Enhancing food promotion in

the supermarket industry

A framework for sales promotion success

Lisa S. Simpson
University ofOtago

Increases in trade and consumer promotion, and the introduction (and prevalence) of
store brands, are all indicators of the importance of sales promotion to both retailers and
manufacturers in the food industry. Recent research has examined more closely the
effects of switching, stockpiling and patterns of consumption of food products on sales
promotion 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 and
manufacturers 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 product
sales. 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 within
food 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 consumer
purchase 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 the
increase include the 'snowball effect', where, due to the commonality of
sales promotions among competitors, many firms are forced to follow suit
in order to maintain market share (Peattie & Peattie 1995). This increase

International Journal of Advertising, 25(2), pp. 223-245

© 2006 Advertising Association
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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 food
retail and how these benefits differ for manufacturers and retailers.
Research has shown that the majority of supermarket purchases are
unplanned, and that unexpected situational factors have a major infiuence
on food purchase decisions (Narhinen et al. 2000). Sales promotion allows
manufacturers of grocery products to differentiate their products from
those of their competitors (Kahn & McAlister 1997), as well as create
favourable 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 sales
increases, 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 repeat
purchase, generate publicity (Williams 1984), create brand awareness,
introduce new products or services (Matteson 1993), secure retail shelf
space 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 18
industry cases throughout food product manufacturing and retailing
groups in Singapore, Malaysia and New Zealand. The framework is used
to form a set of guidelines for sales promotion choice in an international
context for manufacturers of food products, and the theoretical implica-
tions of the research are discussed in relation to proposed future research
in 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 the
short-term objectives of increasingly demanding retailers. At the same
time, manufacturers face the challenge of meeting their own, longer-term,
promotion objectives. Current theory tells us that a number of interrelated
factors, 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 negotiation
in the retailer-manufacturer relationship, will all impact on the success of
a 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 is
lacking. This study attempts to address this gap for manufacturers of food
products specifically, developing a set of propositions that are explored in
the context of industry cases from throughout the supermarket industry
internationally. An initial framework for sales promotion effectiveness in
the supermarket industry has been developed by integrating a number of
aspects 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

>•
r
^ '^

Nature of SP objectives
local
Nature of
and strategy
market ^
industry
IP21
[PI] L. J
• •.

Choice of
SP tooi Retail
partner SP
objectives

Support
mechanisms Acceptance of tooi
[P4a] by retail partner
[P3]

Retailer
expertise
IP4b]

Note: PI-4b refer to planning guidelines

Success of SP
for manufacturers (see Rgure 2)

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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 develop
marketing theories that are suited to a particular country (e.g. Steenkamp
2001). 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 marketing
practices 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 the
supermarket industry, irrespective of customer differences (e.g. Kahn &
McAlister 1997), one could suggest that consideration of culture is of only
secondary importance in predetermining the success of sales promotions.
Instead, industry-related factors such as current practice and consumer
exposure to a range of techniques may indeed have a greater impact on the
likelihood of effective implementation of a sales promotion programme.
This leads to Proposition 1:

PI: Sales promotion strategy will be modified according to issues such

as market development and industry norms rather than cultural
elements.

Sales promotion strategy and objectives

Retailers, due to their on-site interactions with consumers, are predicted
to be more aware of consumer interest in, and preference for, different
sales promotion methods than manufacturers in the food industry. Thus
retailers are said to be more likely to predict shifts in consumer purchas-
ing behaviour and will base most of their sales promotion objectives on
this (Kahn & McAlister 1997). Manufacturers, on the other hand, are said
to focus on restrictions on the promotion of food products in foreign coun-
tries, based on aspects of law, social policy and religion (Terpstra & Sarathy
2000), attempting to balance international promotion decisions to meet

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 ENHANCING EOOD PROMOTION IN THE SUPERMARKET INDUSTRY

these requirements, while still fulfilling their own promotional objectives.

Despite this, planning of sales promotions within the food industry has
been generally regarded as ineffective (Stewart & Gallen 1998) and many
sales promotion plans are seen to be underachieving when it comes to
reaching overall promotional goals (Kasulis et al. 1999).
When a manufacturer designs a sales promotion programme for use
internationally, three key factors need to be considered at the planning
stage: (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 and
limitations 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 food
industry to be easier, faster and requiring less effort than spending time
planning to ensure trial and repurchase of products, and reaching new and
existing customers effectively.
It has long been recognised, however, that the creative differences
between sales promotions and advertising are sufficiently great that,
unlike advertising, sales promotions should be driven almost solely by the
planning process (Flanagan 1988). However, issues such as 'ineffective
planning implementation, and evaluation process', evolved over recent
decades, 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 the
food industry such as using value-adding techniques more effectively, and
could precipitate a move away from price-based techniques as the 'catch-
all' of food retail promotion.
Essentially, food product manufacturers should be concerned with
implementing consumer franchise-building promotions, such as reward
programmes, and limiting the number of price-based sales promotions
they 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 that
the different parties' sets of objectives are not generally well aligned

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(e.g. Mohr & Low 1993) suggests, despite considerations for promotional
planning being clear, that food retailers and manufacturers are still strug-
gling with setting appropriate joint objectives. Further to this, the strength
of retailer focus on the short term has decomposed sales promotion use in
the food industry into 'brand-switching, stockpiling and increased con-
sumption' objectives (Ailawadi 2001). Manufacturer resistance to this
short-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 programme
decisions on their individual objectives, giving in to retailer objectives
when resistance is shown. Thus:

P2: Sales promotion programmes are initially based on individual

objectives, 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 both
market power and the relative power of the channel participants. Food
retailing channel structures are typically characterised by factors such as
increased store sizes and retailer concentration, growth in the importance
of house brands, consumer demand for one-stop shopping and greater
access to a variety of electronic point-of-sale information (Hogarth-Scott
1999). These factors have given rise to a shift in channel power away from
the manufacturer, and highlight threats such as 'de-listing and reduced or
less than optimum shelf space' (Hogarth-Scott 1999, p. 669).
The power balance will naturally influence levels of confiict within the
channel relationship, and thus the extent to which one channel member
can force its demands onto another (Song et al. 2000; Duarte & Davies
2003; Vaaland & Hakansson 2003; Wootten 2003). As noted in the previ-
ous section, in the supermarket industry, manufacturers are often forced
by very powerful retailers to enter into sales promotions that may not fit
with 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 promotion
strategies are thus common in the food retail industry, such as a long-term
orientation in one channel member versus a short-term orientation in
another (Barclay & Smith 1997) and the objectives of one channel partner
are often traded off for the objectives of the partner that holds the balance
of power. Thus:

P3: Objectives of manufacturers are traded off for retailer objectives

in situations of unequal power distribution.

Cooperation and expertise

Unequal power relationships in the food industry can become increasingly
adversarial, with manufacturers pressured to provide sales promotion
allowances that do not always fit with their strategy for building brand
value (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 sales
promotion programme, manufacturers generally require the cooperation of
the 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 a
manufacturer's marketing budget goes into providing retailers with these
sales promotion materials, there is no guarantee that they will be used
effectively 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 too
much 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 the
original promotion agreement due either to a lack of skilled staff in this
area 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 particular

manufacturer. When a large number of consumer purchase decisions in
the supermarket are effectively unplanned and made on impulse, it is
important that manufacturers develop a good working relationship with
the management of the supermarket (Narhinen ei al. 2000). In a market
such as this, where consumers tend to exhibit little brand loyalty, food
manufacturers must ensure that they do not lose precious retail space to a
competing brand that provides more support in terms of sales promotion
(Narhinen etal. 2000; Lehmann & Winer 2002). A key way of ensuring the
success 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) and
clearly presented as beneficial for both channel members (Murry & Heide
1998). 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 that
type.

Methodology
The propositions developed in relation to the literature-based model
(Figure 1) were used as themes to inform the data collection throughout
the research process (refer to Table 1 for specific themes). Questions relat-
ing to each proposition (or theme) were developed as part of the interview
protocols and supporting evidence examined in the context of these four
themes. 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 to
provide information richness, as one Western country (New Zealand) with
a 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 of
America (USA) to represent ideological opposites and cultural extremes in
terms 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, and
educational systems are more similar to [those of] the USA' but its heritage
and 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 country
due to its cultural links with Malaysia and socio-economic, political and
educational similarities to New Zealand.
The research design adopted a case-study approach, with three general
cases (the New Zealand, Singaporean and Malaysian supermarket retail
industries) 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 included
as a method of data collection in this study - first, to enable the researcher
to become familiarised with the industry setting and, second, as a means
of providing comparison between interview data and observed trends, as
well as overall triangulation of literature, interview data and observational
data. A total of 16 retail sites in each country were observed twice (one
weekday observation, one weekend), resulting in 96 separate observation
pro-formas, where both the use of different sales promotion techniques
and the frequency of that use was recorded. The retail sites included in
the 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 of
local 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 among
interviewee responses. The researcher and a peer coder familiar with the
content analysis procedure performed the content analysis. Measures were
taken to ensure reliability and validity in the analysis, including calculation

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of percentage match and agreement coefficients for each set of coding

completed (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 in
Table 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: NZ Singapore iVIalaysia

% comments regarding culture and Manufacturers 89% Manufacturers 89% Manufacturers 89%
strategy that fit theme Retailers 100% Retailers 100% 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: NZ Singapore Maiaysia

% comments regarding objectives of sales Manufacturers 88% Manufacturers 100% Manufacturers 100%
promotion programmes that fit theme Retailers 50% Retailers 33% 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 industry NZ Singapore iVIaiaysia

member objectives Manufacturers 67% Manufacturers 30% Manufacturers 60%
Retailers 92% Retailers 100% 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: NZ Singapore

% comments made by manufacturers 76% 55% 54%
regarding power distribution in the
channel relationship (Theme: Retailer power results in their objectives taking priority over
manufacturer objectives)

% comments made regarding perceptions NZ Singapore Maiaysia

of conflict in the channel relationship Manufacturers 85% Manufacturers 56% Manufacturers 100%
Retailers 27% Retailers 35% 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: NZ Singapore i\1aiaysia

% comments regarding the success of dif- Retailers 7 1 % Retailers 100% Retailers 75%
ferent sales promotion tool types
(Theme: Simple, mass selling techniques used before are most useful
and successful)

Retailers 2 9 % ' Retailers 0 % ' Retailers 2 5 % '

(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 points

relevant to the development of the resultant industry guidelines are given
throughout the results section of this paper. Observational data were sub-
ject to simple proportion and frequency calculations, as were supporting
industry data gathered from evidential materials such as company reports
and 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 study
either currently operated in the same product category, or had done so in
the 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 the
manufacturing firms represented. For example, interviewees from one
manufacturing firm included the trade service manager, responsible for
overseeing 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 relative
success of sales promotions applied in the supermarket industry.
Retailing firms (and retail interviewees) were also chosen to fulfil a
number 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 the
sample
• firms from different regional areas were included to account for any
potential differences
• interviewees were (or had been) directly involved in the negotiation
process for sales promotions with manufacturers and, in cases where
sales promotion decisions were mainly made by head office, had a thor-
ough understanding of this process (through the dissemination of firm
sales promotion activity reports).

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Results and implications of the framework

Table 1 summarises support for the propositions drawn from the in-depth
interviews conducted as part of this research. Support for each proposition
by retailers and manufacturers in each of the three countries examined are
shown 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 that
national culture had little to no effect on the sales promotion methods they
chose. This was supported in other results drawn from the study, where
few inter-country differences were observed in terms of both the sales pro-
motion methods actually used in-store and the techniques perceived as
successful by retailers and manufacturers. Legal restrictions were not seen
to infiuence the use of retail sales promotion greatly either, although these
were 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 the
actual method of promotion. Instead, two main factors that infiuenced the
use and success of retail sales promotions, specifically level of market
development 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 international
context, consideration of these factors should play a major role in sales pro-
motion planning and choice, and reinforces PI, that strategy is more likely
to 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 the
greatest effect on value-added promotion methods and, the more complex
the retail sales promotion technique, the more it should be aligned with
the stage of development of the market and the actual structure of the
industry 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 emerging

sector 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 the
consumer outside of presenting a swipe card each time they shopped, and
offered rewards such as free products or discounts (or even cash
incentives).
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 a
situation where manufacturers negotiate not only with supermarkets indi-
vidually, but also with their controlling body, effectively resulting in two
sets of promotional initiatives per store and many cross-overs between
stores in terms of their promotions. This means that value-added retail
sales promotions should be used here to provide a level of differentiation
between 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 local
supermarket chain in Singapore results in an interesting grocery industry
structure, where the power of the local chain causes competitors to react
aggressively in differentiating their brands. In addition, the industry is
highly developed and Singaporeans are relatively sophisticated consumers
in 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 market
therefore is to provide a sales promotion mix that not only creates excite-
ment among consumers, but also develops the brand image of products
and 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 an
enhanced relationship between the partners and subsequently better
implementation of the sales promotion programme itself. In emerging
markets, with relatively low economic independence of consumers, sales

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promotion tools such as loyalty schemes and free gifts/premiums are likely
to be more successful than other value-added tools. In highly competitive
markets, with one or two strong retail players, value-added promotions can
be used effectively to differentiate between stores/chains, thus resulting in
more successful spend of sales promotion dollars than straight price dis-
counting, and in highly developed, aggressive markets, sales promotions
that 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 greatest
amount of power in the relationship and often demand that other channel
members use their particular sales promotion methods, regardless of oth-
ers' (e.g. manufacturers') objectives. Both P2 and P3 were supported by
the sample, with manufacturers tending to design a promotional pro-
gramme that meets their specific needs, then modifying it on the basis of
resistance from retailers when it comes to actual implementation in store.
Retailers note that their 'main aim is to have items moving fast - to have
a high and quick turnover' (Malaysian retailer D (MRD)), but manufac-
turers tend to feel frustrated by this perspective, arguing that 'discounting
dozens of [products] doesn't actually help anyone ... all that means is that
you buy your product this week instead of next week ... you don't buy
them 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 manufacturers
made 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 this
study as far stronger in terms of decision making in the relationship, and
manufacturers tended to feel they were unable to push any of their own
promotion objectives or preferences in the current industry situation.
Complaints such as 'one of the things we are constantly battling is the
retailers' 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 in
terms of sales promotion, yet the retailers showed openness to a more
cooperative 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'll
hold 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 to
retail sales promotion techniques such as price discounting, where every
aisle is filled with 'special price' tickets for products discounted by only
minimal amounts. This highlights the need for change in the relationship
between retailers and manufacturers, regardless of power bases within the
channel. In order to continue to grow within the competitive supermarket
industry, both parties will need to work towards a better understanding of
how to create sales promotion techniques that not only meet their own
objectives, but interest and excite consumers, effectively 'standing out
from the crowd'. Channel issues such as this were generic to all three
countries included in the research.

Implementation
Although manufacturers indicated they are more likely to prefer value-
added sales promotion techniques (e.g. sampling and demonstrations, and
free 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 result
in a win-win situation for both parties, was therefore one of the biggest
problems manufacturers indicated they faced in designing sales promotion
programmes. Manufacturers tended to believe that using value-added
techniques would improve their own profits (unlike the reduced-margin
situation 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 that
retailers demand, they were not interested in supporting such promotions
as 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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 ENHANCING EOOD PROMOTION IN THE SUPERMARKET INDUSTRY

received with respect to implementing sales promotion programmes in

store. This suggests potential for compromise, were manufacturers to pro-
vide retailers with concrete evidence that they would strongly support
value-added campaigns, and work to meet both parties' objectives, and
supports both P4a and P4b.

Choosing the right sales promotion tools

Tools best suited to the grocery product sales environment appear to be
price based or linked to price reductions (i.e. price discounting, coupons,
discount-linked point-of-purchase or end-of-aisle displays, combination
and volume offers) (see Table 2), which meet retailers' shorter-term objec-
tives but not manufacturers' longer-term ones. The difficulty faced by
manufacturers, then, is aligning their sales promotion objectives with the
tools 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 products
across the entire supermarket industry. However, some differences are

Table 2: Summary of perceptions of successful VS unsuccessful past promotions

New Zeaiand Singapore Maiaysia

Manufacturers

Manufacturers

Manufacturers
Retaiiers

Retaiiers
Retaiiers

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.

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INTERNATIONAL JOURNAL OE ADVERTISING, 2006, 25(2)

evident as to the suitability of other value-added tools across the different

countries studied. Competitions and sweepstakes, for example, are used
with a medium degree of frequency in a high number of supermarkets
throughout Singapore and New Zealand, yet are unlikely to be used at all
in Malaysia. In addition, despite their high use, competitions and sweep-
stakes seemed to be ineffective in New Zealand, regardless of the prize
offered. In Singapore, however, effectiveness of this method was directly
related to the prize itself, with cash and shopping vouchers preferred over
things such as foreign holidays.
Results such as this suggest that manufacturers need to be fiexible
enough to use a combination of both price-based and value-added sales
promotion 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, combination
and volume offers, sampling and demonstrations) can be used globally,
whereas value-added tools should be localised to give the best result in
each national market. One of the core issues here, however, is convincing
retailers 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 as
adversarial, can be fundamentally improved if each party understands
where the other can offer expert opinion in terms of the issues raised
above. Manufacturers, for example, may have experience with a success-
ful sales promotion type previously unused by a particular retailer, or
retailers may be able to offer advice regarding consumer reaction in-store
to particular tools. Consideration of the other party in terms of their needs
and their expertise in either an industry or local market can enhance the
retailer-manufacturer relationship to a point where there is a joint focus
between channel members on the success of individual sales promotions
rather than an individual focus on personal objectives and ease of imple-
mentation.
Manufacturers have often been pressured to provide sales promotions
that fit the demands of retailers, yet do not meet their own marketing
objectives. This has resulted in decreased levels of optimisation of sales

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 ENHANCING EOOD PROMOTION IN THE SUPERMARKET INDUSTRY

Figure 2: Sales promotion planning guidelines for food manufacturers

1. Define objectives 2. Pianning and choice 3. Channei reiationship

1 a. Evaluate own 2a. Identify SP tools inherently 3a. Identify merchandising
objectives suited to your industry support needed for
• Are they achievable individual tools early
2b. Identify SP techniques
through SP? inherently suited to the local • Make expectations
1b. Predict retail partner market clear
objectives * Identify support you
2c. Match different SP tools with
• Compare with own w will provide in return
objectives of both channel W
objectives 3b. Recognise that
partners
• Attempt to understand retailers are experts
motives 2d. Don't present retail partner
• Utilise their experience,
with just an SP plan
1 c. Identify synergies particularly in
• Present evidence of
• Between channel international markets
effectiveness of SP tool chosen
partner objectives and relationship to retailer
objectives

t k

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?

promotion use and limited commitment on the part of the manufacturer

to 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 are
likely to achieve the best results in each individual market. Figure 2 there-
fore provides manufacturers with a number of guidelines for using retail
sales 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 in
focus, emphasising one particular tool (generally price discounting) and
comparing the usefulness of the technique with advertising, for example.

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INTERNATIONAL JOURNAL OE ADVERTISING, 2006, 25(2)

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 the
marketing 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 to
include factors not previously studied.
One of the main conclusions of this study is that channel issues such as
trust and the sharing of objectives are vital to the successful use of sales
promotions in the supermarket retail environment. Relationship market-
ing techniques could be used by channel members to achieve alignment
of sales promotion goals and to maximise the efficiency and effectiveness
of chosen techniques. This would allow channel members with limited
power a greater chance of developing sales promotion programmes from
which they benefit as well, instead of the current situation of engaging in
sales promotions that the more powerful channel member has demanded.
Much research in the area of sales promotion has tended to focus on
issues that have been seen to have an effect on other marketing tech-
niques, particularly advertising. For example, culture has been shown to
greatly infiuence the way individuals perceive and react to advertising
messages (e.g. Cutler et al. 2000; Nikerson & Hoeken 2003). Often, the
assumption 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, and
that the effect of culture on this particular group of marketing techniques
is likely to be less than that on advertising.
It has been proposed that, as communication is intrinsically culture
bound, effective marketing depends on the sender and receiver obtaining
the same meaning from any one communication and thus sales promotion
strategy should take into account cultural differences (Foxman etal. 1988).
Sales promotion, however, is more transactional in its orientation, thus one
can counter-propose that the effect of culture on sales promotion will be
less, and that functional aspects of the channel (such as industry structure
and market development) will have far more importance in determining
the success of a sales promotion programme. The messages inherent in
simple, price-based sales promotions are designed to stimulate immediate
purchase, rather than using psychological appeal cues to inform or persuade

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 ENHANCING EOOD PROMOTION IN THE SUPERMARKET INDUSTRY

the customer to favour a particular company or brand. The research pre-

sented here supports this, as it indicates that, despite differences in
national 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 promotion
research. Further to this, empirical research can be carried out to further
test the propositions developed as part of this study, regarding the effect
of various factors on the success of sales promotion (channel relationships,
level of market development and industry structure). In addition, this
study highlights a need to re-evaluate the effect that the transactional
nature 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 promotion
techniques (rather than simply describing sales spikes and making
assumptions based on these) in order to ensure that sales promotion is
achieving the right results in the fast-growing supermarket industry in
which 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 interests
include research methods, product and brand marketing, advertising and
promotion, retail sales promotion of fmcg and channel management.
Address correspondence to Dr Lisa S. Simpson, Department of
Marketing, School of Business, University of Otago, PO Box 56, Dunedin
9001, New Zealand
Email lsimpson@business.otago.ac.nz

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