Online Promotions: The Big Shift

I wrote this post a week and a half ago about a report by Borrell Associates which states that the online promotions category is expected to nearly triple over the next five years from $8 billion last year to $22.8 billion, surpassing all other online advertising categories (paid search, banners, e-mail, audio/video advertising). Since I wrote this post Borrell Associates was gracious enough to send me a promotional copy of the report. So I would like provide you some more detail and well as some of my observations.

To recap, the report states that as in offline promotions, most of the value of online promotions is the cash value of incentives that are given to motivate short-term sales. The report also states that online display ads (Web page banners, pop-ups, etc.) have lost their luster and that spending on them has been generally flat for the past two years. They believe it will peak this year at $12.6 billion, and then begin a precipitous decline to less than half that amount over the next four years. They also state that paid search advertising is likewise facing a luster-loss and they foresee it hitting its peak next year at $16.9 billion, followed by a gradual decline.

Currently online promotion spending is only 22% of the total $37 billion overall interactive marketing pie. Overall promotions account for about 60 percent of all dollars spent annually in global marketing. The Borrell report says that the composition that makes up online promotions spending will continue to evolve over the next five years. Spending for online discounts and rebates (for example, the reduced ticket prices offered by some airlines) will continue to dominate the category, however, it will decrease in share going from 41.4% in 2007 to 38.7% by 2012. Spending on online games and contests however is predicated to grow from 10.5% of the online promotions pie in 2007 to 28.4% by 2012.

As I said in my previous post, to many of us in the interactive promotions business this is great news. We now have a report that helps to confirm what we've known all along...online promotions, specifically sweepstakes, contests and instant-win games, produce highly measurable results. By putting the right incentive in front of the right audience, you can get them to act! So while this report may contain predictions that seem strange to some, it makes perfect sense to us promotions people. We all know that marketers today need campaigns that can provide measurable results, and online promotions are an effective way for them to achieve this.

What I believe is an up and coming trend which will help fuel the growth of online sweepstakes and contest promotions is integrating them with social media. The strategy of combining these two marketing tactics is bound to become a big part of the increase that is predicted over the next five years.

Social media, including blogs and social networks, has dramatically increased the speed and coverage of word-of-mouth, also known as viral marketing. Blogs are powerful socializing tools that connect people from all over the world and build relationships, therefore can easily get the message out about a promotion. Bloggers like giveaways and contests and integrating a chance to win promotion into their blog provides added value plus excitement for their readers. Bloggers and social networks also help to spread the word quickly about an online promotion that a marketer may currently be conducting. To help get key bloggers involved with a contest promotion, marketers might want to consider inviting a few to be on their panel of judges 

A survey from BIGResearch, cited in the Borrell report showed that 38 percent of people that were online were also watching television; more than 20 percent were listening to radio; 9.5 percent were reading a newspaper; almost 7 percent were reading a magazine. The local medium best positioned to take advantage of the trend could be local TV.

The report goes on to suggest that the local media companies can capitalize on this trend by focusing on creating “promotions” for their advertisers. This may include establishing a special promotions team to develop promotional campaigns that will deliver measurable results for advertisers. These campaigns can include quarterly contests and give-always, weekly or monthly half-price gift certificate sales, “best-in-town” online voting campaigns for restaurants, dentists, ice cream parlors, golf courses, etc. Holidays and sporting events (College Bowl, Super Bowl, NCAA Tournament games, etc.) are all prime promotion periods.

An example of a local promotion sited in the report was created by WAVE-TV in Louisville, KY.  The “Win, Place, Show” promotion was a contest tie-in with the Kentucky Derby sponsored by the Kentucky Lottery. Contestants were invited to choose their three favorites in order for the Kentucky Derby, the Preakness and the Belmont Stakes. The person with the highest number of points – awarded for each correct choice – won a color television.

Another WAVE-TV advertiser, the Louisville Zoo, had been running a discount season pass promotion for the past six years. Its most recent promotion was a “Name the Baby” contest in which visitors to the site could enter suggestions for the zoo’s baby elephant and other baby animals. Both this promotion and the Kentucky Derby contest drove people to WAVE3.com to participate.

A further example was a contest run by WKRN-TV in Nashville, TN, in which they tied in to the 2007 College Bowl games.  The goal of “College Bowl Frenzy” was to increase page views and unique visitors for WKRN and to offer some fun interactivity for their viewers. Jamie Camp, Internet sales manager for WKRN said “It puts us in touch with participants at a more personal level.” With more than 32 College Bowl games last year it was a great fit for them. The contest received 1,000 participants which offered WKRN the chance to gain more knowledge about their audience.

WKRN offered their sponsor advertisers 15-second video spots on the site before the news and weather clips. Advertisers included KFC and RJ Young who were able to choose among three different level packages. These sponsors had online tile ads and displays on the College Bowl Frenzy pages. All the sponsors had the opportunity to create a sign-up survey to collect user information. They were also able to offer giveaways of their own. Since implementing contests, WKRN’s website traffic has quadrupled.

Local newspaper website sites are also offering opportunities to advertisers looking for an online presence without buying standard online advertising. Buffalo.com, owned by The Buffalo News, has been running contests for advertisers since the site launched in 1999, but rather than use contests as a way for advertisers to gain sales leads, Buffalo.com offers them more as an incentive program for advertisers who place ads in The Buffalo News, and as tie-ins to events such as movie premieres.

One promotion they created was an interactive game for Basil Cars called “Hidden Treasures”. Participants could look for Basil Treasure coins in the Basil ads running in the Buffalo News and also on Basilcars.com. When they collected all six coins they could then attach them to a game board and mail them in for a chance to win a two-year lease on a car or $7,000 in Basil Bucks.

What this report is basically saying is that we need to take a look backwards at some of the basic principals of marketing that have worked for years offline (nationally and locally) and effectively make them work online. Here are the three main drivers behind what they believe is the cause for the big shift to online promotions from traditional advertising.

1. Advertisers are demanding larger and more measurable returns from their marketing investments. New technologies are increasing marketers’ targeting and tracking capabilities as well as their expectations. Even within online advertising there is demand for more targeting, more measurement, and better ROI.
2. The Internet is better suited for research and fulfillment than for conveying emotion and excitement for a product. While the Internet does contribute to brand and product awareness, its uniqueness is that it’s interactive, which makes it a perfect media for promotions.
3. Online promotions are primed to closely mirror their offline counterparts. The ratio of non-ad spending to ad spending for total marketing expenditures (local and national) is 60:40. For online marketing, the ratio is 22:78. The online spending ration is out of synch because the Internet is still a relatively new medium and businesses are still experimenting with its marketing capabilities.

So while we all don’t have crystal balls that can look five years into the future, we can always look backwards. It’s an exciting time to be in the interactive, online promotions business. I’m looking forward to the next five years.

Comments

[DaytonaMarketingProfessional]

Hi Donna, from a Marketer that's always learning and has been trying new practices for almost 20 years, I loved this post. It helps to have the details and the graphs. I especially like the fact that you have non-profit org marketing experience.

I am in the process of creating a marketing plan for a non profit organization. I like the idea of using incentives, combining media tactics, and using social marketing as a means to increase our word of mouth referrals. Any low cost suggestions or ideas? Maybe you have insight to what's out there and available but is more feasible for non-profits to grasp and use. Thanks again!

[Donna DeClemente]

Thanks for your comments. I'm glad you found the post helpful. I believe that non-profits have a great opportunity with social media. Doing a blog outreach program to key bloggers that may fit with your particular social cause and also providing them with some type of incentive would be a very cost effective way to get the word out there and a win-win for all. My company does provide these types of services, so I'd be glad to discuss this with you.