NEWS: ITV report slates effectiveness of price promotions as branding tool

Investing in price promotions instead of above-the-line advertising leads to a quantifiable fall in sales and erosion of market share, according to new research published by ITV.

Investing in price promotions instead of above-the-line advertising

leads to a quantifiable fall in sales and erosion of market share,

according to new research published by ITV.



The findings, which were presented to a meeting of 75 advertisers and

agencies at Bafta this week, form part of a new campaign by ITV to

attract budgets away from below the line and back to TV.



Price promotions have increased significantly over the past three years,

yet the number of consumers buying products because of them remains a

small minority, according to the study, conducted by AGB.



The study analysed three years of AGB Superpanel data for three product

categories - instant coffee, washing powder and yellow fats.



AGB found little evidence to suggest that price promotion had a positive

effect on market share. In fact, fewer ‘deal brands’ gained market share

than ‘non-deal’ brands over the survey period.



Andrew Roberts, the AGB technical director, explained: ‘As price

discounts result in lower gross margins for the manufacturer,

incremental sales must exceed normal sales for a price promotion to

break even.’



Less than one third of the brands studied managed to reach break-even

point with their price promotions, according to the study.



Mick Desmond, chief executive of Laser Sales, commented: ‘The findings

clearly demonstrate that there is no evidence that price promotions are

successful at increasing brand share. In reality, non-deal brands have

been far more effective in increasing brand share and profits. Real

marketing to consumers is key.’



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