The number of in-store promotions at Tesco increased dramatically in the year between the fourth quarter of 2007 and the same period in 2008, Dunnhumby data has shown. But at the same time, brand loyalty, defined by Dunnhumby as shoppers who spend 70% in any given category on one brand, has declined.
The report by the Institite of Practitioners in Advertising has concluded brand owners "are giving in to retail pressures by increasing their spend on in-store promotional activity, despite evidence it makes no commercial sense and in fact causes long-term damage to the brand".
The Dunnhumby data shows promotions were up 81% on soft drinks over the period, 151% on household goods, 55% on snacks, 65% on BWS and a whopping 366% on health & beauty.
This, said the IPA in the report, had "resulted in some volume growth in Tesco sales, but without equivalent real sales value uplift resulted in an erosion in real pricing".
Meanwhile, loyalty declined in each of the same categories, apart from health & beauty, by an average of just under one percentage point.
"While in percentage terms these decreases may seem small, the associated value and volume of units sold are significant," said Lawrence Janes of Dunnhumby.
"Brand owners are losing out and must try to engage and work with retailers on a basis of understanding the impact of their different marketing activities, both short and long-term, on the retailers' customers."
Janet Hull, IPA head of marketing, said the data should be a call to action for brands who feel pushed into in-store promotions.
"Past academic theory has indicated price promotions do not benefit brands, however this is the first time we have real sales data to confirm the extent to which this rings true," she said.