Is it time to rethink trade promotion strategies?

Articles
December 01, 2008

Is it time to rethink trade promotion strategies?

There’s one ‘forever’ element of shopping that’s been left out of today’s dire spending forecasts, and it is one that continues to give CPG and retailers quiet hope going forward: the absolute pleasure of an unexpected find on a store visit. That find might be a compelling value, solution or innovation that triggers a purchase. It’s the shoppers’ reward for vigilance in the aisles. As time- and money-crunched as people are today, it would be a grave error if stores and manufacturers became less attentive to in-store displays to try to save labor or merchandising expense, or act on their fears that shoppers would wheel past them in search of essentials anyway.

There’s one ‘forever’ element of shopping that’s been left out of today’s dire spending forecasts, and it is one that continues to give CPG and retailers quiet hope going forward: the absolute pleasure of an unexpected find on a store visit.

That find might be a compelling value, solution or innovation that triggers a purchase. It’s the shoppers’ reward for vigilance in the aisles. As time- and money-crunched as people are today, it would be a grave error if stores and manufacturers became less attentive to in-store displays to try to save labor or merchandising expense, or act on their fears that shoppers would wheel past them in search of essentials anyway.

One of the best parts of displays is they can be effective without costly temporary price reductions (TPRs). They often work simply on smart placement and visual strength.

A new study of more than 6,000 shoppers across numerous U.S. channels by OgilvyAction, part of WPP Group, showed that end-aisle displays drive many more impulse purchases than temporary price reductions. That early-2008 study was corroborated by another survey this autumn for a snack food brand at convenience stores. There, display generated nearly twice as many impulse purchases as price reductions, according to an Ad Age account.

The earlier research said 29% of U.S. shoppers buy impulsively from categories they didn’t plan to. Of these respondents, 24% were influenced by secondary displays, 18% by demonstrations and 17% by price promotion.

Moreover, 39% of U.S. shoppers have categories in mind to shop, but select brands in store. These respondents were more affected by demonstrations than by price promotion, Ad Age reported.

In the opinion of SupermarketGuru.com, Rick Roth, the CEO of OgilvyAction, was absolutely correct when he said brand marketers could convey value in stores without TPRs.

We believe it’s time for CPG and retail to emphasize display over TPR in planning their trade promotion events. First, the approach might be more effective at building category and brand velocity, as this research suggests. Second, CPG suppliers already pay hefty trade promotion expenses that are second only to their cost of goods sold, and they could use some relief. Third, that relief would benefit consumers and retailers if it leads to lower everyday prices that keep stores more competitive every day.