Both grocers and manufacturers can benefit from in-store promotional programs, which offer fresh exposure to brands. Shoppers can see new or existing products as they’re already on the hunt for groceries, making the opportunity ripe for purchases.
Good for new products and existing ones
Promotional campaigns can be presented in a variety of formats, including sampling events, demonstrations, displays, endcaps, price cuts, BOGO offers and many more. But although some companies and grocers believe that the only time to launch a promo campaign is when they launch a new product, the reality is that there are other key times for promotions that work well.
“In-store promotions are great for new products, but you also want to continue promoting an existing item because people lose interest after a while and it’s important to continue the momentum,” advises Mark Bastian, creative consultant with Mark Bastian Bakery Concepts.
Placement, eye appeal are key
When placing displays for in-store promotions, location is key, Bastian advises. “Displays can be very effective, but often times, displays will become too commonplace to shoppers and they’ll stop paying attention.” For instance, if a salad dressing display is in the condiments aisle, shoppers may not notice it, but if it suddenly appears near the produce, consumers may take notice of it more acutely.
“We did a project with a large retailer with packaged muffins and they originally had them in the bakery,” Bastian said. “They decided to set up a display by the dairy, near the eggs, milk and yogurt -- that doubled sales overnight. The sales were extraordinary, because the product was placed near the breakfast items.”
Grocers and manufacturers place displays with the best of intentions, but they can eventually become unattractive, which should be avoided, Bastian says. “Shoppers buy according to their eyes. If a display is disorganized, dirty or only has one product left on it, people will walk away.”
Calculate promotion’s ROI
After running an in-store promotion, always calculate the return on investment to ensure that the money spent was earned back via purchases, advises Wayne Spencer, president/founder of T-Pro Solutions, which analyzes and optimizes the efficiency and return on in-store promotions for brands including Kellogg and Land O’Lakes.
The biggest mistake he sees companies make when calculating their promotion’s ROI is that they just use simple spreadsheets for their number crunching. “When you're managing an expenditure on average of 23% of your gross revenue on trade promotion spend, spreadsheets aren’t going to give you an accurate picture,” he said. “Spreadsheets offer a static, and in most cases, an inaccurate view of what the company has done post-analysis-wise and aren’t capable of projecting what they should be optimally doing in the future.”
The reason, Spencer said, is because companies can’t pinpoint an accurate baseline for modeling purposes that way. “We work with clients to create and maintain that accurate baseline so we can better model their performance, thus enabling our clients to plan their promotions more accurately to meet corporate objectives for years to come.”
Promotional profits can be reinvested in marketing
Once a company has that information, it can more strategically project how to reinvest its marketing dollars rather than stabbing in the dark at trying to lower prices to bring in consumers. “The bottom line is that cancerous price promotions are killing the industry,” Spencer said. “Margins are razor thin, so if you can increase the profit just by increasing price points but you get the less than optimal volume results, that won’t help in the long run. Instead, a smart promotion will allow the brand to get higher volume/profit and reinvest the accrued income into mutually-driven, digital media and brand-building initiatives instead of cancerous price wars.”
While brands are focusing on promotions, retailers themselves should be looking at launching their own optimized promotional programs to meet their category objectives. “By utilizing the power of constraint-based modeling in the annual planning process, to meet both the retailer’s and manufacturer’s objectives, we can begin to execute true collaborative joint business planning as opposed to just talking about it,” Spencer said.
“The key thing we have to stay laser focused on in this industry is that with companies like Lidl, Aldi and Amazon increasing their presence in the CPG sector, traditional retailers may need to cut down their over-proliferated, underperforming distribution base -- not with a hatchet, but with a scalpel,” Spencer said.
If you enjoyed this article, join SmartBrief's email list for more stories about the food and beverage industry. We offer 20 newsletters covering the industry from restaurants to food manufacturing. And be sure to follow us on Twitter for the latest industry news.