Prune promotions for best results

In our workshops with suppliers and wholesalers, the one topic which generates the most (and often, the most heated) conversation surrounds promotions. As ever, price and promotion is an emotive subject – it’s often hard to be objective about it. But that’s what we try to be, having the benefit of 15,000 retailer interviews, and 600,000 shopper opinions, to fall back on. For the record, HIM does believe that price and promotions are important – but keen prices and excessive promotional activity do not make up for poor standards, service, range, offer and convenience.

Only 31% of all independent retailers say promotions are one of the three key drivers when shopping in cash and carries and nearly half of all retailers shopping in a cash and carry at any particular time will buy items which are on promotion. So promotion penetration is reasonably high. And suppliers will be relieved to hear that 50% more retailers are passing on savings made from promotions to their customers today compared to a few years back.

Now let’s dig under the surface a bit more. Most retailers say they receive promotional leaflets or brochures from their cash and carry operator. And nearly three quarters of these say the brochures or leaflets encourage them to use the cash and carry more. Many (a surprisingly amount, in fact) – say they visit a cash and carry simply and only because of offers they’ve seen in leaflets. So leaflets are a powerful footfall driver.

Simple money-off promotions are the preferred mechanic. This is interesting because, until recently, money-off deals were the preferred mechanic for end-customers, shoppers shopping in c-stores. In the last 12 months, our Convenience Tracking Programme has found that shoppers’ preferred promotions are now BOGOFs. Why has this switch occurred?

But rather interestingly, many retailers do not notice promotions in cash and carry depots, even in categories they have bought. For example, about two thirds of retailers who bought beer didn’t notice any beer promotions in the aisle. Could this be caused by too many promotions being available – too much promotion POS which increasingly becomes wall-paper – with little or no impact on retailers?

How many promotions could be going on in a cash and carry at any particular point in time – 1,500-plus? First, that sounds like a logistical, operational and “time-to-manage-all” nightmare. Also, remember, too many promotions means you attract too many deal-hunters. Attracting deal hunters can be detrimental to trip spends and cash profit.

Would fewer, more impactful promotions be more (or equally) effective, producing the same (or better) return? But wholesalers will be nervous of going down this route as fewer promotions mean less promotional income… unless a trade-off between wholesalers and suppliers could be sought on the basis that a slight increase in promotional spend by suppliers would be offset against higher returns (sales) caused by more impactful displays as a result of less promotional POS wall-paper.

The majority of retailers say aisle end promotional displays usually result in them buying the product, which may lead some suppliers and operators to consider whether aisle end promotional displays need to have discounted lines. Just stack a key product at a competitive price and create some theatre around it.

Retailers’ attitudes to price-marked packs are changing. Five years ago most retailers disliked them, claiming suppliers were dictating prices to them. Today, however, we have a slightly different story – retailers actually quite like them, to the point that 40% of retailers say cigarette price-marked packs actually benefit their business. Only 4% say they have a negative effect. How times have changed.

Some final things to consider for wholesalers and suppliers: retailers really want profit-on-return information, but it’s actually often hard to find.

Only 13% of retailers say they hear about promotions via leaflets inside branches. Cash and carry branches really could and should become “information hubs” for anything and everything.

And finally, let’s all really step back and reconsider everything we do through fresh eyes. If we always do what we’ve always done, we’ll always get what we always got. Why are we promoting? Could more be done to maintain and build demand without the need to promote all the time? Why should retailers stock your lines – is there a compelling argument? Operators need to create points of difference outside of price and promotions. This is a better way of tackling the supermarkets.

At the moment there is lots of price and promotion information but not much about consumer trends, seasonality, health, services, local sourcing, top selling products, category adjacencies, layouts, fixturing, events, gifting and local initiatives.

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