The days of supermarket BOGOFs and 2fers seem to be coming to an end. Throwaway your coupons, forget trying to workout whether two small bottles of shampoo are a better deal than one large one and just enjoy everyday low prices. However, in bidding to be ultra-competitive, are grocery retailers and their supplying manufacturers, by removing one marketing lever, going to have to pull much harder on another one?

  • According to research firm IRI, the number of grocery lines on promotion this year has decreased by some 13%, and the volume of products on promotion has declined by 6.4%. In total this represents a 25% reduction in the number of items on offer in stores since 2012.
  • It means in the UK shoppers have received £3.7bn less in promotional savings and the amount saved had they bought at full price is down to 11% from a previous high of 13%.
  • It’s been well documented that part of this change in promotional strategy has been the response of the likes of Tesco, Sainsbury’s, Asda and Morrisons coming under pressure from the discounters, Aldi and Lidl to simplify pricing.
  • Regulatory authorities have had their part to play too. The Chartered Trading Standards Institute released new guidelines earlier this year that shifted the emphasis of promotions from the old ’28 days at full price prior to promotion’ rule to running them on a 1:1 basis – price promotion of a good should run in equal proportion to the period when it is at full price.
  • The Competition Markets Authority has also cracked down to ensure pricing is transparent and compares like with like.
  • The impact of these changes to promotional strategy vary from category to category, some are more sensitive and deal-driven than others. As a result base prices are down in some areas by 2.3% for brands, 2% for own label; while other areas are seeing rises by as much as 3.5% for brands, 1.7% for own label.
  • As a consequence promotional support is being concentrated in those categories that respond the best to short-term growth, leaving other categories largely unsupported.

From the shoppers’ point of view while everyday low prices are an attractive proposition, with inflation forecast to rise over the short and medium term, and a loss of excitement when buying a ‘bargain’, response overall to the changes in strategies may be flat. Other marketing levers may be required to differentiate retailers and certain brands from one another beyond price. Whether this takes the form of
enhanced service, better provenance, NPD, increased use of targeted promotions and ads through paid, earned and owned media or brilliant creative, it will be vital to track performance by the incremental sales performance and changes to shopping behaviour these other levers produce in relation to everyday low pricing.

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Posted by Lawrence Janes

My expertise has come from working with some of the world’s leading retailers and brand owners. These include the likes of Carrefour, Kroger, Tesco & Walgreens; Danone, Johnson & Johnson, Nestle, Pepsico, RB & Unilever.

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