BrainTrust Query: Shoppers Are Changing. Sales Promotions, Not So Much
Through a special arrangement, presented here for discussion is a summary of a current article from the Mark Heckman Consulting blog.
"Deal mentality" is not a fad. While the economy will eventually cycle back to better times, the impetus for many shoppers to seek the best deal will not soon be forgotten.
So how does "savvy consumerism" affect promotion?
First and foremost, short term, ad hoc promotions are becoming increasingly less attractive to loyal retail consumers and more unprofitable for both brands and retailers. Shoppers are learning how to manipulate promotions like triple coupons and percentage discounts or even one or two-day sales events. In the old paradigm, these programs attracted new shoppers and built transaction size within current shoppers.
Increasingly, savvy consumers restrain themselves from purchasing almost anything at regular price knowing that most full margin items will eventually be on deal somewhere else at some point in the future. What’s worse, there is little or no residual sales effect. In fact, many won’t be back until the next "give-a-way."
To build a successful sales promotion today, the retailer needs to change both the way they structure and measure these events. Here, a few suggestions:
- Design more promotions to last more than a week. Extending past the normal weekly time span for most retail circulars creates a point of difference and a reason to shop your store more than once during the promotion.
- Use customer data (if you have it) to both design and measure the impact of the promotion. If possible, focus the promotion on those categories and items where best shoppers index the highest.
- Involve as many departments and categories in the promotion as reasonably possible to encourage full store shopping.
- Focus on just a few types of events and themes throughout the year. Be known "as the place to go for ______" and not for the promotion du jour.
- Measure results and use learning to sharpen future promotions.
- Expand your success metrics from traditional measures such as return on markdown invested and incremental sales and traffic count to include campaign-oriented results such as multiple redemptions, incremental basket size and shopper frequency (pre versus post promotion period).
- If targeting is possible, offer a special version of each promotion to your best shoppers, providing special audiences additional benefits targeted uniquely to them.
- Finally, if your top competitor is already doing it, resist the temptation to join their party. Create something new that is yours to own.
Discussion Questions
Discussion Questions: How should promotional deals be restructured given today’s savvier shopper? Which suggestions would you add to those listed in the article?
I agree with the premise that consumers will forever be looking for the best deal and wait until they can secure it. That’s the new savvy consumerism. As for the new savvy retailing I believe the recommendations outlined are the tactical essence of one plan. However, I’d add to the list the need to maintain an ongoing relationship with the customer, either through social media, direct marketing or in-store “dialog” that engages the shopper, promotes the deals and locks in the sales and return visits.
I’d stress adding value, rather than cutting prices. Value could mean bundling brands or in providing a reward for purchase. This would help retailers maintain pricing, while offering consumers an opportunity to realize savings.
Value could also mean awarding something that the consumer wants, yet costs the retailer little. Examples of this could be double or triple loyalty points or free shipping.
There are many ways to attract and reward consumers without cutting prices.
These “savvy consumers” have been trained by the likes of JCP over decades to wait and they can score the “deal” after it has been picked over, manhandled, and possibly returned due to fit or other reasons.
Now marketers are courting more and more of these types to give them deals on first run merchandise.
Why is every “girls night out,” First Fridays, Second Saturdays and the like mean we’ll give you a deal?
CMOs: Isn’t there something you can offer besides promotions, deals and coupons via email, smartphone, DM or checking-in? I hope so for your sake….
I’m a little confused about these, “savvier shoppers.”
Who are these people? Surely not the ones who spend billions every year on “faux sales” items. Let’s think mall jewelry stores for a minute. You know, the places with the perpetual, “50 to 60 percent-off sales.” Does anyone really believe these are actually sale prices?
I could go on and on but the point is all that glitters is not gold; all deals are not deals; and most shoppers aren’t all that savvy.
Retailers’ promotional calendars should be part of a broader CRM strategy, not just a sale for its own sake. The conventional wisdom about loyalty programs is that they are not driven by price, but judicious use of sales (private events, early notification of promotions, targeted offers) can be effective in building repeat business. The key is to view sales and promotions as part of a holistic CRM strategy.
On this topic, I have more questions too. So let’s say we have about 1,000 customers per week visit a store. How many of them take advantage of a sales promotion? Is that percentage acceptable if it is less then 10% or greater than 50%? I know that of all of the billions of coupons printed each year only 3% of them are redeemed in a normal economy. I think in today’s economy the number would be a bit higher, say 5% or so.
We talk about time starved consumers, so I am not so sure the larger percentage of shoppers are aware of a sales promotion and shop at certain stores because of a better shopping experience. Good sales team, always have the product they like, and or convenience of location. The fact that certain items are on sale, is just all the better but not their primary reason for shopping.
Consumers always crave a good deal; it is human nature. However, consumers have become somewhat immune to the usual run-of-the-mill temporary price reductions and circulars. A deal can be a lot more exciting and creative and doesn’t need to be contingent on one product or one brand at a time. Give the consumer a deal for shopping multiple aisles at your store. For example, buy 25 items and get 3 of the lowest cost items free. Go ahead … you can do it!
This is such an apropos headline as it sums up the inertia that retailers have built up in terms of relying on price promotion as the competitive “lever” of choice.
Mark provides some excellent guidelines for making promotion more intelligent and rational, yet there is one key guideline missing: not all customers need to receive an offer or promotion in order to be prompted to shop!
There are plenty of opportunities to engage customers and communicate with them without relying on an offer, especially when it involves a discount. Marketers need to be more confident and do more testing and they can see this for themselves. If markdowns and discounts are the only arrows in your quiver, there is something fatally wrong with your business.
I feel something big going on — shoppers are being more social through the discount and promotional sites. When Groupon advertises a deal, my friends and people I know talk to each other about it and take advantage of it.
When I speak to people who tell me this is their first time rock wall climbing, they tell me they found this deal on Groupon or another daily coupon site.
Maybe the “discount” is the social driver, something to talk to others about and spread word of mouth and promote social activity to shop or consumer services at a retail establishment. If that is the case, promotions that promote group activity and word of mouth through daily deal sites seem to be what’s working right now.
Mark has written a helpful piece about concrete ways to add intelligence to your promotion strategy.
I think Phil Rubin also touches on a key element that I rarely see in retail promotion programs, and that could be a powerful addition to the retail marketing toolkit: testing.
Wired recently had a great article on A/B testing and how it has become a fundamental thread in the fabric of the web today. It is now standard practice to run many simultaneous tests of different pricing, messaging, creative, layouts, etc., as an intrinsic part of running a website. As a result, online merchants can continuously measure and optimize their marketing and promotion to maximize response rates (and revenues).
Now that certain shopper touch-points can deliver individual messages to each consumer, I’d love to see A/B testing become the norm in bricks-and-mortar retailing. By using the techniques developed for online marketing, retailers could make more promotion decisions fact-based rather than gut-driven, and could be certain they were delivering the very best program to meet their strategic goals.
Nowadays consumers know the sale price of everything and the value of nothing. That’s probably because retailers hide the real value of everything today and consumers buy into that game.
Consumers have been trained to go on scavenger hunts and look for hidden treasurers, excitement, adventure, hope and that mystical process that allows them to think they got a really good deal. And hunt goes on.
Shopping requires an investment of one’s time. Time equals money and the opportunity to win. Consumers may be smarter than before, but shopping is their own world for 30 minutes or so, and they want it to have some human as well as financial ROI. So retailers play “deal” games designed for that purpose and even smart consumers play along.
This topic could go on many tangents, lasting many months, and cost many lives. In my world of retail, we all know that the deep discounters have a zombie-like effect on the consumer. How to conquer that is very difficult, as the big-box stores have a built-in preconceived advantage before you run your first promotion. A sharp focus on high quality perishables at amazing deals, always brings in the folks. It still takes a sharp operator to make a decent margin on those items, as the consumers will focus 90% of their shopping on those hot deals. I know this isn’t a brilliant thought, but it is the reality of today. Most of my customers will not buy center-store items like before, and never will. The dollar stores, and big box stores have that locked in.
Keep the promotions strong, and very timely to match the holidays your promoting, and ramp up the deli and bakery, and pair wines with unique foods (think Trader Joe’s).
Making a profit in today’s market is an investment in great employees, superior knowledge of your products, excellent relationships with your core suppliers and above all, being a unique store, with unique variety of signature items, that people must have, at a fair price, which in turn leads to profits.
Sorry if I have gone astray here, but customers want hot deals on all the basic items, and are willing to pay more for the really cool stuff you can offer them!
Happy selling to all those for the holiday!
Haven’t we all been “trained” by retailers and grocery chains to “wait” for the bargains? Publix as an example, and I love shopping there, comes out with their weekly sales items on Thursday. So I wait until Thursday for my “bogo” or discounted item sales. Sometimes I will wait several weeks; but I know soon enough the items we stock up on will be on sale. We are all doing something to take advantage of the lowest prices at that particular time. This is not going to change when the economy eventually rebounds. Once we have tasted the juice of lower prices we are not going to buy at the highest point, except for the enevetable gas price increases that always come.
Another key element of “savvy consumerism” is shopping around, i.e., this consumer doesn’t shop for groceries at just one store. Rather, they shop multiple stores for all their grocery needs. As such, restructuring promos may increase wallet share a bit, but this consumer will still visit several other nameplates to get that brand’s promos and groceries. I’m not against promos. Indeed, I like the suggestions offered here for altering the brand’s promos. And, I particularly favor the creation of multi-tier frequent shopper programs (e.g., basic, bronze, silver, gold, platinum levels) that reward the best shoppers with better promos.
That said, brands also need to look beyond merely restructuring promos to what I see as the larger picture: clearly differentiating the brand’s shopping experience, e.g., a higher level of customer service than the competition, more unique products (private labels), more locally grown and made products, greater outreach to the community, or targeting key demographics that have their own shopping needs, behaviors and desires (e.g., seniors, males, teens, new parents, etc.).
Yes, thanks to the recession and growing use of shopping tech, retailers and CPGers must learn to attract a savvier shopper. But being savvy also means this consumer is smart enough to know the “value” of shopping experience elements that go beyond hard dollars.
“Value” is key today, however “sale” prices are still the most effective traffic driver. With few exceptions, EDLP doesn’t draw crowds. Think of what draws customers in other industries, and find ways to replicate that in your retail store. Hotels, airlines, etc., drive true loyalty. What aspects of those businesses can be implemented in a store? “Premier” checkout lines for big orders/loyalty members? Etc….
I think Ralph makes a good point here: focus on delivering value to loyal customers as a way to strengthen their loyalty and increase share with them. You can also identify brand advocates within those loyals who will recommend your brand to their peers. Increasingly, social promotions will target known advocates, make them feel special with an exclusive offer or experience, and prompt them to spread word of mouth. Brands that pursue this strategy can start to break the “deal mentality.”