In its report, "Price promotion during the downturn: shrewd or crude?" the advertising body finds that brand owners are giving in to retail pressures by increasing their spend on in-store promotional activity, despite evidence it makes no commercial sense.
Instead, the report recommends call-to-action media near to point-of-sale, which work harder than money-off promotions when used appropriately, as in impulse purchases in convenience stores.
Data within the report reveals an emerging pattern across five sectors of decreased media spend and increased price promotions activity, which has resulted in some volume growth in Tesco sales. But without equivalent real sales value, uplift has resulted in an erosion in real pricing.
As well as the brand owner's profit margins being squeezed, the promotions have also led to reductions in brand loyalty.
Brand loyals from the second half of Q4 2007 to the second half of Q4 2008 have reduced from 20.8% to 19.3% in soft drinks, from 10.6% to 9.9% in beers, wines and spirits, from 10.7% to 9.2% in household, and from 4.6% to 3.9% in snacks.
The research is based on the 14 million-strong Tesco ClubCard database and has been analysed for the IPA by Dunnhumby.
Results show a sharp rise in the use of price promotions in UK retail, with the number of unique in-store promotions in Tesco increasing in every category between Q4 2007 and Q4 2008
In some categories where this is particularly prevalent, the report finds "considerable erosion" of brand loyalty and substantial growth in the proportion of sales made "on deal".
Lawrence Janes of Dunnhumby, said: "Brand owners are losing out and must try to engage and work with retailers on a basis of understanding the impact of their different marketing activities - both short and long-term, on the retailers' customers."
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