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Optimising Promotions

Written by Brett Barclay of Convenience Measures Australia for C&I.

They are evident in practically every channel and they provide shoppers with a level of value whether it to be to buy multiple items or a discounted single item. We have seen many different versions over the years; Buy one get one free (BOGOF), 2 for a price, buy 1 get 30% off the second or more recently half price. Within the channel the majority of promotions have been multi-buys, mainly 2 for a price however we have seen 3 and 4 item multi buys come in as well.

No matter what type of promotion the shoppers buy, we know that within Convenience it is a way of providing value and to drive interaction of Fuel Shoppers who potentially wouldn’t buy any products in store. The challenge at the moment is two-fold:

1/ To provide shoppers with value for money however, not being too cheap

2/ To provide variety of combo offers, yet allowing personalisation

In our CMA 2018 Convenience Shopper Report we identified a decline in the value of Promotional baskets of 10%, despite basket size (items) and Penetration remaining the same. This can be driven by two scenarios’: either unsuccessful promotions or giving away more than we need. Promotions are designed to drive basket value and items, yet we are not achieving both.

Recently we have seen varying of the promotional programme by retailers and this may have had an impact. Sometimes we can be a little timid to either push up prices on what has previously worked despite everyday price increasing or confusing messaging. The latter can see both a value decline and promotional penetration/take up decline. It is really important that the messaging remains as simple as possible, even when you add complexity of multiple categories/items in the promotion. Shoppers are creatures of habit, and changing mechanics that they are used to, can lead to changes in behaviour especially around highly promoted categories.

The second point is around personalisation, which means Shoppers are looking for promotional solutions that suit there needs not being forced into buying something they don’t want. We know that almost 80% of Shoppers are by themselves when purchasing in Shop however, most of the promotional mechanics in Convenience are 2 for mechanics. The 2 for mechanic was designed to upweight the basket increase value and profitability of that basket however, not necessarily satisfying the shopper need. I would suggest that this has become successful based on the fact that it has provided value for money in the past especially when we have seen price points of 2 for 5 versus a single item at $4.

What customers are now looking for is if I am forced into buying a second item to get value I want it to be something that I want. So, this is where meal deals or cross category promotions work well, as it doesn’t force someone to buy 2 items of the same product if they don’t want to.  We do still have a way to go however, in regard to shoppers not buying on promotion as they don’t rate the promotional offers in store great. This is identified through our Net Promoter Scores which shows those buying on promotion rating a 56 (which is very good) and those not buying on promotion rating a -18 (not so good).

The reality is that 81% of shoppers don’t buy on promotion so that is where the potential opportunity exists however, we must work to ensuring that the value works for both Retailer and Shopper.

 

 

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