Winning the promotion race

To a greater or lesser extent, virtually all marketing categories promote, and it is interesting to note how different markets react to different types of promotion. There seems to be one fundamental difference between the grocery sector and the health and beauty aids (HBA) markets.

While many HBA products are deemed essential, such as shampoo, toothpaste, nappies and so on, in groceries there is a lot more scope for luxury or merely non-essential purchasing. Frozen hot desserts and yogurts are obvious examples, but even products like soup are not necessarily key to the normal diet.

As a result of this phenomenon, promotions are ever-present in certain sectors and the amount of volume sold while on promotion can be significant. Frozen hot desserts, which include strudels, crumbles and the like, is an indulgence market and so manufacturers seem to do all they can to attract some-time buyers by price reductions or even buy-one-get-one-free offers (BOGOFs).

BOGOFs are most successful when placed at the end of an aisle. However, manufacturers must pay for this privilege and while a lot of volume is sold which in turn benefits brand share, the cost disadvantages of such promotions can often outweigh the advantages.

Yoghurts and dairy desserts provide a similar scenario. The high levels of promotion mean that the consumer can “cruise the fixture”, seeking out the best offer and very rarely paying full price.

In-store materials, such as shelf-talkers, are often used in conjunction with price reductions because they usually provide better sales uplifts than on-pack price promotions alone. These however can prove costly for the manufacturer. Consequently, an offer of “18 for the price of 12” looks impressive on shelf and with these extra free offers, bold (not to mention large) on-pack descriptors do as good a job as shelf-talkers.

However, in a market which would appear to have little brand loyalty, there is one product which has truly broken the mould. The category leader, Mller, is an unusual product and as a result, a different promotional strategy. As a rule, Mller does not make multipacks and so the single pot becomes very much an impulse purchase. Considerable price cuts or multi-buy offers, alongside in-store materials, give Mller a seemingly unassailable advantage within the market.

Mincemeat represents an extreme in the grocery market because it is so seasonal. With over 70 per cent of sales occurring in November and December, it is no surprise that manufacturers and retailers alike are keen to shift stock as quickly as possible. In December last year, nearly three-quarters of all mincemeat sales were made while it was on promotion, some way above the already high annual average for promotions of 60 per cent (Chart 1).

Because so many of the HBA categories are deemed essential, the reasons for promoting are quite different. Without the need to tempt buyers, attention is focused on increasing market share in an extremely lucrative market. Two of the most expensive HBA products are disposable nappies and sanitary protection, and these are also two of the most heavily promoted. Both types of product are technologically complex, which goes some way to explaining the high price, and as a result, any promotion will be gratefully received by the consumer. This is particularly so because both nappies and sanitary protection are perceived as essential products.

BOGOFs within the nappy market represent a good deal because of the sheer quantity of product being given away. In April 1997 one retailer ran a BOGOF on Huggies nappies for less than a week. The result of this promotion was that it generated short-term share gain. Ultimately however, it had no lasting effect on changing consumers’ shopping habits.

Multi-buy promotions such as “buy two, save s” remain the most common promotional mechanism within the nappy market, as single-pack price reductions do not build loyalty to the same extent.

Deodorants are another must-buy product – the only question for the consumer is “which one?” Promotions are again prevalent to encourage repeat purchasing and the success of these depend on the type of promotion used.

Uplifts in sales are far higher when displays (or secondary locations) and in-store materials such as shelf talkers are utilised than price reductions alone. Typically, these promotions are supporting multi-buy promotions such as “three for the price of two” and these create the sort of high volumes beneficial to all parties.

It is clear, then, that each promotion type will achieve a different response, depending on the category and also on many influencing factors therein. Whether promotions are profitable seems no longer to be the key objective. If profitability can be achieved, then all well and good, but a return on investment, particularly considering the amount of money spent on promotions, and staying ahead of ever-growing competitors is far more important.

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