Retail offers focus on value

As retailers expand their range of sales promotions to increasingly value-conscious consumers, Matthew Valentine learns the reliance on buy one, get one free offers may be coming to an end

The ubiquitous buy one, get one free (BOGOF) promotion has ruled the roost in supermarkets for many years. The received wisdom is that the promotional tactic ticks many desirable boxes – it provides a tangible perception of value, encouraging product trial and brand switching by shoppers while driving increased volume sales.

The method is popular with some shoppers. Research among consumers by Marketing Week’s sister title In-Store found that more than 70% of supermarket shoppers rate it as their favourite type of promotion. Other multibuy offers, such as buying two items to get a third free, are favoured by only 4%.

BOGOFs also benefit from high recall rates. When asked which promotions they remembered seeing on their most recent shopping trip, 48% mention a BOGOF. But not everybody is an unqualified fan.

Some shoppers feel they are being pressured into buying greater quantities of a given product than they want or need. Whether these people live alone, are concerned about food waste or are simply short of storage space, some buyers do not automatically believe that greater volumes equate to a better bargain.

They might simply prefer lower prices on their favourite food products, for example, as they begin to plan meals more carefully to cut back on costs. The sentiment appears to be gaining ground as more consumers reduce the size of their shopping budgets. So if the BOGOF falls out of favour, where next for incentives marketing?Research from Harris International claims: “Customers are cutting back on BOGOFs – they want simple money-off promotions. They are also increasingly aware of wasted products if they buy BOGOFs. About one-third of products bought in BOGOF are thrown away.”

The research business predicts that recession-hit consumers will increasingly prefer to shop closer to home, saving on travel costs to large supermarkets and reducing the temptation to over-shop. Neighbourhood convenience stores stand to benefit from the trend.

David Norbury, of implementation agency REL – which makes sure promotions appear correctly in stores – agrees: “There are fewer BOGOFs at present. Price remains a key component, but clearly there are different ways of promoting that. People will buy what is the most competitive offer.”

Paul Nevett, Unilever marketing director for foods in the UK and Ireland, says his company has been using fewer BOGOF promotions after they reached a peak in 2005. While he says these incentives are still a relevant part of the marketing mix, they are not suitable for all brands, categories or situations.

Collaborative relationship

Nevett adds that brand manufacturers need to understand which promotion fits best for particular shoppers in specific locations. “You need to have a collaborative relationship with the retailers,” he says.

The BOGOF tactic has traditionally been popular with large retailers because it drives volume sales while invariably being funded by brand manufacturers. The retailer takes the glory for perceived low prices while brands pick up the tab.

As a result, some brands can find BOGOFs less than satisfactory. Colin Harper, managing director of Storecheck Marketing, warns: “BOGOFs do little to help build a brand. It does encourage product switching, but only because consumers are shopping around for the cheapest deal.”

One-sided benefit

Unilever’s Nevett is unwilling to go as far as those critics who say BOGOFs provide a one-sided benefit to retailers at the expense of brand margins. “There are objectives for both retailers and brands in employing BOGOF tactics, although for us it is the exception rather than the rule,” he says.

Unilever is considering using a multitude of marketing and promotional techniques in future, with Nevett reporting that “depth of offer is not always the key issue” but “getting noticed”.

While BOGOFs and other multibuys still occur, Nevett is witnessing a considerable increase in single-unit price promotions, supporting the theory that shoppers prefer, say, a 30% discount to a doubling of volume.

“Customers are thinking more about basket size and that leads to a targeted approach,” he says. Fear about their finances alongside ethical issues such as food waste – although Unilever makes few products with a short shelf life – could be driving the popularity of these discounts with consumers, Nevett adds.

According to Nick Murray, head of planning at marketing communications agency Euro RSCG KLP: “There is quite a lot of resistance to BOGOFs and multibuys. Some consumers feel that they are being railroaded by this bulking up of products. They begin to get nervous that they are wasting their money by buying the wrong things.”

Murray says that BOGOFs are really retailer inventions, part of a drive by shops to demonstrate perceived value in stores. He thinks they are less popular with manufacturers than other methods.

Tough challenge

However, to find a promotional incentive that provides long-term benefits for brands while delivering the same volume uplifts in sales is a tough challenge,” he says.

“BOGOFs would be replaced by whatever retailers think is a good idea, which will extract money from manufacturers and shift greater volumes,” says Storecheck Marketing’s Harper.

Some of the “good idea” promotions around at the moment include Marks & Spencer’s food kit that lets couples dine at home for 10, while Sainsbury’s undercuts this with its “Feed your family for a fiver” campaign.

These offers use more complex language and ideas than a straight BOGOF, with retailers taking a strategic lead over brands in developing these new ideas. There are also some more standard promotions in categories such as alcohol, where many cheaper wine ranges have been on offer at “three bottles for 10”.

Sainsbury’s credits such promotions, alongside the “Switch and Save” campaign to encourage take-up of its Basic own label range, for its like-for-like sales growing by 6.2% in the first three months of 2009.

Sainsbury’s chief executive Justin King says: “Our work on providing universal customer appeal through continued investment in price, quality and a broader product range has been well received.

Product mix

“Our price perception metric recorded the biggest improvement of the measurements we track on a regular basis. We are seeing some significant changes in the mix of products that customers are choosing to buy.”

The retailer’s Basics range saw year-on-year sales grow by more than 60% compared to the first three months of 2009, from its chain of 509 supermarkets and 276 convenience stores. Many of those purchases must have impacted on the bottom line of standalone brands.

As Euro RSCG KLP’s Murray points out, while shoppers are nervous of making the wrong buying decision at the moment, they are also arriving at stores in a less-decided frame of mind in terms of what brands they are going to buy. The chance to save money is a tempting call to action.

The success of Sainsbury’s Basics range provides evidence of a propensity to switch from regular brands if an offer is compelling enough. While it is a blunt instrument, the BOGOF might be the easiest way to help brands fight back against advances in own-label sales. “It might not be time to replace the BOGOF just yet,” Murray says.

Unilever’s Nevett suggests that the more inventive a promotion can be, the more loyalty and excitement it is likely to generate. “That kind of approach is very important right now,” he says, citing the Flora “Cooking with schools” promotion – which allowed customers to collect proof of purchase to obtain cooking equipment for local schools – as a good example.

While the extra-product-free offer might not be dead, it seems that its grip on the consumer’s pursestrings is weakening. This is set to be the year of the promotion, but the incentive may no longer be limited to BOGOF.

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