It wasn’t that long ago when shoppers got quite excited to see a product on the shelf with 10% off. Of course shoppers soon got used to 10% off promotions and stores had to offer 15% or 20% price cuts. In what seemed like no time at all 20% became the minimum price cut to have an impact and 25%, 40% and 50% are frequently seen today in many different product categories.
Shoppers are smart
As the discount offers increased shoppers began to wonder how stores could afford to be so generous. Some smart shoppers came to the conclusion that they were paying for the discounts through higher prices on other products, smaller pack sizes or altered product quality. Worst of all they believed that some retailers were misleading them by using techniques such as quietly raising prices and then shouting about bringing the price back down again to where it was before.
Retailers lose out
Some retailers end up giving away margin to reduce prices and getting unhappy customers as a result! Another expensive side effect that Retailers and suppliers have to cope with is the increased costs in their supply chain when a successful promotion increases sales by a factor of 10. This can also lead to empty shelves and once again unhappy customers. Retailers cannot continue to operate in this way. Promotions have to be done differently.
Smarter promotions are not about giving ever larger discounts. They are about adding value to customers and not just relying on price cuts to get shoppers to buy. In the same way that retailers are spending millions on improving the customer experience, training more staff and introducing new ways for customers to pay investments also have to be made in smarter promotions.
Retailers who get smart promotions right will increase product margins, get more happy customers, smooth supply chain peaks and improve other internal processes.
If you want to know more about smarter promotions read my next blog which will be out on Friday 20 April 2012.