Archive for June 17, 2012

Shoppers are Changing, Sales Promotions…not so much!

Traditional sales promotions are experiencing changing times.    Across all channels of retailing, shoppers are now “armed” with digital coupons, multiple store circulars, and competitive prices at a click of the mouse.   Above all, these shoppers now posses the intelligence to understand the difference between a good deal as opposed to being manipulated by the retailer.

This emerging “deal mentality” is not a fad.  Certainly, the economy will eventually cycle back to better times, but the impetus for many shoppers to seek the best deal will not soon be forgotten.  You can call it anything you like.  I call it “savvy consumerism” and thanks to hundreds of “coupon and shopping websites this movement is just getting its legs.  I believe it to be the single most important consumer marketing movement of the decade ahead.

So how does savvy consumerism impact promotion? 

First and foremost, short term, ad hoc promotions are becoming increasingly less attractive to loyal retail consumers and more unprofitable for both brands and retailers.  Shoppers are learning how to manipulate promotions like “triple coupons” and “percentage discounts”, or even one or two day sales events.  In the old paradigm, these programs attracted new shoppers and built transaction size within current shoppers as both groups were lured to make companion purchases at full or nearly full margin.  This “mix” of sales items and full margin items was the formula the retailer counted upon to have a successful promotion.

Increasingly, savvy consumers restrain themselves from purchasing almost anything at regular price, staying disciplined to their shopping list, knowing that most full margin items will eventually be on deal somewhere else, at some point in the future.  The result is a spike in sales and traffic and a huge dip in profitability.  What’s worse, there is little or no residual sales effect.  In fact, many of these shoppers won’t be back until the next “give-a-way”.  While these promotions can create a short-term spike in sales, they exist in a silo and lack the ability to foster long term, profitable customer relationships. Instead of consumers reacting to retailers, the converse is now reality.  Retailers must use the tools they have to adapt.

To build a successful sales promotion today, the retailer needs to change both the way they structure and measure these events.  Here are just a few suggestions.

  1. Design more promotions to last more than a week. Extending the rewards and benefits of a sale past the normal weekly time span for most retail circulars creates a point of difference and a reason to shop your store more than once during the promotion.  Think about sprinkling a few “campaigns” in the promotion calendar as opposed to a series of weekly promotional themes.
  2. Use customer data (if you have it) to both design and measure the impact of the promotion.  If you have a best shopper strategy, insure the offerings in the promotion are focused on those categories and items where best shoppers index the highest.
  3. Involve as many departments and categories in the promotion as reasonably possible.  Encourage full store shopping, not just where the brand money takes you.
  4. Focus on just a few types of events and themes throughout the year.  Be known “as the place to go for……..”, not for the promotion de joure. 
  5. Measure results and use learning to sharpen future promotions. This is a critical step in building sustainable loyalty from promotion.
  6. Expand your success metrics from traditional measures such as return on markdown invested and incremental sales and traffic count to include campaign-oriented results such as multiple redemptions, incremental basket size and, shopper frequency (pre versus post promotion period).
  7. If targeting is possible, offer a special version of each promotion to your best shoppers, providing special audiences additional benefits targeted to uniquely to them.
  8. And finally, if your top competitor is already doing it, resist the temptation to join their party.  Create something new, that is yours to own.

Ideally after every promotion or campaign, retailers should have a sharper idea as to which price points and items moved the needle the best both in the short and long term.  Concurrently keeping an eye on longer-term benefits such as incremental basket size over longer periods of time than just during the promotion period.

Having the ability to track and target shoppers is a huge advantage in this new promotional marketplace, but not a show stopper if the capability is not there.  There are techniques both high and low tech that can serve as agents to gaining additional customer behavior data pre and post promotions.  Optimally, the retailer should be able to profile their shopper base according to their responsiveness to the offerings fine tune promotional offers to reward and retain best shoppers, while building basket size and frequency with more causal shoppers.

Armed with promotional intelligence that builds with each promotion, the retailer can avoid running sales events that produce unprofitable sales spikes, with little or no lasting effect on shopper loyalty and begin to leverage their promotional investment for more profitable, loyal shoppers!