Simpson_Enhancing Food Promotion in the Supermarket Industry

Enhancing food promotion inthe supermarket industry

A framework for sales promotion success

Lisa S. SimpsonUniversity ofOtago

Increases in trade and consumer promotion, and the introduction (and prevalence) ofstore brands, are all indicators of the importance of sales promotion to both retailers andmanufacturers in the food industry. Recent research has examined more closely theeffects of switching, stockpiling and patterns of consumption of food products on salespromotion use and effectiveness, and has given support to the assertion that the short-term effect of consumer-directed promotions on sales of food is both positive and sub-stantial. Most research into the supermarket industry suggests, however, that retailers andmanufacturers may not be optimising their marketing mix decisions and years of acrimo-nious relationships and distrust have stunted communication, resulting in little to no cor-relation between the goals of each group when using promotion to enhance food productsales. The current study presents a framework for sales promotion success in the super-market industry, based on current theory and analysis of 18 industry cases from withinfood manufacturing and retailing.

Sales promotion in the food retail industry

In the food industry, an increasingly large proportion of retailer and man-ufacturer marketing budgets are allocated to retail sales promotion (Low& Mohr 2000). Some of this increase is attributed to changes in consumerpurchase behaviour, with greater levels of impulse buying and value seek-ing making sales promotion a more effective means of reaching the super-market shopper (Peattie & Peattie 1993). Other explanations for theincrease include the 'snowball effect', where, due to the commonality ofsales promotions among competitors, many firms are forced to follow suitin order to maintain market share (Peattie & Peattie 1995). This increase

International Journal of Advertising, 25(2), pp. 223-245© 2006 Advertising AssociationPublished by the World Advertising Research Center, www.warc.com 223

INTERNATIONAL JOURNAL OE ADVERTISING, 2006, 25(2)

in the use of sales promotion in the food industry gives rise to the ques-tions of what, exactly, are the benefits of using sales promotion in foodretail and how these benefits differ for manufacturers and retailers.

Research has shown that the majority of supermarket purchases areunplanned, and that unexpected situational factors have a major infiuenceon food purchase decisions (Narhinen et al. 2000). Sales promotion allowsmanufacturers of grocery products to differentiate their products fromthose of their competitors (Kahn & McAlister 1997), as well as createfavourable brand image associations with the consumer (Matteson 1993)and provide support for other aspects of their marketing mix (Peattie &Peattie 1993). However, competitive pressures are great in the food indus-try, with retailers pushed to develop a low price image and short-term salesincreases, and manufacturers to support their strategy for brand building(Mohr & Low 1993). The major objectives of retailers tend to be increas-ing purchasing (Ailawadi 1998), moving large volumes of stock quickly(Mohr & Low 1993) and increasing profits (Low & Mohr 2000).Manufacturers, on the other hand, wish to secure brand trial and repeatpurchase, generate publicity (Williams 1984), create brand awareness,introduce new products or services (Matteson 1993), secure retail shelfspace and increase sales and market share long term (Mohr & Low 1993).

This paper posits a framework for sales promotion success in the super-market food industry, developed from current theory and analysis of 18industry cases throughout food product manufacturing and retailinggroups in Singapore, Malaysia and New Zealand. The framework is usedto form a set of guidelines for sales promotion choice in an internationalcontext for manufacturers of food products, and the theoretical implica-tions of the research are discussed in relation to proposed future researchin this area.

Drivers of sales promotion success

Retailers are said to hold the balance of power in the supermarket indus-try, and manufacturers need to choose sales promotion tools that fit theshort-term objectives of increasingly demanding retailers. At the sametime, manufacturers face the challenge of meeting their own, longer-term,promotion objectives. Current theory tells us that a number of interrelatedfactors, including promotion tool preferences, national culture, and social.

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ENHANCING EOOD PROMOTION IN THE SUPERMARKET INDUSTRY

legal and political factors, as well as issues such as power and negotiationin the retailer-manufacturer relationship, will all impact on the success ofa sales promotion programme. The difficulty for manufacturers and retail-ers alike is that the majority of these factors have been studied independ-ently, and a coherent system for sales promotion decision making islacking. This study attempts to address this gap for manufacturers of foodproducts specifically, developing a set of propositions that are explored inthe context of industry cases from throughout the supermarket industryinternationally. An initial framework for sales promotion effectiveness inthe supermarket industry has been developed by integrating a number ofaspects of current theory, focusing specifically on four key drivers of success:(1) the nature of the local market; (2) channel member strategy and objec-tives; (3) partner relationships and cooperation; and (4) expertise in imple-mentation (Figure 1).

Figure 1: Framework for manufacturer-driven sales promotion (SP) success

Supportmechanisms

[P4a]

Retailerexpertise

IP4b]

Nature oflocal

market[PI]

>•

r

^ ' ^

SP objectivesand strategy

IP21

•

^

•.

Nature ofindustry

L. J

Note: PI-4b refer to planning guidelinesfor manufacturers (see Rgure 2)

Choice ofSP tooi

Acceptance of tooiby retail partner

[P3]

Success of SP

Retailpartner SPobjectives

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Nature of the local market

Internationalisation of the food industry has led to suggestions that mar-keters need a better understanding of cross-cultural issues and their effect(Gong 2003), and that national culture frameworks can be used to developmarketing theories that are suited to a particular country (e.g. Steenkamp2001). An understanding of cross-cultural effects is particularly empha-sised in relation to Western versus Asian countries, where Confucian cul-tural values are said still to have a profound infiuence (Gong 2003).However, other research suggests that in today's globalised environment,it is appropriate, while still considering the effect of culture on marketingpractices to some extent, to target consumers in a similar manner(Lindridge & Dibb 2003). Combined with the claim that some sales pro-motion techniques (such as price discounting) are inherently suited to thesupermarket industry, irrespective of customer differences (e.g. Kahn &McAlister 1997), one could suggest that consideration of culture is of onlysecondary importance in predetermining the success of sales promotions.Instead, industry-related factors such as current practice and consumerexposure to a range of techniques may indeed have a greater impact on thelikelihood of effective implementation of a sales promotion programme.This leads to Proposition 1:

P I : Sales promotion strategy will be modified according to issues suchas market development and industry norms rather than culturalelements.

Sales promotion strategy and objectives

Retailers, due to their on-site interactions with consumers, are predictedto be more aware of consumer interest in, and preference for, differentsales promotion methods than manufacturers in the food industry. Thusretailers are said to be more likely to predict shifts in consumer purchas-ing behaviour and will base most of their sales promotion objectives onthis (Kahn & McAlister 1997). Manufacturers, on the other hand, are saidto focus on restrictions on the promotion of food products in foreign coun-tries, based on aspects of law, social policy and religion (Terpstra & Sarathy2000), attempting to balance international promotion decisions to meet

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these requirements, while still fulfilling their own promotional objectives.Despite this, planning of sales promotions within the food industry hasbeen generally regarded as ineffective (Stewart & Gallen 1998) and manysales promotion plans are seen to be underachieving when it comes toreaching overall promotional goals (Kasulis et al. 1999).

When a manufacturer designs a sales promotion programme for useinternationally, three key factors need to be considered at the planningstage: (1) the extent to which a sales promotion accomplishes various mar-keting objectives; (2) the interaction of the sales promotion method cho-sen with existing marketing strategy variables; (3) the legality andlimitations of particular methods in certain situations (Foxman etal. 1988).Despite this, Schultz's (1990) early criticism of sales promotion planning,that most managers tend to implement a large number of sales promotions(regardless of waste) in the hope that at least one will reach the right tar-get market, stills appears to hold true. This approach is seen in the foodindustry to be easier, faster and requiring less effort than spending timeplanning to ensure trial and repurchase of products, and reaching new andexisting customers effectively.

It has long been recognised, however, that the creative differencesbetween sales promotions and advertising are sufficiently great that,unlike advertising, sales promotions should be driven almost solely by theplanning process (Flanagan 1988). However, issues such as 'ineffectiveplanning implementation, and evaluation process', evolved over recentdecades, have become a driver of sales promotion choices, rather than ade-quate consideration of the merits of the different tools themselves(Stewart & Gallen 1998, p. 559). A more functional, marketing mix-orientated focus to sales promotion planning would allow change in thefood industry such as using value-adding techniques more effectively, andcould precipitate a move away from price-based techniques as the 'catch-all' of food retail promotion.

Essentially, food product manufacturers should be concerned withimplementing consumer franchise-building promotions, such as rewardprogrammes, and limiting the number of price-based sales promotionsthey use, sticking to necessary trade-based allowances and the like(Stewart & Gallen 1998). However, the fact that sales promotion objec-tives are often not well defined by manufacturers and retailers, and thatthe different parties' sets of objectives are not generally well aligned

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(e.g. Mohr & Low 1993) suggests, despite considerations for promotionalplanning being clear, that food retailers and manufacturers are still strug-gling with setting appropriate joint objectives. Further to this, the strengthof retailer focus on the short term has decomposed sales promotion use inthe food industry into 'brand-switching, stockpiling and increased con-sumption' objectives (Ailawadi 2001). Manufacturer resistance to thisshort-term focus does not appear to have prompted a move towards co-cre-ation of joint-value promotional programmes, rather a breakdown in com-munication to the point where manufacturers base initial programmedecisions on their individual objectives, giving in to retailer objectiveswhen resistance is shown. Thus:

P2: Sales promotion programmes are initially based on individualobjectives, rather than co-created for mutual benefit from the out-set.

Channel partner relationships

Kasulis etal. (1999) suggest that promotion works best as part of an over-all channel management strategy, based on accurate perceptions of bothmarket power and the relative power of the channel participants. Foodretailing channel structures are typically characterised by factors such asincreased store sizes and retailer concentration, growth in the importanceof house brands, consumer demand for one-stop shopping and greateraccess to a variety of electronic point-of-sale information (Hogarth-Scott1999). These factors have given rise to a shift in channel power away fromthe manufacturer, and highlight threats such as 'de-listing and reduced orless than optimum shelf space' (Hogarth-Scott 1999, p. 669).

The power balance will naturally influence levels of confiict within thechannel relationship, and thus the extent to which one channel membercan force its demands onto another (Song et al. 2000; Duarte & Davies2003; Vaaland & Hakansson 2003; Wootten 2003). As noted in the previ-ous section, in the supermarket industry, manufacturers are often forcedby very powerful retailers to enter into sales promotions that may not fitwith their own strategy and objectives (Kahn & McAlister 1997). In addi-tion, when trust between channel members is low, the likelihood of strate-gic cooperation of the two firms is reduced. Unequal division of power can

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lead to a breakdown in trust between channel members, reducing the like-lihood of goal congruity being achieved. Confiicting sales promotionstrategies are thus common in the food retail industry, such as a long-termorientation in one channel member versus a short-term orientation inanother (Barclay & Smith 1997) and the objectives of one channel partnerare often traded off for the objectives of the partner that holds the balanceof power. Thus:

P3 : Objectives of manufacturers are traded off for retailer objectivesin situations of unequal power distribution.

Cooperation and expertise

Unequal power relationships in the food industry can become increasinglyadversarial, with manufacturers pressured to provide sales promotionallowances that do not always fit with their strategy for building brandvalue (Mohr & Low 1993), thus the manufacturer may tend to use the pro-motional budget less and less for strategic marketing, and come to con-sider sales promotion a 'necessary evil'. When implementing a salespromotion programme, manufacturers generally require the cooperation ofthe retailer in placing point-of-sale materials, allocating signage that high-lights price discounts, dealing with coupons and maintaining product dis-plays (Lehmann & Winer 2002). Where a large proportion of amanufacturer's marketing budget goes into providing retailers with thesesales promotion materials, there is no guarantee that they will be usedeffectively by the retailer, if at all (Murry & Heide 1998). Often, sales pro-motion materials are seen by the retailer to be a nuisance, or to take up toomuch retail space and, as a consequence, a large proportion of manufac-turer-supplied point-of-purchase materials are never used (Shutt 1995,cited in Murry & Heide 1998).

While manufacturers are said frequently to succeed in obtaining agree-ments from retailers to participate in promotional programmes, a key prob-lem associated with this is that retailers often fail to follow up on theoriginal promotion agreement due either to a lack of skilled staff in thisarea or a lack of time and resources to properly administer the programme.Negative experiences of retailers with inadequately supported sales pro-motions can result in a reluctance to promote in a similar way in the future

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or, worse, a reluctance to provide extra promotional space to a particularmanufacturer. When a large number of consumer purchase decisions inthe supermarket are effectively unplanned and made on impulse, it isimportant that manufacturers develop a good working relationship withthe management of the supermarket (Narhinen ei al. 2000). In a marketsuch as this, where consumers tend to exhibit little brand loyalty, foodmanufacturers must ensure that they do not lose precious retail space to acompeting brand that provides more support in terms of sales promotion(Narhinen etal. 2000; Lehmann & Winer 2002). A key way of ensuring thesuccess of a promotional programme, and building a good promotion rela-tionship with a retailer is thus to ensure they are well supported in main-taining the promotion and that the goals of the programme are achievable(given retailer resources, skills and experience with sales promotion) andclearly presented as beneficial for both channel members (Murry & Heide1998). Thus:

P4a: Retailer acceptance of a sales promotion programme will be mod-erated by the level of support provided by the manufacturer.

P4b: The overall success of a sales promotion programme will be mod-erated by retailer expertise in dealing with promotions of thattype.

Methodology

The propositions developed in relation to the literature-based model(Figure 1) were used as themes to inform the data collection throughoutthe research process (refer to Table 1 for specific themes). Questions relat-ing to each proposition (or theme) were developed as part of the interviewprotocols and supporting evidence examined in the context of these fourthemes. Data were collected in New Zealand, Singapore and Malaysia,consisting of in-depth interviews, retail observation, and collation of indus-try and firm materials, including corporate reports and promotional plan-ning documents. The three countries used in this research were chosen toprovide information richness, as one Western country (New Zealand) witha medium level of economic advancement is contrasted with and com-pared to two Asian countries, one with a relatively advanced economy(Singapore) and one with a slower-growing economy (Malaysia).

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In his Study of the personal value systems of managers. Tan (2002)chose the People's Republic of China (PRC) and the United States ofAmerica (USA) to represent ideological opposites and cultural extremes interms of Western and Eastern beliefs, religious philosophies and social val-ues (i.e. at opposite ends of the cultural spectrum). Singapore was there-fore chosen as the comparison country as its 'socioeconomic, political, andeducational systems are more similar to [those of] the USA' but its heritageand culture are more similar to those of the PRC (Tan 2002, p. 817).Similarly, this study places New Zealand at the opposite end of the cul-tural spectrum to Malaysia, and uses Singapore as the comparison countrydue to its cultural links with Malaysia and socio-economic, political andeducational similarities to New Zealand.

The research design adopted a case-study approach, with three generalcases (the New Zealand, Singaporean and Malaysian supermarket retailindustries) made up of two embedded cases each (retailers and manufac-turers operating within each country). The research design for the in-depth interviews included four clusters of interviewees (local retailers,local manufacturers, multinational retailers and multinational manufactur-ers), and 18 research interviews were conducted with 24 employees par-ticipating from within the 18 firms. Observation studies were also includedas a method of data collection in this study - first, to enable the researcherto become familiarised with the industry setting and, second, as a meansof providing comparison between interview data and observed trends, aswell as overall triangulation of literature, interview data and observationaldata. A total of 16 retail sites in each country were observed twice (oneweekday observation, one weekend), resulting in 96 separate observationpro-formas, where both the use of different sales promotion techniquesand the frequency of that use was recorded. The retail sites included inthe observation studies were chosen on the basis of a convenience sample,although efforts were made to include examples of each major supermar-ket chain operating in the individual countries combined with a range oflocal and multinational, urban and suburban, and different-sized stores.

Data gathered from in-depth interviews were subject to a content analy-sis procedure in order to identify emergent themes and patterns amonginterviewee responses. The researcher and a peer coder familiar with thecontent analysis procedure performed the content analysis. Measures weretaken to ensure reliability and validity in the analysis, including calculation

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of percentage match and agreement coefficients for each set of codingcompleted (Krippendorf 1980). As the research was qualitative in nature(and thus large volumes of interview text were coded), summary percent-ages of thematic match of individual respondent comments are given inTable 1 to highlight levels of support for each proposition.

Table 1: Summary table of support for propositions

Proposition PI: / Supported

Sales promotion strategy will be modified according to issues such as market development and industry norms

rather than cultural elements.

Comments reiated to issue:% comments regarding culture and

strategy that fit theme

NZ

Manufacturers 89%

Retailers 100%

Singapore

Manufacturers 89%

Retailers 100%

iVIalaysia

Manufacturers 89%

Retailers 100%

(Theme: Culture does not have an impact strategy based on industry

nature and level of market development)

Proposition P2: / Supported

Sales promotion programmes are initially based on individual objectives, rather than co-created for mutual benefit

from the outset.

Comments reiated to issue:% comments regarding objectives of salespromotion programmes that fit theme

NZ

Manufacturers 88%

Retailers 50%

Singapore

Manufacturers 100%

Retailers 33%

Maiaysia

Manufacturers 100%

Retailers 50%

(Theme: Giving individual objectives as reasons for using sales pro-

motion programmes)

'Remaining % all related to perceived customer demands, not joint

objectives or consideration of channel partner objectives.

% comments related to specific industrymember objectives

NZManufacturers 67%

Retailers 92%

Singapore

Manufacturers 30%

Retailers 100%

iVIaiaysia

Manufacturers 60%

Retailers 60%

(Theme: Specific retail objectives, specific manufacturer objectives)

'Singaporean manufacturers qualified their statement of only 30%

specific manufacturer objectives by noting that although this was an

uncomfortable compromise, high competition combined with govern-

ment control of retail outlets made it necessary. However, these

respondents also noted that the benefits retailers receive (or mutual

benefits for that matter) were not considered when developing these

programmes.

(continued)

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Table 1: Summary table of support for propositions (continued)

I Proposition P3: / Supported

Objectives of manufacturers are traded off for retailer objectives in situations of unequal power distribution.

Comments reiated to issue:% comments made by manufacturersregarding power distribution in thechannel relationship

NZ

76%Singapore

55% 54%

(Theme: Retailer power results in their objectives taking priority over

manufacturer objectives)

% comments made regarding perceptionsof conflict in the channel relationship

NZ

Manufacturers 85%

Retailers 27%

Singapore

Manufacturers 56%

Retailers 35%

Maiaysia

Manufacturers 100%

Retailers 54%

(Theme: High levels of conflict perceived in the channel relationship)

'Retailers' limited perception of conflict in the channel further

reinforces the proposition that they, due to unequal power

distribution, more often 'win' channel struggles over sales

promotion.

Proposition P4a: • Supported

Retailer acceptance of sales promotion programme will be moderated by level of support provided by

manufacturer.

Proposition P4b: • Supported

Overall success of sales promotion programme will be moderated by retailer expertise in dealing with promotions

of that type.

Comments reiated to issue:% comments regarding the success of dif-ferent sales promotion tool types

NZ

Retailers 71%

Singapore

Retailers 100%

i\1aiaysia

Retailers 75%

(Theme: Simple, mass selling techniques used before are most useful

and successful)

Retailers 29%' Retailers 0%' Retailers 25%'

(Theme: Complex new/unused techniques most useful and

successful)

'Retailers in NZ and Malaysia note that these techniques have been

useful and successful in a few instances as they were particularly

weil supported by manufacturers. Singaporean retailers noted that

due to a complete perceived lack of support from manufacturers,

none of these techniques has been successful to date, although they

did believe that there was potential for success with these

techniques if the support was improved.

Note: Comments drawn from transcriptions of 1-2-hour depth inten/iews with 24 representatives of 18 firms.

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In addition, specific comments that serve to illustrate particular pointsrelevant to the development of the resultant industry guidelines are giventhroughout the results section of this paper. Observational data were sub-ject to simple proportion and frequency calculations, as were supportingindustry data gathered from evidential materials such as company reportsand sales promotion plans.

Interviewee selection was based on a number of criteria. For food man-ufacturing firms the criteria were:

• food product category in which they operate• level of experience within the food industry• access to interviewees in a number of key roles within the firm• level of involvement with retail.

Essentially, those manufacturing interviewees included in the studyeither currently operated in the same product category, or had done so inthe recent past, and had a high level of experience within the food prod-uct industry (had generally worked in that industry for ten years or more).Additionally, interviewees represented a wide range of roles within themanufacturing firms represented. For example, interviewees from onemanufacturing firm included the trade service manager, responsible foroverseeing and approving sales promotion deals, the key account execu-tive, who negotiates with supermarkets directly, and the business devel-opment representative, who is responsible for evaluating the relativesuccess of sales promotions applied in the supermarket industry.

Retailing firms (and retail interviewees) were also chosen to fulfil anumber of criteria, albeit less detailed than the manufacturer selection cri-teria. These criteria were namely that:

• all major supermarket retail firms in each country were included in thesample

• firms from different regional areas were included to account for anypotential differences

• interviewees were (or had been) directly involved in the negotiationprocess for sales promotions with manufacturers and, in cases wheresales promotion decisions were mainly made by head office, had a thor-ough understanding of this process (through the dissemination of firmsales promotion activity reports).

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Results and implications of the framework

Table 1 summarises support for the propositions drawn from the in-depthinterviews conducted as part of this research. Support for each propositionby retailers and manufacturers in each of the three countries examined areshown as percentages of comments that specifically related to that propo-sition or theme, with more detailed discussion of individual areas of impor-tance to follow.

International application of sales promotion

The general view of both retail and manufacturing interviewees was thatnational culture had little to no effect on the sales promotion methods theychose. This was supported in other results drawn from the study, wherefew inter-country differences were observed in terms of both the sales pro-motion methods actually used in-store and the techniques perceived assuccessful by retailers and manufacturers. Legal restrictions were not seento infiuence the use of retail sales promotion greatly either, although thesewere regarded as more likely to have an effect than culture. A few restric-tions specific to sales promotion were named in each country studied,although they tended to be related to the product type rather than theactual method of promotion. Instead, two main factors that infiuenced theuse and success of retail sales promotions, specifically level of marketdevelopment and industry or channel structure, were strongly empha-sised, with 'the strength of the trade in each market' (NZ manufacturer B(NZMB)) and 'state of market development' (Singapore manufacturer A(SMA)) noted as far more important than cultural considerations. This sug-gests that, where sales promotion methods are applied in an internationalcontext, consideration of these factors should play a major role in sales pro-motion planning and choice, and reinforces PI, that strategy is more likelyto be modified according to issues such as market development and indus-try norms than by cultural elements.

Overall, level of market development and industry structure had thegreatest effect on value-added promotion methods and, the more complexthe retail sales promotion technique, the more it should be aligned withthe stage of development of the market and the actual structure of theindustry considered in order for it to be successful. For example, in

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Malaysia, where the grocery market is still considered to be an emergingsector and hypermarket retailing is tending to dominate the industry(given the relatively low economic independence of many consumers),value-added promotions such as loyalty schemes were perceived as impor-tant. This was because they required little effort on the part of theconsumer outside of presenting a swipe card each time they shopped, andoffered rewards such as free products or discounts (or even cashincentives).

The New Zealand supermarket industry, on the other hand, is domi-nated by two federating bodies; each controls approximately half the dif-ferent supermarket chains operating in the country. This results in asituation where manufacturers negotiate not only with supermarkets indi-vidually, but also with their controlling body, effectively resulting in twosets of promotional initiatives per store and many cross-overs betweenstores in terms of their promotions. This means that value-added retailsales promotions should be used here to provide a level of differentiationbetween stores or chains, aside from the identical (generally price-based)promotions used throughout all stores under each federating body.

The mix of multinational retailers and the government-controlled localsupermarket chain in Singapore results in an interesting grocery industrystructure, where the power of the local chain causes competitors to reactaggressively in differentiating their brands. In addition, the industry ishighly developed and Singaporeans are relatively sophisticated consumersin a market crowded with sales promotion activity. Singaporean intervie-wees highlighted the overuse of some sales promotion tools in the market(e.g. loyalty schemes) but highlighted key social issues with which pro-motional programmes could be linked, such as the growing interest in per-sonal health and children's nutrition. The challenge in this markettherefore is to provide a sales promotion mix that not only creates excite-ment among consumers, but also develops the brand image of productsand appeals to the social conscience of consumers.

Providing retailers with evidence of an understanding of the local mar-ket, and sound reasons why (or why not) particular sales promotion tech-niques are best suited to that market, is more likely to result in anenhanced relationship between the partners and subsequently betterimplementation of the sales promotion programme itself. In emergingmarkets, with relatively low economic independence of consumers, sales

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promotion tools such as loyalty schemes and free gifts/premiums are likelyto be more successful than other value-added tools. In highly competitivemarkets, with one or two strong retail players, value-added promotions canbe used effectively to differentiate between stores/chains, thus resulting inmore successful spend of sales promotion dollars than straight price dis-counting, and in highly developed, aggressive markets, sales promotionsthat develop the brand image of products or appeal to the social con-science of consumers are more likely to be successful in reaching con-sumers in a market crowded with price-based sales promotion activity.

Channel relationships, strategies and objectives

In the supermarket industry, retailers are likely to hold the greatestamount of power in the relationship and often demand that other channelmembers use their particular sales promotion methods, regardless of oth-ers' (e.g. manufacturers') objectives. Both P2 and P3 were supported bythe sample, with manufacturers tending to design a promotional pro-gramme that meets their specific needs, then modifying it on the basis ofresistance from retailers when it comes to actual implementation in store.Retailers note that their 'main aim is to have items moving fast - to havea high and quick turnover' (Malaysian retailer D (MRD)), but manufac-turers tend to feel frustrated by this perspective, arguing that 'discountingdozens of [products] doesn't actually help anyone ... all that means is thatyou buy your product this week instead of next week ... you don't buythem next week though' (NZMA). However, the reality is that '[retailers']objectives are all different from one another and that of [the manufac-turer's brand]' (MMA), and many manufacturers feel that their objectives'get pounded into the ground by an aggressive, savvy, smart grocery man-ager' (NZMA). Retailer response to this was to suggest that manufacturersmade no effort to understand their needs and that, in terms of sales pro-motion programmes, 'what's offered is not always suitable' (NZRC2).

Overall, retailers were perceived by manufacturers included in thisstudy as far stronger in terms of decision making in the relationship, andmanufacturers tended to feel they were unable to push any of their ownpromotion objectives or preferences in the current industry situation.Complaints such as 'one of the things we are constantly battling is theretailers' perception that the product is a commodity, not a category, allowing

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them to trade off suppliers' (NZMA) and 'It is always difficult to negoti-ate a lower purchase price from the manufacturer' (MRB) were common.Both parties felt that the other did not properly understand their needs interms of sales promotion, yet the retailers showed openness to a morecooperative alliance in terms of sales promotion planning, making com-ments such as 'at the end of the day we're both in business and they'llhold my hand and I'll hold their hand and let's both make money together'(NZRC2).

It was also suggested that consumers are becoming less responsive toretail sales promotion techniques such as price discounting, where everyaisle is filled with 'special price' tickets for products discounted by onlyminimal amounts. This highlights the need for change in the relationshipbetween retailers and manufacturers, regardless of power bases within thechannel. In order to continue to grow within the competitive supermarketindustry, both parties will need to work towards a better understanding ofhow to create sales promotion techniques that not only meet their ownobjectives, but interest and excite consumers, effectively 'standing outfrom the crowd'. Channel issues such as this were generic to all threecountries included in the research.

Implementation

Although manufacturers indicated they are more likely to prefer value-added sales promotion techniques (e.g. sampling and demonstrations, andfree gifts or premiums), price-based techniques (preferred by retailers)were in fact used most often in the retail environment. Convincing retail-ers that using value-added techniques (if properly managed) could resultin a win-win situation for both parties, was therefore one of the biggestproblems manufacturers indicated they faced in designing sales promotionprogrammes. Manufacturers tended to believe that using value-addedtechniques would improve their own profits (unlike the reduced-marginsituation they face with price discounting), as well as improving the prof-its of retailers through stronger manufacturer support for the promotion.They suggested that, while they do provide the sales promotions thatretailers demand, they were not interested in supporting such promotionsas they did not fit with their overall objectives. Interestingly, retailers'main complaint regarding the relationship was the lack of support they

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received with respect to implementing sales promotion programmes instore. This suggests potential for compromise, were manufacturers to pro-vide retailers with concrete evidence that they would strongly supportvalue-added campaigns, and work to meet both parties' objectives, andsupports both P4a and P4b.

Choosing the right sales promotion tools

Tools best suited to the grocery product sales environment appear to beprice based or linked to price reductions (i.e. price discounting, coupons,discount-linked point-of-purchase or end-of-aisle displays, combinationand volume offers) (see Table 2), which meet retailers' shorter-term objec-tives but not manufacturers' longer-term ones. The difficulty faced bymanufacturers, then, is aligning their sales promotion objectives with thetools that are best able to achieve results in the supermarket environment.

When value-added tools are considered, only sampling and demonstra-tions seem to be inherently suitable for the promotion of food productsacross the entire supermarket industry. However, some differences are

Table 2: Summary of perceptions of successful

Successful toois

Mass selling/simple (price discounts, coupons, P-o-P displays,

free gifts, combination and volume offers)

Personal selling/complex (sampling, demonstrations,

loyalty schemes, competitions)

Unsuccessfui toois

Mass selling/simple (price discounts, coupons, P-o-P displays,

free gifts, combination and volume offers)

Personal seliing/compiex (sampling, demonstrations,

loyalty schemes, competitions)

Note: • denotes majority agreement.

VS unsuccessful

New Zeaiand

Ret

aiie

rs

Man

ufa

ctu

rers

/ •

•

past promotions

Singapore

Ret

aiie

rs

Man

ufa

ctu

rers

•

MaiaysiaR

etai

iers

Man

ufa

ctu

rers

•

•

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evident as to the suitability of other value-added tools across the differentcountries studied. Competitions and sweepstakes, for example, are usedwith a medium degree of frequency in a high number of supermarketsthroughout Singapore and New Zealand, yet are unlikely to be used at allin Malaysia. In addition, despite their high use, competitions and sweep-stakes seemed to be ineffective in New Zealand, regardless of the prizeoffered. In Singapore, however, effectiveness of this method was directlyrelated to the prize itself, with cash and shopping vouchers preferred overthings such as foreign holidays.

Results such as this suggest that manufacturers need to be fiexibleenough to use a combination of both price-based and value-added salespromotion types. For manufacturers operating internationally, tools inher-ently suited to the supermarket industry itself (such as price discounting,discount-linked point-of-purchase or end-of-aisle displays, combinationand volume offers, sampling and demonstrations) can be used globally,whereas value-added tools should be localised to give the best result ineach national market. One of the core issues here, however, is convincingretailers to accept this promotional mix, given their apparent existing pref-erence for mainly price-based tools.

Enhancing sales promotion success overall

The relationship between channel members, while traditionally seen asadversarial, can be fundamentally improved if each party understandswhere the other can offer expert opinion in terms of the issues raisedabove. Manufacturers, for example, may have experience with a success-ful sales promotion type previously unused by a particular retailer, orretailers may be able to offer advice regarding consumer reaction in-storeto particular tools. Consideration of the other party in terms of their needsand their expertise in either an industry or local market can enhance theretailer-manufacturer relationship to a point where there is a joint focusbetween channel members on the success of individual sales promotionsrather than an individual focus on personal objectives and ease of imple-mentation.

Manufacturers have often been pressured to provide sales promotionsthat fit the demands of retailers, yet do not meet their own marketingobjectives. This has resulted in decreased levels of optimisation of sales

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Figure 2: Sales promotion planning guidelines for food manufacturers

1. Define objectives

1 a. Evaluate ownobjectives• Are they achievable

through SP?

1b. Predict retail partnerobjectives• Compare with own

objectives• Attempt to understand

motives

1 c. Identify synergies• Between channel

partner objectives

w

2. Pianning and choice

2a. Identify SP tools inherentlysuited to your industry

2b. Identify SP techniquesinherently suited to the localmarket

2c. Match different SP tools withobjectives of both channelpartners

2d. Don't present retail partnerwith just an SP plan• Present evidence of

effectiveness of SP tool chosenand relationship to retailerobjectives

t k

W

4. Measurement and feedback

Observe differences in industry structure between countries• What is the effect on use and success of different tools?

Observe differences in levels of market development• What is the effect on use and success of these toois?

3. Channei reiationship

3a. Identify merchandisingsupport needed forindividual tools early• Make expectations

clear* Identify support you

will provide in return

3b. Recognise thatretailers are experts• Utilise their experience,

particularly ininternational markets

promotion use and limited commitment on the part of the manufacturerto support these sales promotion initiatives. Additionally, many manufac-turers are faced with promoting their products through a number of dif-ferent countries and need to design sales promotion programmes that arelikely to achieve the best results in each individual market. Figure 2 there-fore provides manufacturers with a number of guidelines for using retailsales promotion and optimising the success of their promotional pro-grammes within the supermarket retail environment.

Conclusions

Studies of sales promotion over the years have tended to be narrow infocus, emphasising one particular tool (generally price discounting) andcomparing the usefulness of the technique with advertising, for example.

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However, challenges faced in the food industry, such as increased compe-tition, decreased product life cycles, rising prices and advertising clutter,have led to a growth in the importance of sales promotion as part of themarketing mix. The challenge for sales promotion researchers, therefore,is to move the area forward from its mainly descriptive beginnings, con-duct empirical research in the area and widen the focus of research toinclude factors not previously studied.

One of the main conclusions of this study is that channel issues such astrust and the sharing of objectives are vital to the successful use of salespromotions in the supermarket retail environment. Relationship market-ing techniques could be used by channel members to achieve alignmentof sales promotion goals and to maximise the efficiency and effectivenessof chosen techniques. This would allow channel members with limitedpower a greater chance of developing sales promotion programmes fromwhich they benefit as well, instead of the current situation of engaging insales promotions that the more powerful channel member has demanded.

Much research in the area of sales promotion has tended to focus onissues that have been seen to have an effect on other marketing tech-niques, particularly advertising. For example, culture has been shown togreatly infiuence the way individuals perceive and react to advertisingmessages (e.g. Cutler et al. 2000; Nikerson & Hoeken 2003). Often, theassumption has been made that the effect on sales promotion will be sim-ilar, despite little research specific to this area. This study leads one to con-clude that the effect of culture on sales promotion is in fact not similar, andthat the effect of culture on this particular group of marketing techniquesis likely to be less than that on advertising.

It has been proposed that, as communication is intrinsically culturebound, effective marketing depends on the sender and receiver obtainingthe same meaning from any one communication and thus sales promotionstrategy should take into account cultural differences (Foxman etal. 1988).Sales promotion, however, is more transactional in its orientation, thus onecan counter-propose that the effect of culture on sales promotion will beless, and that functional aspects of the channel (such as industry structureand market development) will have far more importance in determiningthe success of a sales promotion programme. The messages inherent insimple, price-based sales promotions are designed to stimulate immediatepurchase, rather than using psychological appeal cues to inform or persuade

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the customer to favour a particular company or brand. The research pre-sented here supports this, as it indicates that, despite differences innational culture, some price-based promotion techniques work to stimu-late product sales in all three countries studied.

The current study has provided a foundation for moving sales promo-tion research forward by identifying key areas for future research.Specifically, the results of this research have indicated a need for the link-ing of sales promotion back to the basic theoretical constructs of market-ing, as opposed to the current prescriptive nature of much sales promotionresearch. Further to this, empirical research can be carried out to furthertest the propositions developed as part of this study, regarding the effectof various factors on the success of sales promotion (channel relationships,level of market development and industry structure). In addition, thisstudy highlights a need to re-evaluate the effect that the transactionalnature of sales promotion has on its use in the supermarket industry.Future studies should be aimed at better aligning channel member objec-tives and better understanding consumer response to sales promotiontechniques (rather than simply describing sales spikes and makingassumptions based on these) in order to ensure that sales promotion isachieving the right results in the fast-growing supermarket industry inwhich it is predominantly used.

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About the author

Dr Lisa Simpson is a lecturer in marketing at the University of Otago,teaching postgraduate research methods. Lisa's primary research interestsinclude research methods, product and brand marketing, advertising andpromotion, retail sales promotion of fmcg and channel management.

Address correspondence to Dr Lisa S. Simpson, Department ofMarketing, School of Business, University of Otago, PO Box 56, Dunedin9001, New Zealand

Email [email protected]

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Simpson_Enhancing Food Promotion in the Supermarket Industry