Online Promotions Drive Traffic and Sales

In the next two years, brick-and-mortar retailers will start to realize the potential of online promotions in “pulling” traffic and “pushing” products.

Both packaged-goods manufacturers and retailers are beginning to realize that integrated online and offline campaigns with traditional retail partners are likely to be a more effective use of marketing dollars than existing trade investments and underperforming web advertising. There are a number of new online tools that, when integrated with current push and pull marketing approaches, should improve marketing performance.

Ushering in the Interactive Direct Marketing Age

E-promotions are coming of age in virtually all business categories. A wide variety of permutations are evolving in the financial services, media, consumer electronics, and consumer packaged-goods industries. The retail segment will be one of the top three areas crossmedia online promotions will affect.

From 1998 to 2000, consumer packaged-goods manufacturers, retailers, and e-tailers competed, testing a war chest of interactive marketing programs designed to build online brands. Traditional grocery retailers, late in adopting e-business, made it possible for online grocers to take the early lead. However, the direct online grocery models may achieve limited success. META Group predicts that online groceries will expand to reach only 2 percent of total grocery volumes ($9 billion) by 2003 and eventually top out at 15 percent of the total U.S. grocery market volume by 2005.

In the interactive direct marketing age, sophisticated retailers will leverage their “channel power” to redirect OEM marketing dollars to fund and support their online sales and marketing initiatives. Best-in-class retailers and suppliers will adopt “win-win” approaches that balance a joint customer focus, customer ownership, marketing investment allocations, and revenue attribution.

Retailers like Wal-Mart, Kmart, and Target are learning how to leverage e-channels. Retailers and distributors are driving traffic through web sites, building e-brands and leveraging hybrid-selling economics. Consequently, investments dedicated to traditional trade promotions and web advertising programs will soon be shifted to online variations of more familiar push/pull promotional programs with traditional point-of-sale partners.

Over the next several years, OEM marketers with traditional retailers will increasingly use e-coupons, e-samples, and co-op advertising to drive traffic and sales. IMT Strategies predicts that brick-and-mortar retailers, with the help of manufacturers, will win the e-commerce war over dot-coms. Consequently, by 2003, more than 3 percent of the dollars dedicated to trade promotions will find its way to the web. More significantly, customer behavior will dictate that more than 70 percent of all promotional campaigns include an online media component.

Eleven Good Ideas

Among the many tools at the manufacturers’ disposal are 11 strategies that will make a difference. These tools make sense for three reasons: They are a better match with online customer buying behavior; they are more effective than traditional tools alone; and they are a win-win for the manufacturer-retailer partnership.

To demonstrate this point, let’s consider a few of the tools. Consumers are flocking to online promotional sites that reward loyalty such as MyPoints.com, CoolSavings.com, AllAdvantage.com, FreeRide.com, and Cybergold. According to NetValue’s Internet Panel, eight online incentive sites made the top 200 web sites in June 2000.

By contrast, one consumer packaged-goods manufacturer (P&G, #125) and three retailers (Sears, JCPenney, and BlueLight.com) rank among the top 200. Priceline has turned the tables on traditional discounters, demonstrating that customers will significantly shift buying behavior with an innovative reverse-auction model. Maytag provides microsites in support of web marketing initiatives of 1,500 independent dealers, supplying them with content, configuration, and ordering capabilities. Finally, permission email can substitute for direct mail to deliver coupons at much lower costs. It’s been forecast that leading marketers will have in excess of one million ongoing email relationships by 2001.

Planning for the Long Haul

Looking beyond 2003, marketing leadership must develop the plans and infrastructure to accommodate the integration of online-offline promotional delivery. Many of the parts are in the assembly stage. Others are available through external vendors and application service providers that can support the execution of these programs.

Bottom Line

Hybrid distribution models will be the dominant approach for packaged-goods distribution. This will require consumer packaged-goods manufacturers to incorporate interactive direct marketing tools into all push and pull marketing programs focused on supporting the retail (and distribution partner) channel to support hybrid brick-and-mortar business models.

Manufacturers are mandated to identify how traditional push and pull programs will migrate to and integrate with the Internet to remain competitive while reducing the cost of cross-media promotions in an age where customers tend to “follow the sale” in their retail shopping behavior.

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