Visions of the future

The market for Sales Promotion in the UK is a growing one with good prospects for growth in the future, according to senior figures in sales promotion agencies polled on behalf of Sales Promotion magazine.

The survey was sponsored by fixed fee company Fotorama and Argos Business Solutions, and run in conjunction with the Institute of Sales Promotion (ISP). It was conducted by Fusion Communications between December last year and February this year.

Overview

Digital technology was the key trend identified by sales promotion agencies as likely to impact the industry over the next couple of years, with 58 per cent and 38 per cent of respondents expecting significant growth for digital and mobile channels respectively.
At the moment, the mobile element of sales promotion campaigns in particular appears to be outsourced. Responses to the survey suggest that the use of mobile will increasing and that it will more and more be taken inhouse by agencies.
‘Classic’ sales promotion techniques will continue to be widely used within agencies, however, with respondents indicating that they feel there is particular room for growth in price/prize promotions as well as in loyalty schemes.

Sales Promotion is used extensively within the agencies that took part to the survey. Nearly half -- 46 per cent – of respondents said that the Sales Promotion discipline is directly related to their role, while an average the agencies in the survey reported that they had 18 clients buying sales promotion services from them.

The biggest concern for the future for agencies revolves around the measurability of sales promotion, with those who took part in the survey reporting that they are putting metrics in place to enable Return On Investment and campaign benefits evaluation to be quantified, with a view to increasing client confidence in sales promotion as a discipline.
However, there were also significant concerns expressed over the quality of the agency-client relationship and the general vulnerability of agencies to clients’ whims, driven by an increase in the number of ad hoc projects compared with clients on retainer or continuous budgets, lower levels of commitment from clients, shrinking budgets.

The respondents

The survey attracted a high level of senior personnel as respondents, with 31 per cent being managing director, chairman or chief executive and another 21 per cent classifying themselves as director or partner, 16 per cent account director and 17 per cent account manager.
On average, respondents were 41 years old; just over a third (34 per cent) said they were aged between 35 and 44, with another 28 per cent aged 45 to 54. The over 55s accounted for 11 per cent of responses, while 24 per cent were between 25 and 34 and 3 per cent were under 25.
When it came to how much of their job function is devoted to sales promotion, nearly a quarter (24 per cent) said it took up 90 per cent of their time. In total, 57 per cent said it took up half of their time or more.
Three-quarters – 74 per cent – of respondents have a university or college degree. Just under a third (30 per cent) have a qualification of some sort from the Institute of Sales Promotion, while 19 per cent have a post graduate degree, 14 per cent have a Chartered Institute of Marketing qualification and 4 per cent have an MBA.
Four in 10 of the agencies in the survey classify themselves as sales promotion or promotional marketing agencies, with another 22 per cent calling themselves either marketing or marketing communications agencies and 15 per cent integrated. PR agencies accounted for 6 per cent, creative/advertising for 4 per cent, event and experiential for 4 per cent and direct marketing for 3 per cent.
The agencies that responded have an average of 9.4 clients each, although 30 per cent have 20 or more clients and 14 per cent claim to have more than 50 clients.

On average, agencies in the survey have 63.2 employees; 19 per cent claimed to have 100 or more staff and 2 per cent claimed to have more than 1,000.

The agencies that filled in the questionnaire have average annual billings of £5.1 million, although claimed billings range from less than £500,000 (23 per cent of the survey sample) up to £50 million or more (3 per cent).
Geographically, London dominates, with 39 per cent of all the agencies that responded, while the South East excluding London accounts for another 21 per cent. The North West of England is home for 10 per cent of the survey sample, with Yorkshire & Humberside on 7 per cent and then Scotland, the West Midlands, the East Midlands, the South West and East Anglia all on 3 per cent with 2 per cent of agencies based in Northern Ireland and 1 per cent in Wales and the North East of England.
Techniques, channels and industries served.

The agencies that took part in the survey do the majority of their work on the consumer side, which accounts for 64 per cent of all the promotions they do. Business to Business accounts for another 34 per cent, with 2 per cent ‘other’.

As table XX clearly shows, prize promotions of some kind are by far the most popular sales promotion technique, with a massive 78 per cent of all agencies saying they use them.
We have no historic data to compare this figure with, as this is the first survey of this nature that Sales Promotion has run, but logic would suggest that this figure has increased since the start of the recession, since prize promotions tend to be relatively cheap to run and quick to set up (when they involve
relatively low value prizes), so delivering short term sales boosts.
Free items, either collected at the point of purchase or ones that consumers have to send off for, are the next most popular technique, used by 66 per cent of agencies, with loyalty schemes in third place on 64 per cent.

In-house vs outsourcing

Most agencies have been building up their capabilities in online over the past decade, to the extent that today, 67 per cent of the ones that responded to our survey say they perform digital marketing activities in-house. Given that 36 per cent said they outsource these functions, for a total of 103 per cent, suggests that some agencies use both in-house and outsourced resources for certain digital activities.
On mobile marketing, however, the picture is very different. Only 24 per cent say they handle these functions in-house, compared with 39 per cent who say they buy in these services from outside. That suggests that at least 37 per cent of respondents do not use mobile marketing at all, which seems odd, given the technique’s apparent ubiquity.
Door-drop is the other function most often outsourced, with 35 per cent of respondents buying in these services compared with 28 per cent going in-house.

Incentives

When it comes to the incentives that agencies are using to get target audiences to change their behaviour, the most popular is online content (something the consumers can watch on a company or brand website) at 74 per cent, followed by vouchers at 68 per cent and coupons at 56 per cent. Downloadable content comes in at 45 per cent, while traditional merchandise items (clothes, USB memory sticks, clocks, office supplies etc) were used by 42 per cent.

Channels used

Online is used as a distribution channel for sales promotion activity by 82 per cent of the agencies in the survey, with the next most popular channel being direct mail. In-store and experiential both rate highly, racking up 68 per cent and 61 per cent respectively. Mobile is used by just under half the survey sample, at 47 per cent, with door drops on 40 per cent.
But what is much more interesting is what our respondents said when asked what they expect to happen to all the different channels used over the next 12 months – a very short period of time.
A massive 58 per cent said they expect digital to grow significantly, with another 30 per cent expecting it to grow slightly. When it comes to mobile marketing, 38 per cent expect it to grow significantly and another 42 per cent expect it to grow slightly.

The huge increase in the use of digital and mobile marketing channels is probably not going to surprise too many people. Nor will the significant growth expected in the use of experiential and in-store as channels – the ISP has already identified both as key areas for growth this year and next, and has invested much time and effort in developing its expertise and its educational programs in both areas.

Just over a quarter of those in our survey (28 per cent) think experiential will grow significantly, and another 40 per cent expect it to grow slightly. With in-store, 23 per cent of our survey believe it will grow significantly and 38 per cent think it will grow slightly.

General trends

It will come as no surprise to anyone that the current buzz phrase is integration. Just over a third – 36 per cent -- of all respondents strongly agree with the statement that “clients are increasingly asking for an integrated offering that doesn’t just include sales promotion,” with another 38 per cent agreeing ‘somewhat’.