THE UNUSUAL ECONOMIC ENVIRONMENT of the past year has made some retailers take a new approach to their pricing and promotional strategies, Jon Hauptman, a partner with consulting firm Willard Bishop, Barrington, Ill., told SN.
Rather than simply repeating the same promotions in the same time slots year after year, many retailers have begun coming up with new ideas to increase sales volume, he explained.
“We are finding that retailers are much more critically analyzing their historical promotions, so that they are replicating those that really do move the needle and drive sales of cases,” he said. “That way they are not only attracting more shoppers, but they are making their cases more appealing to CPG companies, who are looking for the best partners to invest with — so there is an emphasis around critical evaluation and setting up new metrics that will guide new promotional activity.”
That translates into a rethinking of the strategies for deciding what goes on Page 1 of the weekly ad circular, Hauptman explained.
“It has everything to do with what categories and what items go on the front page — what degree of discount is being offered,” he said. “Not only the front page and in the ad, but through all promotions and [temporary price reductions], ensuring that promotional discounts meet certain thresholds.”
Retailers should ensure that they are maximizing the use of promotional dollars from suppliers, he pointed out, and not investing their own money in promotions unless they are sure they are generating adequate returns.
They also need to identify the types of promotions that are not working, and stop using them.
The weekly circular, he said, is as important as ever — if not more so, Hauptman said.
“The challenge for retailers is to break out of the cycle of merely organizing promotions in the circular the way they did the same week a year ago,” he said. “Many retailers evaluate their personnel on growth vs. year-ago, so there's often a tendency just to replicate what they did last year. However, given that sales are tight and many businesses find their sales are soft, merely replicating what they did a year ago isn't enough. We are seeing progressive retailers coming up with entirely new themes and entirely new ways to leverage the circular, without regard to what they did last year.”
It is a risk that is often worth taking, Hauptman said, especially if the alternative could be disappointing sales compared with a year ago.
“Just because we ran a buy-one, get-one free theme this week a year ago, doesn't mean that's appropriate this week,” he said. “It might be something different — it might be something seasonal. And just because we had three meat and three produce items on the front page a year ago, doesn't mean we are going to do that again this year.” It is looking at themes, but also looking at products that are on the front cover.
“It is taking risk, but it is taking a calculated risk by quantitatively analyzing what works best, and then enhancing the circular based on that.”
One of the new trends that emerged in the economic downturn was the placement of more private-label items on Page 1 of the circular.
“Leveraging the power of private label on the front page is a new approach to leveraging the circular,” Hauptman said. “It is designed not only to drive sales of private label, but to get the shopper to come to that store first.”
Many progressive retailers are looking at syndicated market data to see how well certain products and groups have performed in conjunction with certain promotions, he explained.