Blog
Article 3: Price Promotion
I thought I would share some insights on price promotion (that I recently came across whilst on a research mission) - from the UK’s ISP (Institute of Sales Promotion).
The Institute of Sales Promotion estimates that (in the UK) £25.6b was spent on Sales Promotion in 2007/8 with direct price promotion being the largest sector. The ISP goes on to comment:
The true cost of these sales to the UK manufacturing industry is of the order of £14.4 Billion (based on 2008 figures), representing the amount that manufacturers contribute to retailers to gain “additional” units to those that sell at full price and margin.
The percentage of FMCG products sold on price promotion at retail has increased year on year from just under 30% of all FMCG products sold to now nearly 35% 12 months later.
Manufacturers, when questioned, expect this trend to continue. If the current rate of growth is maintained, spend in this unmeasured area is expected to exceed that on advertising in the UK within 12 months. At the moment, it represents over 50% of the total spend on Sales Promotion in the UK.
The ISP goes on to suggest that deep cut value promotions have become the drug of choice for the FMCG manufacturer because they give an immediate good feeling, but deal long term damage to the brand. Dunn Humby, the key commentator on Tesco Stores Ltd shopper marketing (and part owned by Tesco) also considers that these price promotions devalue the brand.
Of course, there are ways around this with different Sales Promotion strategies that will provide sales volume and brand development. It is also possible to offer the consumer value - at shelf level - without having to enter into a (potentially damaging) price promotion strategy. It is the humble cash back.
More about cash backs and how you can use URMA to shape them next time.
Until then....Melissa
Ref: ISP – The UK Promotion Tracker: ‘Mortgaging the Future in 2009?’
