Have a great start in 2020!
And, yes, we decorated our Christmas tree again with the data from the latest Accuris benchmark study on trade promotions!
The data indicates that large inefficiencies still remain "under the radar". Apart from extra sales for the products being promoted, trade promotions cause large amounts of subsidisation, cannibalisation, retail switching and stock piling by loyal shoppers - all of which margin reducing. These switching effects represent a staggering 54% of sales on promotion.
Optimise where your promotional sales are sourced from
The Accuris benchmark study for the UK reveals the following sources of promotional sales.
(Scroll down for a free summary report)
Source of Business®™ of £100 sold on promotion:
Competitive brand switching
Basis: Accuris Benchmark study, edition 2019 - data for 2018 in value (pounds)
37 pounds are subsidisation: sales to shoppers who otherwise would have bought the product at full price.
Reduce subsidisation by requiring an effort from shoppers in return for receiving the deal; avoid single unit promotions; use multibuys, larger pack sizes, ladder promotions or volume-plus or value added promotions; promote more in large stores and less in small stores; target replenishment shopping trips.
10 pounds are cannibalisation : shoppers attracted to this product and not buying another product of the same supplier.
Reduce cannibalisation by offering a choice of promotions rather than a “one size fits all” approach. Promote your entire range and use value added or volume-plus mechanics rather than simple price offs.
2 pounds are stock piling: shoppers buying more now, but less than normal after the promotion.
Reduce stock piling by putting a variety of products in promotion: flavours, sizes, packages.
Promote secondary SKUs (alternatives for main SKU). Avoid predictability; align weight of purchase with shopping trips / store format.
5 pounds are sourced from retail switching: shoppers buying in a store where the product is promoted and buying less in other stores.
As a supplier you want to reduce retail switching by timing promotions simultaneously across retailers and not promoting anywhere during other periods. Retailers advertising your promotions will increase the uplift of your promotion, but will also increase retail switching,
and a net 7 pounds are added to the category. The promotion brings infrequent shoppers back in the category and some shoppers buy and consume more than what they had intended.
Increase category expansion for low penetration categories by using mechanics on entry level packs and for high penetration categories by using mechanics that increase weight of purchase such as multibuys, ladder promotions and premium display space.