Why brands use promotions to compete in saturated markets

How do you win customers from your rivals in a saturated market? Promotions, price discounting and coupons can all help to add to the value you offer consumers for coming over to your brand.

In a climate of few new customers – either due to high levels of market penetration or due to an economic downturn – increasing share means you need to put forward a more compelling value proposition than your opponents.

That can mean undercutting the brand leader’s prices, but it can also be achieved using vouchers, on-pack promotions and other incentives to reward shoppers who make the switch.

In this article, we’ll look at how different types of brands – from leaders, to premium and budget competitors – use promotional activities to steal market share at peak saturation, as well as how changing economic cycles can affect decision-making.

Which brands use promotions?

Writing in the International Journal of Research in Marketing, an international team from Denmark, Turkey and the Netherlands explain how brand advertising competition varies across economic cycles.[1]

“In saturated markets in which sales gains come primarily from brand switching, competition is fierce, and firms closely monitor the marketing actions of their rivals,” they write.

They found that leading brands are less likely to adopt aggressive marketing practices during economic contractions, whereas premium-tier brands become much more defensive when conditions are challenging.

For cheaper brands, a downturn can be an opportunity to gain business from consumer belt-tightening, and this can actually give budget brands more power to lead promotional activity while their premium opponents are left to respond.

Crucially, the research shows that even in a slower consumer market, smaller brands can use a variety of promotional techniques to win and keep customers who might be looking to spend less and get more.

What type of promotions are used?

In their analysis, the team listed several common types of promotions and special offers used to gain market share, while noting that other promotional activities are also used.

Their article cited the following techniques used by market leaders and competing brands:

The researchers looked at 105 brands and found that on average, promotions were offered in 35% of stores in any given month. Some brands were on offer in zero stores, while others’ promotions spanned 99.7% of outlets.

Price discounting via money-off coupons can be highly effective in a downturn. Voucher codes can be printed on packs, distributed via leaflets, or included in marketing emails. Codes can even be made searchable online, to reach out to consumers looking for ways to save on their household spending.

Of course, campaigns are not restricted to a single type of promotion. Brands can combine marketing methods for even greater effectiveness.

For example, in a campaign designed to gain customers and increase repeat sales, initial purchase intention could be improved through price discounts or multi-buy deals, with on-pack and/or digital coupons to reward consumers who buy again in the future.

How can smaller brands compete?

As the research shows, challenging conditions – including saturated markets and economic downturns – can lead to less aggressive tactics from brand leaders and unlock opportunities for their rivals.

This is supported by analysis from the University of Wisconsin[2 ], which found that promotions such as loyalty programmes can help small businesses in saturated markets to achieve a number of objectives:

In particular, loyalty schemes offer a ‘two birds with one stone’ benefit. That’s because they not only incentivise customers to make repeat purchases, but also provide a way to collect detailed data about consumers’ buying habits, which can then inform future campaigns.

“By understanding their customers’ preferences, behaviours, and purchasing patterns, small businesses can tailor their product offerings and promotional campaigns to better align with their audience’s needs,” the authors write.

When a market is at or near saturation point, this better understanding can be crucial in steering campaigns and individual promotions, to achieve the best results from reaching out to an established and mature customer base.

More ways to increase market penetration

Gaining market share doesn’t have to mean discounting prices or offering 2-for-1 deals, although as we’ve seen above, these methods can work well even in challenging cycles.

Consumers perceive value in lots of different ways, so activities which make more people aware of your brand can also lead to increased purchases and revenues.

Some alternatives to the methods already mentioned above include:

Campaigns can combine digital marketing methods, such as loyalty scheme websites and apps, with physical marketing such as door-drop leaflets and paper vouchers.

While the goal is (usually) to drive sales, campaigns can have other intended outcomes too, such as to raise brand awareness, improve positive consumer sentiment about your company or products, and build your network of influencers and brand ambassadors.

All of this combined will help new brands and smaller players become more established in a saturated market, allowing you to overcome the inertia of consumers who are already loyal to an existing rival brand.

Find out more

If you’re entering a market with high levels of penetration, or you just want to compete more effectively against rival brands in your segment, speak to MRM today about how a promotional campaign can help you to do just that.

We have over 30 years of experience managing multi-channel marketing campaigns for our customers, with specialist expertise in logistics and fulfilment for any physical ‘real-world’ elements such as leaflet drops, subscription boxes and competition prizes.

This makes MRM uniquely capable to deliver the kind of complex, joined-up campaigns needed to compete in economic downturns and saturated markets, while achieving the best possible outcomes in market share, customer loyalty and revenues.

Call us today on 01858 410 510 to speak to one of our helpful advisors or email sales@mrm.co.uk and our friendly team will get straight back to you.

[1] https://www.sciencedirect.com/science/article/pii/S0167811623000812

[2] https://www.researchgate.net/publication/380519524

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