Instore promotions. Price promotions. Giveaways. Free with purchase. Buy-one get-one-free. Remember them? Not so long ago it seemed like every store in the world was full of discounts, deals and offers. Love them or hate them, they were a massive part of how brands and retailers tried to win with shoppers. Then Coronavirus happened, and most instore promotions disappeared. But they are about to make a massive comeback, and this creates huge implications and opportunities for your brand. Want to know how to optimize the return of instore promotions for your brand? Read on!
Instore promotions are about to make a big return!
During the early months retailers just focused on keeping products on the shelf. But time ticks on, and we can already see promotions creeping back onto the shelves. Is this a good thing or a bad thing? That depends. One thing for sure – it is an opportunity for brands to review and reset the way they use promotions to connect with shoppers. But before we go there – how do we feel about in-store promotions?
What was so bad about instore promotions anyway?
The consumer goods industry used to do a lot of instore promotions. Depending on the country, a typical hypermarket could have up to 40 percent of its entire range on deal at any one time. And over the past decade, that number has steadily increased. But is it a bad thing? I mean, shoppers LOVE instore promotions right? And aren’t we supposed to keep shoppers happy?
Well yes, but no. We’re supposed to do that, but in a way which is profitable. And therein lies the problem with a lot of instore promotions. We’ve analyzed promotions all over the world and we find that most of them lose money. Not all, but many.
Why? Because promotions are indiscriminate – any shopper can pick them up. So while some promotion shoppers might be high value shoppers being introduced to our brands, most are not. Many shoppers will be deal buyers; shoppers we have trained to check out deals. They’ll buy brands when they are on deal, and perhaps stock up (but not consume any more than usual). Or they’ll buy whichever brand is on deal – but will never be loyal. And many shoppers who buy your brand on promotion are loyal shoppers who would buy your brand anyway. That’s just wasted profit.
Why instore promotions will return in a big way
If promotions are such a bad idea, why can’t we just not do them anymore? Sadly, that is unlikely. Promotions are driven by two major factors. Firstly, it is probably the easiest way for brands to gain a sales uplift quickly. So brands that have had a tough time in the past few months are likely to be eyeing up any opportunity to pile into a heavy discount promotion. But what about brands that have done really well during the pandemic? Surely they will be able to resist the temptation? That is where the second factor comes in: retailers.
Retailers can’t resist instore promotions
Retailers historically have loved instore promotions. Why? Because they are simple, easy, and usually funded by manufacturers. Consumer goods retail has had a challenging time. Some parts of the industry have been closed for months. And even those parts, for example supermarkets that have seen sales rise, have seen profits dive. Retailers will be eyeing the future and seeing increased competition. And they will be looking ahead and realizing that we are entering what is likely to be an extended economic downturn.
What does a retailer do to compete, drive sales, and win shoppers during an economic downturn? Promote!
This will be compounded by the fact that a lot of other in-store activities will be challenging to execute. Sampling? Not happening? Events? Unlikely. Big displays? Probably not as they make the store hard to navigate. And even if they could be executed, will shoppers stop and browse and interact? Maybe not.
But what is quick to execute, easy to execute, highly flexible? Price promotions!
How can brands prepare for the return of instore promotions?
So whether brands like it or not, they are likely to come under pressure to run promotions across the trade. If you are totally happy with your current promotional strategy, you know that they are profitable, and drive brand value in the short and long-term – that’s great. But to the 99 percent of you that really shouldn’t be going back to a profit-destroying, brand-equity-killing promotional plan – there is a window of opportunity!
Habits have been broken. Shoppers are different. While telling a retailer ‘no’ when they request something is never easy, there is legitimacy in offering an alternative. It’s not necessarily about stopping all promotions, but about re-evaluating how we engage shoppers, and seeking a better alternative.
Now is the time to take a step back. And you have to do it now. Soon it will be too late, and you’ll be running promotions because the retailer wants them, rather than because they fit with your brand and shopper strategy.
Making the most of this situation will require consumer goods companies to do two things:
Be shopper-centric:
If we are to be successful in changing our approach to instore promotions, we need to ensure that we can still engage shoppers effectively. That means we need to be shopper-centric. Rather than just offering indiscriminate deals, we need to be focused on how we can create value for shoppers. And specifically – our target shoppers. If we could reduce the amount of ‘value’ we give to shoppers that we aren’t targeting, couldn’t we create even more value for our target market? To begin – start by asking the following questions:
- Who is your target shopper?
- What has changed about the way that they shop?
- What do they do right now, and what do you want them to do in the future?
- What are the key barriers to them shopping in that way?
- What, other than a promotion, could enable them to behave in the way that you want to?
- Is a promotion likely to help at all?
- If the only thing you can do is a promotion, what different promotions could you consider?
Be retail-centric
Instore promotions, remember, are not just about winning with shoppers. We need to win with retailers too. Without retailers on board, it will be tough to reach those shoppers!
To engage better with retail we need to understand their needs, understand what they are likely to ask for, and be ready with credible alternatives that still support them, but in a way that delivers better returns for us. We need to ensure that our sales managers on the front line are trained to deliver some challenging negotiations.
But more than that, we need to work out which retailers are important, and why. The sands of retail are shifting. We can’t increase investment in every retailer. We will need to make some tough choices. And that means we need to be strategic in our customer management.
Yes, this is a lot to ask. Yes, it is going to be difficult. But there is a fantastic opportunity to step-change the way we invest as well as step-changing the relationships we have with our most important customers.
Now is the time to change the way we invest in retail
Yes, you might still end up doing promotions. But at least by taking these steps there is a possibility that you’ll come up with something else. There is a possibility that if you do end up doing in-store promotions they will be much more focused.
Promotions are part of a bigger strategy of shopper and retail engagement. This is a golden opportunity to reset both retail relationships AND how you market to shoppers. We have a clear, proven roadmap that can guide you through this process. If you’d like to know more about The Shopper and Retail Strategic Roadmap, get in touch now.