-40% across all PepsiCo's 1,5L PET soft drinks brands
This promotion for sure will sell “like hell”. Still, we believe it’s a true Halloween Horror promotion that will certainly “kill” all profits in the soft drinks category!
What is wrong?
The discount is too deep, the offer is too broad and there is no incentive for the loyal shopper to spend more in the category.
Discount of 40%
This is certain to wipe out all profits. And the discount needs to be funded on the entire volume sold on deal: on the extra bottles sold thanks to the promotion, but also on all base volumes sold to people who would have paid full price. Which leads to …
… excessive subsidisation
Shoppers get a discount from the first bottle they buy. This means that anyone planning to buy soft drinks will get the discount, including all shoppers who were planning to buy this product anyway and who were prepared to pay full price. As a shopper you do not have to make an extra effort to obtain the 40% discount. Actually, it is impossible to
Too many products
As if to make sure not a single cent of profit survives, the offer is valid on all types of fizzy drinks (from one supplier). Brands behave differently when promoted and this horizontal discounting across brands ignores the differences between brands to generate traffic (or not), upgrade spend (or not) or bring in new or light shoppers in the category (or not!).
Why do companies run promotions like this?
It buys market share. Competitive steal can be the core motivation from the supplier’s point of view, retail switching from the retailer’s. However, it generally must suffice to use one or a few core products to make shoppers switch. Brands do not have equal ability to generate switching. Discounting such a broad range of sparkling products causes unnecessary and massive opportunity costs.