R&FF Retailer: Don’t Be a Turkey This Year!
By R&FF Retailer
a special arrangement, presented here for discussion are excerpts of a
current article from Refrigerated
& Frozen Foods Retailer magazine.
As Bubba once said, we
feel your pain. Every year, you buy a gazillion turkeys, price ’em low
and stack ’em high in the display cases. You
pray they’re all gone by Thanksgiving. And every year, you wonder if you
could have made more money on the deal. So what’s the best method?
Kevin Janiga, president of Winsights Marketing,
urges stores to “do the math,” creating ‘what if’ scenarios
for taking the turkey margin below cost alongside the expected gains on
the items such as stuffing, pie mix, sweet potatoes, milk, cranberries.
Research has shown that retailers make the same profit whether they use loss-leader pricing or not, and that the practice does not
significantly increase traffic long term.
“A retailer might
gain 15,000 more shoppers with a loss leader investment of $80,000, but
ultimately make about $25,000 less profit,” said Mr. Janiga.
Hoss Tabrizi, managing partner of Strategic Price Advisors, urges
retailers to always assume a competitor will match a lower everyday or
a promoted price, and should gauge whether a respectable margin can be
achieved under the new pricing structure. Poorly thought-out promotions
have lowered the
“reference price” that shoppers expect to pay for turkeys, and
it takes significant time and investment to re-establish it at a profitable
to tell shoppers why the price of a promoted product is so low and that
the price drop is temporary,” noted Mr. Tabrizi.
“This lets them understand not only the savings they are getting, but
what the true (and higher) reference price is. That helps them adjust to
higher prices more quickly in the future.”
If using turkeys as traffic
generators, Mr. Tabrizi said retailers should
consider setting a reference price of $50 (around $2.79/lb), and giving
shoppers a $30 coupon if they spend at least $250 in the month before Thanksgiving.
“This is very different
from just offering $20 turkeys, and it will raise their value in the minds
of shoppers,” said Mr. Tabrizi.
“The communication mechanism is as important as the discount itself
in setting the reference price. Very few retailers or manufacturers effectively
communicate the non-price features of a product and instead focus consumer
attention primarily on discounts and giveaways. Above all else, base your
pricing decisions on careful analytical measurement and a sound pricing architecture.”
Mr. Janiga said
most retailers could dramatically increase holiday sales by doing a better
job of cross-merchandising and encouraging one-stop shopping. A $5 gas
card or free turkey-basting pan could be offered to shoppers who buy enough
“Don’t just blindly
give it away,” said Mr. Janiga. “There are a lot of dollars involved here, and
you should plan it out carefully.”
Do you think food retailers have become “turkeys” for giving
away or deeply discounting turkeys around Thanksgiving? Why or why not?
If so, what are some smarter promotions around Thanksgiving?