Local businesses spent $169 billion on local promotions last year, roughly 82% more than the $93 billion they spent on local advertising, finds Borrell Associates in a new study. Spending on promotions will continue to climb this year, per the study’s forecast, reaching $176 billion, compared to $101 billion for local advertising. The researchers note that the increased spending on promotions may not be cannibilizing traditional ad dollars, which have been growing in their own right, albeit slowly, since 2010.
Rather, promotions spending seems to be drawn from cutbacks in agency fees, printing budgets and postage, as well as from ex-employees who handled marketing, and thinner profit margins.
The data shows a fairly dramatic turnaround in the past 6-7 years. Back in 2006, local businesses were spending 11% more on advertising than promotions ($140 billion vs. $126 billion). But in 2007, the situation was reversed, with promotions ($130 billion) taking precedence over advertising ($120 billion). As the recession hit, promotions dollars declined more slowly than advertising dollars, presumably as local businesses looked to entice cash-strapped consumers with deals and coupons.
But discounts and promotions continue to lure customers – they’ve been cited as the chief reason consumers visit brand sitse on social media, and the top reason consumers opt-in to retail email lists. That may be why spending on promotions skyrocketed as economic conditions somewhat eased, jumping from $115 billion in 2010 to $159 billion in 2011, even as advertising spending only rose marginally, from $87 billion to $90 billion.
- Total promotions spending in the US reached $584 billion last year, more than double the total ad spend of $244 billion. Local share of promotion spending was about 29%.
- The report suggests that a good “rule of thumb” for local businesses would be to spend $3 on promotions for every dollar spent on advertising.Â The study cautions that the value of a discount, coupon or deal should be counted as a cost.
- Spending on digital promotions is expected to boom, growing from $32.2 billion this year to $80.3 billion in 2017.
About the Data: The study looks at 12 sub-categories of promotions spending: discounts; coupons; promotional products; event marketing; licensing; point-of-purchase; sampling; sponsorships; loyalty/retention programs; specialty printing; games/contests; and white paper marketing.