WHEN PUSH COMES TO PULL
Byline: Alev Aktar
Gift-with-purchase promotions are a necessary evil in the U.S. prestige beauty industry.
That was the upshot of a lively debate on promotions during the session called, “When Push Comes to Pull.”
On the frontlines, defending the practice were Robin Burns, president and chief executive officer of Estee Lauder USA and Canada, and her boss, Leonard Lauder, chairman and ceo of Estee Lauder Cos.
Lauder even justified the practice from his seat in the audience, delivering an impromptu lecture on the genesis of the gwp — the Lauder brand originally gave samples away, but started charging after the lines got too long — and explaining how leading brands are forced to use gwp’s to retain their prime real estate in department stores.
Another surprise came when Don Loftus, president and ceo at Sanofi Beaute, confessed to boldly setting forth plans for a no-gwp policy and then capitulating.
“We’re launching a new Oscar fragrance this fall, and we said we’re not going to do gift-with-purchase. But we couldn’t bring ourselves to walk away from it during Christmas. We just didn’t have the guts.”
Members of the panel asked Arie Kopelman, president and chief operating officer of Chanel Inc. — one of the few top 10 companies in the U.S. not to run gwp programs — to weigh in on the practice. He declined politely.
However, the next day, while moderating the conference on preserving equity, Kopelman stated his belief clearly: Gwp’s erode brand image over time.
Here’s a look at differing points of view:
According to Jerry Abernathy, chairman of Coty U.S. Inc., “Gwp’s are expensive to run, the value claims become somewhat unbelievable and they produce short-term results and then set up an obligation to anniversary those results the following year.”
Loftus noted that gwp’s take away from the value of the product. “As the practice grows, we’ve convinced the customer that the product alone is not worth the money. It’s only worth the money when we’re giving something away with it.”
On the positive side, gwp’s can pull people into the store, draw shoppers wandering around a store to a counter and are an effective way to drive up sales volume. Also, very importantly, “They are a good way to sample,” noted Burns.
Leonard Lauder gave two reasons gwp’s are necessary in the U.S.: to retain “number one location” on department store floors and to generate volume to pay for full-time sales coverage.
He explained that the three largest cosmetics companies — Estee Lauder, Clinique and Lancome — are basically buying their real estate with extra sales volume generated by gwp’s. “It’s a hidden slotting allowance,” he observed, adding, with a laugh, that in Europe “you don’t have to pay to have good locations because everyone is treated equally badly.”
Lauder also said gwp income is reflected in the salaries of sales advisers, and as a result, some second-tier brands that don’t run gwp’s — Prescriptives, for example — have a much higher turnover of staff.
Burns conceded that gwp’s aren’t required in every store, citing the example of the multimillion-dollar, wholly owned Las Vegas unit, which doesn’t offer gwp’s or purchase-with-purchase. “[The customers] aren’t even looking for them.”
Another example was when Lauder used a gwp to open new assisted-self-sell environments and the promotion turned out to be superfluous. “We had to take it out of the selling environment on day two in Paramus and Toronto because it was just getting in the way.”
She also cited research that shows that 67 percent of shoppers buy when they want to buy, not when there’s a gift; 17 percent wait for the gift to replenish their stock, and 16 percent respond to a gift, whether or not they need anything.
At Sanofi, Loftus’s studies have shown similar results. “We’ve done focus groups, and very low on the list of what makes women buy is either price or the gwp. We’ve just convinced ourselves over the years that it is essential. We can’t blame the department stores, we can’t blame the customers. We’re not listening to the customers.”
Loftus went on to discuss promotional opportunities presented by department stores, such as co-op advertising and catalogs, and whether the paybacks are sufficient. He concluded that while sometimes the promotions do increase business, there are instances where retailers strong-arm the brands and essentially blackmail them.
“We’ve actually been told [by retailers], ‘If you don’t participate in the catalog, you won’t get any exposure,’ and even, ‘We can’t carry lines that don’t support our catalogs.”‘
Loftus questioned the suspiciously high cost of participation in certain department store catalogs. “We did a study where we pulled all the catalogs that we participated in last year to get a cost-per-thousand. The quality isn’t so different, excepting Saks & Neiman’s, where they go to Italy to shoot it, and the postage is about the same. The rate per thousand can go from $4 to $40, and those where we are paying the $40, you know that’s going somewhere else. It is money that perhaps could be better directed.”
The lone mass market representative on the panel, Don Pettit, president of Sassaby Cosmetics, which markets the successful Jane line, observed that abusing any type of promotion can devalue the brand. Too much couponing in the mass arena, for instance, can have a negative effect.
Pettit added that whatever the promotional tools used, companies should focus on the consumer and what they want. “We have all the echo boomers coming up, and it’s up to us to excite them about cosmetics and fragrances,” he noted.
“Having recently been through the experience of introducing a new brand of cosmetics in mass, which was lunacy to many people, we approached it very much from a zero base: Let’s not just do what’s been done, but how do you do it differently to excite the consumer?”
Using a similar argument, A. Keith McCracken, chairman and ceo of McCracken Brooks, Bozell Worldwide, a full-service promotion marketing agency, urged companies to “start from the beginning and address the behavioral and image objective you have. Then you can start to build test strategies, at least, that might well be more effective and profitable. Be brave enough to do zero-based marketing.”
Finally, Gerald K. Bayne, president of Color Prelude Inc., a sampling company, stressed the truth of the industry’s “try before you buy” adage.
He predicted salable samples would be more important in the future, and that they would be available via the Internet and home-shopping TV channels.
He noted Color Prelude is working on a new generation of samples that come with applicators, and another important direction is self-dispensing hygienically clean samples that don’t create litter.
The big question remains: Is all the investment in advertising and promotion triggering a growing use of cosmetics and fragrance?
The answer, according to Abernathy of Coty, is “no.”
“In 1997, only 75 percent of our women said they used fragrance once a week. Men’s usage is at 61 percent and it has stayed flat since 1993.
“We haven’t increased frequency of usage at all. This is in spite of the fact that in fragrance alone, we spent $476 million dollars on pure media. And if you add color or treatment into that, you would be at over $1 billion dollars, or approximately 10 percent of our sales.”