More frequent, less deep promotions cause most shoppers to balk.
CPG and retailers that don’t refine their promotion strategies will face a tough ride in 2013.
Food price hikes that grow dollar sales but impede unit volume force manufacturers to promote in order to move units. It’s a costly way to retain or grow share—trade-spend is the #2 CPG expense after cost of goods at about 20% of gross sales.
Yet while CPG amps up its spend, 62% of retailers “take more margin on promotion than they did last year” and 46% move towards “more of a clean-floor policy,” limiting available space for shippers and displays, according to new research by AMG Strategic Advisors, a consulting unit of Acosta.
The result: higher prices for shoppers and less visual impact on the selling floor. The situation isn’t pretty, imply findings of the report, A Shift in the Lift: A Study of Key Factors Influencing Trade Promotion Effectiveness. Despite a peak level of 43% of unit purchases in supermarkets in 2012 occurring on promotion—and nearly 60% in categories like ice cream and carbonated soft drinks—shoppers aren’t biting as readily as they once did.
Why? Many households continue to struggle financially. Two-thirds of shoppers (67%) tell Acosta they’re “buying less and sticking to a budget” these past six months. Also, 59% say more than half of their shopping basket includes items on deal. More than half polled (54%) say they’re buying fewer unplanned items on impulse. And if prices aren’t where shoppers want them to be, they’ll often wait: 65% say they “expect certain products to be on sale and, if they are not, they will wait until they are on sale to purchase.”
A few more key metrics: