Promotions drive traffic in the Center Store. This is not a groundbreaking development. Yet in the face of ever-increasing competition and the modern appetite for so-called "retailtainment," it is no longer as simple as a good price on candy canes in December.
A recent study conducted by the Promotion Marketing Association, New York, indicates that from 20% to 35% of all consumer purchases are linked to some kind of promotion. That same study suggests that promotions gratify the shopper's senses, in addition to providing clear monetary benefits.
"Effective promotions are probably one of the most critical factors in enhancing a retailer's share of market," said Tom Butler, president of the retail sales and services group at the Sunflower Group, Overland Park, Kan. "The grocer's motto used to be 'location, location, location,"' he continued. "Grocery stores were purely functional. Today, retailers have to create a shopping experience that beats the store down the street."
People are willing to go out of their way in today's retail landscape, Butler said. The best price is not always the best incentive. Oftentimes, the most successful promotions are those that involve the community.
Jim Hickman, owner of six Hickman's IGA stores based in Mexico, Mo., has been participating in IGA's annual Kidsfest promotion for several years. The promotion, run during typically sluggish July, is always a success, he said.
"It's a no-brainer. Anytime you do something for kids, you get the entire community involved," Hickman said.
This past July, the promotion included a space camp giveaway and winners were chosen from an essay contest. The space theme was supported by point-of-purchase material throughout the stores. Each store gets out of the promotion what is put in, Hickman said. Some stores go so far as to host carnivals in the parking lots.
"One of the most critical factors in the store-level success of any promotion is providing leadership to the employees," he said. "We have to get them excited about the promotion."
Kidsfest is supported by the Red Oval family of sponsors, which includes Nabisco, Minute Maid and Unilever, among others. Featured products are promoted and displayed at the manger's discretion.
Bells and whistles notwithstanding, most shoppers are still looking for a good deal when buying on promotion. However, a low price is not necessarily synonymous with value.
"Discounting is a slippery slope, especially if you are talking about a brand you are trying to build equity around," said Jeff Mellin, president of the Promotional Marketing Group, Alta Loma, Calif.
Mike Madigan, pricing manager and buyer at Camellia Food Stores, Norfolk, Va., told SN that staples such as pet food, paper products and laundry detergent are most sensitive to price promotion. Seasonal promotions are not as dependent upon price as a sales driver, Madigan said; however, there are exceptions.
"For example, if you are going to run a promotion on charcoal, the price has to be as good as your competitors," he said.
Stuart Armstrong, vice president at Euro RSCG Meridian, a consulting firm in Westport, Conn., stressed the importance of continuity between promotional advertising and the in-store experience.
"If shoppers have been conditioned to look for a premium product, and they walk into a supermarket and that product is being sold at a drastically reduced price, that can detract from the product's perceived value," Armstrong explained.
In such cases, on-pack coupons or cross-promotional programs may be more appropriate. For the launch of a new product, sampling may be most effective in garnering trial.
"Retailers and manufacturers must work together to understand those triggers that stimulate purchase and, more importantly, drive consumers from purchase to loyalty," Armstrong said.
In certain cases, a smart display may be enough to stimulate incremental purchases without any price reduction at all, he said. While the sales lift might not be as great as one yielded by a TPR, the loss in volume can be offset by the full price.
According to Madigan, display never hurts. "Everything runs better off display," he said. "A display is guaranteed to double sales."
Ross Nixon, vice president of merchandising at Dahl's Food Markets, while acknowledging the power of display, said pricing remains top of mind.
"Price may not be everything, but the supermarket industry has to be very concerned about very competitive prices," Nixon said. "If not, we are going to continue losing a lot of those price-sensitive Center Store items to the mass channel."
According to Nixon, once the retailer has a fix on the competitive price, the other factors such as display and location will naturally fall into place.
Indeed, judging from some recent successes, it would appear that price continues to play a major role. According to Madigan, the most lucrative promotion at his stores over the past several months was a sale on the soft drink Shasta. Cans were selling for 10 cents apiece.
"We moved 20,000 cases in 19 stores over a two-week period," Madigan said. "People simply had not seen a price like that on soda in ages."
At Dahl's, Nixon saw a substantial lift in sales of Era laundry detergent selling at $2.99 for 100 ounces. According to Nixon, the recipe was fairly basic.
"We bought large quantities at a great price and put up a massive display," he said. Display and price are all the consumer may see, but execution is the first step in any successful promotion. Retailers must be properly prepared to move 20,000 cases of soda in two weeks.
Some retailers are demanding more from their partners when it comes to continuity coverage at retail, putting more pressure on the broker's or the vendor's sales force to provide support at shelf-level.
"Promotions are one of the most dynamic aspects of shelf-support," said Armstrong. Retailers are increasingly looking to their suppliers to provide assistance in various shelf-level activities to ensure that promotions are fully realized, he said.
However retailers SN polled said they find it generally more efficient to take care of the nuts and bolts in-house.
"We want to promote uniformly in all of our stores," said Madigan. "If you leave it up to the vendor, they sell product to the manager of an individual store, and that does not help our cause."
Madigan also said that aside from very specific promotional materials, he prefers to use the chain's own signage.
"It depends on what you are trying to accomplish, but manufacturer support is not extremely critical," said Hickman.
In Hickman's opinion, communicating with the customer is the most important part of a successful promotion and effective use must be made of all forms of media, print and otherwise, as well as in-store signage and POP materials.
Communicating with employees is also crucial, Hickman added, reinforcing his previously stated stance.
"There is nothing worse, from a customer's standpoint, than an employee that doesn't know what is going on in the store," he said.