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Know your promotion objectives before you select a promotion

2012-12-01 - David Sables - CEO
Source - The Grocer

Have you ever got to the checkout and been told: “These are on bogof so you can have another one free”? Or have you been notified of deals you were unaware of by the self-scanner? OK, you saved money, and you feel EPIC, but think about it. The businesses funding these promotions have rewarded you for something you were going to do anyway.

This costs money. While there will always be an element of this, it’s important to know how much of your promo spend is building value, versus the amount achieving nothing or destroying it.

Promotions soak up account managers’ time, but they are an invaluable part of the mix for driving business and realising plans. So, as you are going to do them anyway, do them for the right reason, with the right mechanic and depth. There are hundreds of badly aimed promotions misfiring all over the shelves at all times.

The right reason to run a promotion is: never because the retailer wants you to. Poor promotions are often justified as ‘the cost of doing business’ with customers. Getting caught up in retailers’ corporate promotions can often conflict with your own product goals. Famously some retailers go for a corporate 3 for 2 deal. This is to drive their own shopper penetration and loyalty. Recognise if you take part, however, that this is a loading promotion, which makes sense only if you need to drive volume of an established product. It’s not great for trial of a new product.

Promotions are not just for the sales plan, they are an important lever in the marketing mix of your product. If you need to drive trial to reach a greater number of users in the market, then it makes sense to focus on reducing the entry barrier. This might mean a cut-price offering on a small size. If, however, penetration is good, this could actually reduce income. The right answer may instead be a loyalty event to reduce the time it takes shoppers to come back and buy the next one. Frequency of purchase is so often forgotten.

Only when you know the levers you are trying to pull can you set in place the measures to rate a promotion’s success. Is it penetration, weight or frequency? Do you need help to decide? Just know this: for almost all promotion objectives a bogof is an inefficient spend of budget. The retailers love it though.

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