturbing that we are raising a whole generation of customers on price offs and promotions, and signaling to them that other than the 'deal' on offer, on all other counts there is no reason to buy one over the other. As Shiv Kumar, an anthropologist, pointed out at a retail conference, the consumer is a dynamic participant in the marketing game, not a passive 'done to' recipient. He or she is also learning how to play the game. They know that bargains are being made and bargain hunting is the right behaviour. A favourite theme at most marketing conferences is to discuss the "new consumer". The totally brand promiscuous behaviour, the extreme price sensitivity, the demand of wanting the moon but not willing to pay for it. Guess why? Guess who made them that way. Supplier conduct, I am afraid, is the culprit.

I have no problem with the idea of promotions . I just think they need to be thought through in terms of whether they are adding value to the brand, or, to pick an even more modest objective, are they even vaguely in line with the brand proposition and personality? The health supplement that I talked about could have offered a spa for a few days, free medical consultations with experts, a yoga DVD. But even so, I cannot escape the niggling doubt that I am a less valuable customer if my sale was bought for thirty pieces of silver, than if I were convinced that my health would improve if I used the supplement. I vote that quality of resultant increase in market share or sales be the benchmark against which to approve any promotion budgets. Quality being defined as the right kind of customers in terms of profile (i.e. that which is written as the target market for whom you have chosen to compete, in your business strategy document), and with a reasonable probability of converting to regular buyers in case of a frequent repeat purchase item, and a reasonable probability to give you the inside track at the next point of purchase, if you are a consumer durable.

I think this whole business of using promotions as the main sales getting tool is symptomatic of a deeper malaise. It is a part of not knowing how to cope in the era of competition that is just dawning, where the answer to the most fundamental question "why buy me and not someone else" is not easy to create. So we are picking the easy path of unprofitable, unsustainable, low consumer quality sales growth. Market leaders can, and do, play this game far longer. But if you are number two, it makes sense to not play by his rules, but to seriously think "brand proposition".