To stop the rot, sales promotion agencies are integrating their core activity into campaigns using other marketing media - digital, in particular - to bolster their relevance to today's consumers and increase potential touch points.
Indeed, as much traditional promotional work, particularly basic on-pack and point-of-purchase offers, has been taken in-house by brands, these specialist agencies have been taking a wider responsibility for experiential campaigns. But while this might have halted the decline in agency revenues, some believe it has simply covered up the real problem.
Rob Gray, chief executive at Mercier Gray, is one of those who has been frustrated by the industry's approach to core sales promotion work. 'I'm genuinely disappointed in the use of sales promotion mechanisms,' he says.
'There has been no innovation for a number of years. The last truly novel mechanism was instant wins, and we've been using those for between 10 and 15 years now. Creativity in this area is distinctly lacking.'
Although it is true that the mechanics of promotions have changed little over the past decade, perhaps the medium itself needs to change its focus to being more creative in its executions.
This road will not be easy as logistical hurdles stand in the way of the creative process. Gray admits that the approach taken by FMCG retailers toward on-pack promotions has not helped, as the major supermarkets, in particular, have established ever tighter control over the product promotions that appear in their stores.
Jamie Matthews, board director at Arc London, believes that by taking such a hard line, retailers have discarded one of the main routes for core sales promotion activity. Matthews points to his agency's work with washing powder Ariel on its 'Championship Whites' campaign, which moved the brand strategy away from on-pack promotion toward a more integrated approach that included posters and direct mail, as well as on-pack and point-of-sale work.
Exclusivity complication
'A few years ago, sales promotion was seen as one of the main tools for driving sales,' says Matthews. 'Now pressure from retailers is dictating how much sales promotion we see from FMCG brands. Retailers' demands are for more exclusive campaigns, so one of the main promotional avenues - on-pack - has been ruled out, because brands can't afford to make tailor-made packaging.'
The stance taken by retailers is likely to get tougher still, and Matthews believes agencies must react by becoming smarter about driving sales in the retail environment. On-pack and point-of-purchase promotions have been the most affected in terms of the limitations imposed by retailers.
One response has been the use of external media to drive consumers to the promotion, with digital marketing techniques taking an increasingly prominent role. 'Traditional media are still a favourite for those that can afford to advertise their promotions, but the growth of electronic media has been phenomenal,' says Simon Mahoney, managing director of agency SMP. 'Emails, viral campaigns, SMS and the internet are all new ways in which promoters can deliver a call to action.
'The creativity has changed, in that it has to deliver the most basic and simple message as well as use movement and imagery. Good agencies are able to marry creativity with a host of media platforms to deliver the message.'
Digital adoption
Cynics would claim that the use of digital media to deliver messages is more about the latest technological advancement than any real improvements in creativity, but for Meerkat chairman Graham Green, such criticism is unjustified. 'If a new mechanism comes along, sales promotion agencies will be among the first to pick it up and run with it,' he argues. 'If anything, these agencies have been making great strides forward with the quality of their creative delivery.
'If there is a creativity problem, it is one of changing dynamics in the retail landscape, particularly in terms of FMCG and the on-trade,' he adds. 'A small promotion no longer carries any weight in terms of stocking, and we are seeing a consolidation in terms of fewer larger promotions.'
The very fact that there has been a decline in major on-pack promotions has certainly allowed digital marketing to get a foot in the door, with many brands now using internet fulfilment and text-to-win strategies as central delivery mechanisms.
The emergence and strengthening of new channels to market, such as SMS and in-store televisions, are also having a revolutionary effect on strategies.
Simon Marjoram, director at Geoff Howe Marketing Group, believes digital marketing has become an instrinic part of the sales promotion agency remit.
He cites the technology's ability to interact with consumers as the reason for its high uptake. 'Four years ago, agencies had to really push for the use of digital marketing techniques,' he says. 'Now it's central to most things we do.
It isn't necessary for us to fight that corner with clients any more.'
Consumer participation levels will always be a problem for evolving media channels but, with more and more brands choosing to adopt the digital approach, the uptake hurdle is becoming less of an issue.
This is not to say that on-pack promotions have been abandoned altogether.
In many ways brands have become more adventurous in terms of using their packs as a media channel, in some cases even allowing the logo to be replaced by a promotional offer. However, the on-pack promotion is no longer the sole focus of the strategy and can often act purely as a way of diverting the consumer toward another interaction point, such as the brand's website.
It is clear that traditional sales promotions have taken a back seat in recent years. Whether it comes in the form of a new promotional mechanism or through a more creative approach to the delivery of the message, change could bring the medium back to the forefront of brands' marketing consciousness.
ESSENTIALS - ISP AWARDS
Creativity is essential for sales promotion agencies. League tables may reward financial performance, but it is hard to assess from them alone which agencies are producing the most effective activity.
The Institute of Sales Promotion's annual awards reward the most creative and effective promotions. 'The awards recognise creativity and accountability in terms of impact on the bottom line,' says ISP chairman Peter Kerr.
The table offers a cumulative score of the best-performing agencies in the past five years of the awards. The most recent example of table-topping SMP's work is the 'Puppy in Pack' promotion it ran for Andrex. The agency's brief was to replace the 12-for-9 roll promotion pack with a creative that added value while reducing Andrex's reliance on price promotions.
The campaign carried a soft toy instead of the three free rolls and was rolled out exclusively in Tesco with extensive point-of-sale work in support.
About 600,000 packs sold in less than a month, making it the third-highest promotional recall in the UK during the period - all without TV support.
Andrex's share of toilet tissue in Tesco rose by 17.7%, bringing in 拢3.59m in incremental sales.
ISP AWARDS 2000-2004
Agency Score
1 SMP 190
2 Triangle 170
3 KLP 94
4 Saatchi & Saatchi 92
5 CHJM 86
Source: ISP (Grand Prix 16pts, platinum 10, gold 8, silver 4, bronze 2)