“If you’re giving something away you have nothing to say”, is the first thing I used to fire back at the marketing teams. There was this incessant desire to find something to say and attract consumers (rather than shoppers) usually through discounted price and/or a convoluted competition. Often this is at the expense of previously successful mechanics and to the detriment of increased return on investment (ROI).
The proliferation of competitions and product price promotions in the grocer channel is insane. On a recent month-end shopping trip where I typically shop about 10 categories I was exposed to over 20 promotions and competitions. All were vying for my attention, creating clutter and not really speaking to me. This was creating more angst than delight.
In the past I also used to fall into this trap too. When a seasonal or promotional period came up in a specific category, it was all about how we were going to reinvent the wheel and find savvy ways to induce purchase through discount and/or competition. We usually got a spike in volume for the period. This justified ROI in the very short term but when one looked at the baseline gains a few months afterwards it did not deliver medium to long term dividends. In very competitive categories this gets more acute as competitors respond with their own campaign that inevitably promotes the wrong behaviour – training shoppers to buy on promotion.
To illustrate the above I used to work on two categories a few years ago that were highly competitive and seasonal. To maximise the period we usually invested in new creative, a novel competition mechanic, discount on product and off-location / additional displays in store. We saw the initial spike over the promotional period but when we analysed the return the results were mediocre in the short term and disappointing in the long term.
When we started shopper marketing, our focus changed from myopic gains to developing long-term value for the shopper, retailer and the brand. There were some incredible insights and gains. Firstly we focussed on shopper propositions and solutions. This opened a new communication channel with shoppers where we either presented new shopper solutions or simply reiterated the proposition. We also shifted significant spend to off-season periods as we discovered that a large percentage of the spike during the seasonal period would actualise without the heavy promotional support. The net result is that we doubled ROI with smarter investment that delivered in the short and long term.
In his book, Inside the Mind of the Shopper, Herb Sorenson writes that the most important aspect of promotion is place and not price. He referenced a study by Glen Terbeek that found that shoppers were “unaware that over 51% of the promoted items they had purchased were on sale; the discount had no impact on their buying behaviour. Of those 49% who were aware of the promotion, 40% would have bought the item anyway; 37% switched from another brand, and only 23% purchased the product “incremental” to their buying behaviour.” Referencing another study of 3,000 price promotions, Huang and Dawes found that promotions forsake huge margins on stock that would have been sold anyway and that for every additional purchase on promotion brands are “often giving away margin on another two times as much volume (or more).”
One doesn’t get far with switchers or shoppers that have a repertoire of brands in a category. I do believe that there is a time and place for temporary price reductions and competitions as long as it’s rewarding the right shopper behaviour with the right shoppers.
Jason Frichol (Frich)
These views and opinions are my own and not those of my employer or customers.