Sales promotion in multinational companies has traditionally been a local affair. Although global marketing is influencing traditional decision making in areas such as product line, branding, pricing, and advertising, it has had little influence on sales promotion. The rest, including consumer and trade promotions, became the domain of the company’s country operations around the world.
The outcome: reduced brand profitability, contradictory brand communication, and a serious potential for dilution of brand franchises with consumers. Today Nestle is trying to put some central direction back into its worldwide communication practices, including sales promotion. Management is painfully aware of the damage “brand management by calculators” and “commodity promotion” can do to its international brands and their long-term profitability. Laissez-faire in sales promotion is no longer considered a virtue at Nestle.
For some global brands, the importance of promotion in the marketing mix varies dramatically from one country to another. Table 1 illustrates the divergent marketing strategies applied to one consumer packaged goods brand in five countries during 1987.
Finally, we will make recommendations for strengthening management policy toward sales promotion.
PROMOTION: A HEADQUARTERS CONCERN
Nestle’s uneasiness over the impact of local action on its international brands is just one reason why sales promotions are increasingly becoming a headquarters concern for MNCs. The cost of sales promotion has risen worldwide. Global Branding. The visible trend toward establishing uniform brand personalities internationally implies some degree of consistency in brand communication, including sales promotion. Transnational Trade. As a consequence, sales promotion, especially trade promotion, will have to become more multinational in tone and coverage.
PROMOTION: A LOCAL ACTIVITY
Although the above factors are working to make sales promotion of increasing concern to headquarters, it still remains primarily a local activity. After all, sales promotion is about motivating local consumers and members of the trade to act–to try the product, repurchase it, buy more, switch brands, and so forth. Market Maturity
Although tools to promote consumer trial (sampling, full-value couponing, and cross promotion with established products and brands) might be appropriate for countries in the early phase, more emphasis on other promotional vehicles (trade allowances and consumer promotions designed to reinforce consumer loyalty) might be more effective in the more mature markets. The lesson for international sales promoters: check local perceptions toward particular types of promotion before transferring promotional ideas internationally.
Laws pertaining to sales-promotion activities differ widely across countries. In Germany, only full-value coupons may be used in consumer promotions. Trade Structure
Local trade structures influence sales promotions. Also, store facilities differ from country to country. There are still good reasons for leaving sales promotion primarily in the hands of local management. To draw the line for the role of headquarters in local sales promotion, one needs to distinguish among local, regional, and global brands. * At one extreme are the local brands that do not need international coordination. * Between local and global brands are regional brands, such as Polaroid’s “Image System,” which is the company’s European brand for its cameras and accessories introduced elsewhere under the “Spectra System” brand. We believe the role of the center vis-a-vis local management in sales promotion decisions should closely reflect a brand’s geographical equity and communication objectives. Broadly speaking, the center’s influence should be at its minimum for local brands and at its maximum for global brands. Global Brands
A promotional strategy statement may include guidelines on the relative emphasis on sales promotion versus media advertising in the overall communication budget, the relative weight of consumer and trade promotions, and the appropriate role of price deals versus value-added offers in the promotion mix. Whereas the center decides the appropriate promotional strategy for global brands, its implementation is best left to local management. For global brands, program design and execution are assigned to local management because that is where the local market knowledge–so critical to the campaign’s success–typically lies. Though center driven, international promotion/public relations events often provide an umbrella for complementary individual country promotions directed at the trade, salespeople, and consumers.
Regional Brands – Local Brands
With local brands the degree of local influence on promotional decisions is at its maximum, the need for central coordination is nonexistent, and all decisions on promotional strategy, program design, and execution are local affairs. The center’s task for local brands is information transfer. Some brands will be designated local, some regional, and some global. The degree of headquarters involvement in promotion decision making will vary accordingly. Most country managers will be willing to accept some reduction in promotion decision-making authority over regional and global brands because they will still have local brands in their portfolios over which they have complete marketing control. In addition, at least half the promotion budget for the most global of brands is still likely to be devoted to strictly local promotions.
Second, we recommend the appointment of an international sales promotion coordinator with recognized expertise in the promotion field, strong persuasion skills, and line marketing experience in one or more operating units.
The international sales promotion coordinator’s role would be to:
* Propose and solicit ideas for regional or global blockbuster or special event sales promotions on appropriate brands, organize regional or global promotion task forces to design and implement them, and persuade the operating units to participate with headquarters in funding these efforts.
* Encourage developing countries to use innovative sales promotion techniques as a source of competitive differentiation versus local producers.
* Gather performance data on promotions run by all brands in all countries plus data on consumer and trade promotion expenditures and promotion-to-sales and advertising-to-promotion ratios.
* Develop standard systems for measuring the effectiveness and efficiency of promotions that country managements can implement–and that can also furnish the data headquarters needs for worldwide promotion evaluation.
* Coordinate relations with the company’s sales promotion agencies worldwide. The international sales promotion coordinator’s biggest challenges involve regional and global rather than local brands.