How much of your budget do you spend on promotions? If you are like most companies, you will spend a lot.
The promotional tap is easy to turn on. If you need to hit the quarterly sales number, the easiest thing to do is promote more. It works. Put something on half price and you are going to shift more product.
BUT…there is always a but, right?
Can you spend that promotional money in a better way? Are you properly thinking about how to spend that money or are you spending it in the way that you’ve always spent it? Are you able to turn the promotional tap off or have you become reliant on each promotional hit? Are you driving the right kind of sales? Are you training shoppers to behave in the way you want them to behave or are you training them to shop on deal?
We think a lot of companies need to look at their promotional strategy and plans. Then ask themselves 3 questions.
Why are you promoting? Are you doing the right things? Are you maximising impact?
Let’s take each question in turn….
1. Why are you promoting?
A lot of promotions are reactive. They are done in response to something.
It could be a response to competitor activity. Our competitors are doing it, so we need to do it. It could be based on what you did last year. We ran four price discounts last year, so we need to do at least four this year. It could be that your base price is too high. Not enough shoppers are buying at full price, so you think you need to discount. It could be the absence of good activities or new news. We don’t have anything else to interest shoppers, so we’d better promote.
Many of these are valid reasons. But they are reactive reasons. And when you react you are usually on the back foot.
Promotional activities should be proactive. When you are proactive, you are on the front foot.
You are using promotions to help deliver against category or brand opportunities. You are not just trying to sell more. You are trying to drive specific shopper behaviour. This might mean you are using promotions to get more shoppers into the category or your brand. It might mean trying to get existing shoppers to buy (& use) more. It might mean trying to get existing shoppers to trade up.
Your promotional strategy should be based around the shopper behaviour you are trying to drive. This means you don’t just drive sales, you drive the right kind of sales. You promote with purpose.
2. Are you doing the right things?
Most promotions follow a basic set of rules. Walk around a supermarket and 99% of all promotions will follow them.
Firstly, they are focused on this purchase. They are only concerned with getting a shopper to buy a brand or product now. They have little, or no, consideration for future purchases. Most shoppers are rewarded for promiscuity – buying a different brand in a different retailer each time. They are not rewarded for loyalty – buying the same brand in the same retailer each time.
Secondly, a price discount is the main incentive to buy. This might be a price reduction. It might be a multi buy. Either way, it is some form of saving. The more the incentive for shoppers to buy a brand is price, the more likely they are to make future purchase decisions based on price. This is storing up trouble for categories and brands.
Thirdly, they could be run by any brand. Any brand can run a half price discount. You can run one this week. Your competitors can run one next week. Most promotions do nothing for brand equity. Well… they do something – weaken it.
More promotions need to break these promotional rules
They need to consider future purchases not just this purchase. McDonald’s Monopoly promotion is a great example of this. Scratch and win a free soft drink next time you come in (and buy a burger & fries at the same time).
They need to offer shoppers a different incentive to buy than a price discount. This means activities that engage shoppers and that retailers will want to support. The PG Tips Monkey gift in pack was a great example of this.
They need to be something that can only be run by your brand. Something that can be sales driving and brand building. The Innocent Big Knit activity is a great example of this.
We are not saying you should stop all price promotions. We are saying that you could rebalance the promotional mix.
3. Are you maximising the impact?
Exactly the same promotion can be communicated in two different ways and lead to two very different outcomes. HOW you do things can be even more important than WHAT you do.
An example. Promotion A is “Buy 2 for £5”. It has small stickers on pack to signal the promotion. You have to get close to see them. Promotion B is also “Buy 2 for £5”. It has one big shelf barker signalling the deal. Which do you think will drive the bigger uplift? It’s obvious – but you might be surprised at just how big the difference is.
Another example. Exactly the same price saving can be communicated in different ways. You could say 33% off. You could say “was £3, now £2”. You could lead with the cash saving, “save £1”. Each route leads to significantly different uplifts. Again, you may be surprised how different. Shoppers rarely do the maths in store. The more they have to think about whether something is good value, the less likely they are to end up thinking it’s good value. Simple sells.
One final example. Often the most impactful promotions have an accelerator. This is something that prompts the shopper to buy over and above the promotion itself. It accelerates demand. For instance, a promotion that limits the number of products available or limits the time in which you can buy, is an accelerator. The success of the Discounters’ When It’s Gone It’s Gone promotions are less about the deal and more that it won’t be there next week.
Get all this stuff right and you often get bigger uplifts for less spend. Significantly bigger.
A serious amount of money is spent on promotions in our industry. A lot of it is spent without thinking too much about it. Spent on doing the same things that have always been done.
Maybe it’s time to break the promotional rules.
If you want to know more about how we can help you think differently about promotions, drop us an email or give us a call:
Jeremy Garlick: jeremy@insight-traction.com 07733 003100
Neil Munro: neil@insight-traction.com 07747 867645
Naomi Geffen: naomi@insight-traction.com 07968 840423
Ali Perkins: alison@insight-traction.com 07825 022998
We are Insight Traction. We are a shopper focused consultancy working with FMCG companies and retailers. We help companies find simple ways to sell more. We do that in three ways – through Category Strategy, Channel Strategy and Shopper Marketing Strategy.