Promotion Management

Price Discounts, the widest used, and least understood promotion technique of all

14% Of UK Consumers Now Do All Of Their Grocery Shopping Online

14th June 2017

New research from Mintel highlights the continued growth in the UK online grocery market with sales forecast to increase 12% this year to £11.1bn.  The proportion of households who do all their grocery shopping online has also doubled since 2014.

The research confirms that value of virtual shopping baskets is growing at a far a faster rate than physical ones with sales in the online grocery market rising by an estimated 15% during 2016, while total food retail sales grew by just 1.5%.

The growth in the market comes as an increasing number of shoppers are choosing to forgo their trip to the supermarket. Almost one in three (29%) online shoppers say that in the past 12 months they have done more of their grocery shopping on the web.

What’s more, the proportion of consumers who say they do all of their grocery shopping online has doubled in recent years. As many as 14% of people currently do all of their grocery shopping online, up from 7% in 2014. Meanwhile, the proportion claiming to do most of their grocery shopping online has risen to 13%, up from 10% in 2014. Overall, 48% of consumers do at least some of their grocery shopping online, up from 43% who said the same in 2014.

 Online grocery is the quickest growing grocery channel. Nick Carroll, Senior Retail Analyst at Mintel

Once seen as simply a service to replicate the needs of a supermarket shop online, a number of new services came to market in 2016 that have the potential to elevate online grocery beyond this barrier and adequately serve the more fluid and frequent shopping behaviours seen in the wider market. Growth is being driven by encouraging users who have done most or some of their shopping online to do more. This suggests that it’s just as crucial for online grocery retailers to engage as much with their current consumer base as it is for them to attract new shoppers to drive sales.

Once seen as simply a service to replicate the needs of a supermarket shop online, a number of new services came to market in 2016 that have the potential to elevate online grocery beyond this barrier and adequately serve the more fluid and frequent shopping behaviours seen in the wider market. Growth is being driven by encouraging users who have done most or some of their shopping online to do more. This suggests that it’s just as crucial for online grocery retailers to engage as much with their current consumer base as it is for them to attract new shoppers to drive sales.”

While the online grocery market has experienced rapid growth in recent years, it remains a small part of the wider market, accounting for an estimated 6% of all grocery retail sales in 2016. However, it is poised for strong growth over the next few years, forecast to reach £16.7bn in 2021, accounting for a 9% share of the total grocery market.

Key to this growth and showing the longevity of the market, Mintel’s research finds that younger consumers are the most likely to do their grocery shopping online. Almost two thirds (62%) of consumers aged 25-34 are current grocery shoppers, as well as 57% aged 35-44 and 56% aged 16-24. What’s more, almost a quarter of (23%) of consumers aged 25-34 currently do all of their grocery shopping online, as do 20% aged 35-44 and 16% aged 16-24.

In comparison, just one in three (32%) consumers aged 55 and over are current online grocery shoppers, while approaching half (47%) of this group say they have never bought groceries online and have no interest in doing so.

Carroll commented: “The fact that younger consumers are far more likely to shop online highlights that rising smartphone ownership and internet connectivity has created an expectation from consumers that they can get what they want, whenever they want it. A younger online grocery shopping consumer base means it is crucial that grocery retailers have a well thought-out desktop and mobile site to best interact with the core online grocery consumer base.”

5 things you must know about EDLP when you are going for growth

Tesco, ASDA and Morrisons are all talking to their suppliers about going to EDLP. Retailers do this because they believe (or at least they tell you they believe);


1. The only thing shoppers care about is price


This is, of course, entirely untrue. What shoppers care about is feeling they are not being ripped off.


However, most retailers, except Waitrose, have never been accustomed to delivering value. So the way they will look to increasing basket size is via a continuation of current promotions. Of course, we have been here before – at intervals ASDA has focused on EDLP as part of their parent companies raison d’etre. At the time they said, as they say now, take the margin you are using for your discounts, and give it to us, you won’t need to run promotions with us in future. As you can see when you walk through any ASDA supermarket, what they say, is a long way from what they do.


Lidl on shelf offer

On top of this, the discounters also further discount and promote special offers. They realise that shoppers like to be given deals.


Moreover, just being well known simply for being cheap has not helped Poundland. They have seen profits fall in the year to 27 March in what chairman Darren Shapland said had been a “challenging” year for the discounter. Pre-tax profits were down 83.7% to £5.9m, with total sales up 18.7% to £1.3bn. The company said that excluding the 99p Stores acquisition, comparable profits were down 13.5% to £37.8m, with sales up 9.3% to £1.2bn.


Basically, the extreme EDLP of having a shopper pitch based solely on price has failed to deliver more profits. Highlighting the truth that depending solely on low margins is a precarious business. 


Obviously, retailers also feel (or at least they tell you they feel) that;


2. Lower prices will increase your sales


The KANTAR summary for the period to the 28th June was “Supermarket sales down as prices continue to fall”. Over the next 12 months, the focus shoppers for a branded business are declining in the core supermarkets.

What are the chances that, if you drop your price these incrementally fewer shoppers will consume incrementally more of your products next year than this?


If you believe they will, where will this additional consumption come from? Obviously from your competitors, who are also on EDLP. Under EDLP it would be true to say that you will need to increase your competitive edge just to stay still. Without help whatever you got last year, you will get less next year unless you go out of your way to becoming more competitive in your category.


Will EDLP do this for you? Of course not. It is designed to get people through the doors of the supermarket, what they do when they arrive is frankly left to chance. We have just completed a comprehensive study of the British shopper for and with the Grocer, and without giving too much away, it agrees exactly with recent reports from Mintel and Nielsen that shows the biggest gripe shopper have with the majors is not being able to find product they expected to be able to buy.


Retailers fail to understand that;


3. Shoppers like promotions


They like them a lot. In fact research I did with the IPM and iMotions (a groundbreaking eye tracking company who measure emotional involvement alongside where people look) revealed that;


On pack promotions had the same impact on they eye as low grade pornography leading to pick up and purchase when messaging was added to packs.


The research was carried out with IPM prize winning promotions. They proved to be very easy on the eye, and opened the purse strings of those people for whom shopping is a chore lightened by finding something more on the shelf than they expected.


Mintel store selection

Selected by 1800 UK main shoppers as being most important in their choice of where to shop

Nielsen research reveals that 51% of shoppers report that having a range of promotions on offer is important to them. What does this mean? – well retailers focus on price as a means of getting shoppers in the door. When they reach this objective they will rapidly realise that they then need to add excitement to the visit to avoid falling into the Poundland trap of finding it really hard to improve the basket size for the average visit. Typically the way they do this is with special discounts.  Special discounts are there to create a distinction from the run of the mill, and this distinction is badly needed. Whatever, if you want to reach half the shoppers, you know how to do it.


For the majors, a Mintel report in May 2016 found 59% agreed that  “Sainsbury’s, Morrisons, Tesco and Asda all have similar prices”. Only 20% disagreed with the proposition. Clearly the ASDA intention of getting within 5% of the discounters, and under the rest is having little or no traction at all. Meanwhile, the same report highlighted that 51% of these shoppers said that a “range of promotions and offers” was part of their selection for where to choose to shop.



Example of Lidl regular price offer

Special discounts appear right across the spectrum. Lidl does special discounts. Waitrose does special discounts, M&S do special discounts, in fact, they advertise them. What marks these retailers out to the shopper, though, is that their brand image is well understood, so shoppers have visited knowing what to expect. They stay to buy more because they are stopped down the aisle by a range of offers that persuades them to be more adventurous.


Special offers exist simply because shopper look forward to finding them, and, as a result, they buy more than they might have otherwise. ‘Which’ may feel this is a bad thing. But for brands and retailers, purchase outside of the standard shop is what turns a shopper journey into profit.


In a period when shoppers are buying in more varied outlets than ever before, closing out at least some of the larder to the next makes increasing sense. Except of course, right at the moment when buyers are promising no calls on promotion monies. Anyone believing them needs to remember the words of George Santayana;


Those who cannot remember the past are condemned to repeat it



4. There are other ways to add value and build sales in store


They have been around for years, but have typically been ignored since it was just so easy to simply do what retailers asked. With retailers basically driving branding out of sight, brands need to find ways to standout that are not driven by the Sales function, but by Marketing.


Stand Out on the Shelf in ways that are not controlled by the retailer in the knowledge that over half of the shoppers walking past you can be easily stopped if you make them an offer.


Extra Value FREE


Loyal shoppers will queue for this, and those simply browsing will appreciate the additional value. On top of this, the larger pack offers a greater standout, as well as value.


On Pack Messaging and Promotions


28-07-2016 17-01-49You only have to look at the way people shop to see that they are drawn to the new, and the different. Often a changed message does not need to cost you anything, perhaps even just highlighting a product change that is a benefit. In the new tomorrow, product benefits will be really important. Don’t sneak them onto the shelves, shout them there.


On pack sales promotion messaging is still really important – an example being the Mars promotion – but there are a number more on the “In Place of Price” white paper you can access from the bottom of this blog.


Mars Chocolate UK announced it is bringing back its Sweet Sundays promotion for the fifth year running in 2016, offering consumers the chance to get hold of free cinema tickets for Sunday screenings.;”bringing back its Sweet Sundays promotion for the fifth year running, offering consumers the chance to get hold of free cinema tickets for Sunday screenings.” They also announced that “Sweet Sundays has been proven to drive bitesize category growth, increasing incremental value of the bitesize category by 13% last year. Returning bigger and better than ever, we’re confident the promotion will continue to increase in popularity with consumers so retailers are advised to maximise the opportunity for increased awareness in store, using our new range of POS solutions to capture their attention.”


Successful techniques haven’t gone away, they have just been forgotten.


Local Marketing, Signage and Supply initiatives


You can define your core by the shoppers – and core stores  (the 80/20) for you will have the following characteristics;


  1. They will sell 30% or better than the average store from the same space
  2. They will sell 60% or more the moment you go on promotion (and you will)
  3. They will struggle, and fail to cope with sales from the space that catman has allocated.

There is an opportunity to multiply the value of your sales in 20% of stores simply by identifying these, and making sure the store has enough product, and targeting your marketing support so they are able to consistently over-perform their peers.(Remember the store manager is competing with other managers in the same group, not other groups nearby).


You can do a really surprising amount in and around your core stores. For the store manager getting their local assortment right is more than simply useful.


Nielsen report that; “Only about half (53%) of global respondents believe that retailers always or mostly understand their grocery requirements, meaning that nearly half of those surveyed feel somewhat underserved. A core element in increasing share of wallet is understanding and responding to local consumer needs (my italics).”


It makes sense then, that differentiation from your competition could be an important way to build a competitive advantage. So what are consumers looking for? Mintel says; “40% of shoppers nationally complain the biggest issue they have with all their normal supermarkets is that products they want are not always available normally or on promotion – and that this issue is bigger than their concern about price now.”


Looking after your local consumer is inexpensive, gives fast returns, and offers a stable way to invest independently of what retailers may choose to do to your brand.


5. You have a choice – should you choose to accept it.


Brexit has forced a re-evaluation of what being British means. The actions of the retailers forces brands to decide whether they really are a brand, and investing behind brand values and margins OR simply selling on price. There is no middle course.


If you want to change your fortunes in just one day, then join us on the 29th September 2016 at the CIM in Cookham for our seminar – Overnight change without pain.


Resources: You can download a white paper reviewing the options from here.


In Place of Price – the white paper

Promotions Make Waves – in the brain as well as on the balance sheet

Research carried out by our MD Colin Harper BSc MA for the IPM and with the University of Westminster generated hundred of lines of copy internationally. This is one example from the Huffington Post;

Want to feel lusty? Go shopping. A recent study at the University of Westminster found that special offers ignite the same level of emotional excitement that one experiences from sexual arousal. Bargains make people deliciously happy, firing up the brain in much the same way as watching an erotic film.

Researchers measured brain activity in the emotional parts of the minds of 50 volunteers, as well as their eye movements and emotional responses in the body, in determining which of several activities evoked the most excitement. They found that giving participants a coupon or free gift with a loaf of bread or a jar of the savory British spread Marmite induced the same level of excitement as being exposed to porn.

This makes perfect sense given that the brain emits the neurotransmitter dopamine during positive shopping experiences, which includes special deals. This chemical activates parts of the brain that bring us pleasure. It is also the same neurotransmitter that is released when we fall in love and the one that stimulates the release of testosterone, the hormone of sexual desire. New experiences, like coming across desirable items to purchase and, better yet, acquiring them, triggers this brain chemical of lust, increasing its levels in our system.

While claims that bargain shopping is as good as sex are certainly debatable, these findings help to explain why people are prone to shopping sprees when down in the dumps. It also gives clues as to how shopping can act as a form of foreplay for some, putting them in the mood for much more sexually stimulating activities when they get home. Whether a pastime, an excuse to get out of the house, a means to feeling less lonely, or a way to kill time, the “shopper’s high” could, arguably, be the occasional quick-fix to a slump in one’s libido. And, in addition to dopamine’s influence on desire, the reason may be wonderfully selfish.

It has long been suspected that people shop when they’re sad or feel bad about themselves, with research finding that we’re more willing to spend when we feel low, depressed or miserable. Better known as “retail therapy,” this escape from one’s troubles involves people spending more on themselves, even if they don’t have the money.

As confirmed in a 2008 issue of Psychological Science, a study involving 33 volunteers found that feelings of sadness lead to those of self-centeredness, which ultimately leads to a greater possibility of one spending more money on something that will act as a “pick me up.” The increased degree of self-focus has been suggested as the reason for the overspending, especially in shopping for things that can make us feel better about ourselves and our look, like clothes.

Instead of devaluing ourselves, we enhance ourselves with more material goods. Spending also fills an inner void in shifting attention from what’s going on inside to making one’s outside more attractive. And that can have any of us feeling terribly sexy.

If you want to know what promotions float your customer’s boat, then read this white paper;

The Path to Loyalty – Techniques and Outcomes

ASDA – more promotion issues than most, and what this means to brands

Asda Agrees To Make Changes After Being Singled Out By CMA In Probe Into Supermarket Pricing Practices

Asda has agreed to change the way it operates promotions after the Competition and Markets Authority (CMA) singled it out during its investigation into pricing tactics used by the leading supermarkets. .

Consumer watchdog Which? raised concerns about supermarket pricing and promotional practices via a super-complaint last year. The CMA’s investigation found that supermarkets generally had “good awareness” of consumer law and took compliance seriously. However, it committed to follow-up work that involved engaging with the supermarkets to ensure that ‘was/now’ offers and multi-buy deals were genuine and did not mislead shoppers.

In a statement today, the CMA said it had met with a number of supermarkets and asked them to work with their Trading Standards Services partners to review their pricing and promotional practices. All of these supermarkets were said to have engaged “constructively” with the CMA and it now expects them to review their practices and make any necessary changes to ensure consumers can be confident they are “getting a good deal”.

The CMA added that it has had particular engagement with Asda in relation to specific areas of concern. While the CMA has not made any findings against Asda, the chain has given a written commitment to the competition regulator to change the way it operates ‘was/now’ and multi-buy deals. The CMA said it welcomed Asda’s commitment to change its promotional practices and strengthen its compliance controls, adding the revised business rules it is implementing will ensure that:
•‘Now’ prices will not be advertised for longer than the ‘was’ price applied, ensuring they are a meaningful comparison
•Multi-buy offers will represent better value than a single product before the offer
•Multi-buy offers will not be immediately followed by ‘was/now’ promotions, so it will be easier for shoppers to tell what is a good offer
Asda has already started making changes and these will be fully implemented by August 2016 with CMA saying it will check how they are working 6 months later.
ASDA store
Michael Grenfell, CMA Executive Director, Enforcement, said: “The CMA’s examination of the market, following the super-complaint, found that supermarkets generally take compliance seriously, but there were some promotional practices that could mislead shoppers.

“We welcome the commitment we have received from Asda as well as the engagement from other supermarkets, and expect them all to ensure that their practices are not misleading and that shoppers are better informed and able to choose the products that most suit their needs.”

The CMA added that its follow-up work to the super-complaint has now come an end. Which? executive director Richard Lloyd commented: “Following our super-complaint last year, we are pleased to see the CMA investigation has resulted in Asda taking action to stop misleading special offers. Asda has been found breaking the rules and now must immediately clean up their act.

“Our super-complaint and actions taken by the authorities should serve as a clear warning to all retailers. If they try to pull the wool over consumers’ eyes they will not get away with it. Retailers must get their house in order.”

RVS comment that;

ASDA have been pushing the boundaries for some time, by simply alternating BOGOF and ‘Price Offers’ (two for the price of one establishes the price of one :). They have, of course cleaned up their offer, but we confidently predict that, as their objective is to be ‘only slightly more expensive than ALDI’ and their ability to manage promotion volume is lamentable, overall volumes will continue to decline.

An objective of being slightly worse than a competitor on a key measure without any kind of definition of what your customers need is either foolish, or simply desperate.

Simply understanding that you will need to flex to meet local demand patterns as a replacement for the failed ‘one size fits all’ would be enough to help them through. This will, predictably, need changes at the top, and the kind of new thinking that Tesco have employed.


Supermarket price promotions hit a new low

Supermarket Promotions At Lowest Level For Over Seven Years

The proportion of consumer spend at UK supermarkets that goes on items on promotion has hit its lowest level in over seven years, according to the latest data from Nielsen. .

In the four weeks ending 23 April 2016, 29% of spend at UK supermarkets went on products with temporary price cuts or multi-buy offers, the lowest level since February 2009 (also 29%).

Mike Watkins, Nielsen’s UK head of retailer and business insight, explained: “Over the last two years, around 34% of a typical supermarket shopping bill went on promotional items. However, to help combat the rise of the discounters, supermarkets are now turning temporary price reductions into permanent cuts. Consequently, there’s now less promotional activity as many prices are cheaper all-year round.”

What promotions look like

What promotions look like

Nielsen’s data showed that Aldi and Lid’s share of the grocery market reached 11.5% in the twelve weeks ending 23 April 2016, compared to 10.1% a year ago – a relative rise of 13.9%. Nearly half of all households now shop at a discounter every month – up from 40% two years ago.

All four of the major supermarkets saw a decline in sales. Aside from the discounters, only Marks & Spencer (3.1%), Waitrose (2.7%) and The Co-Operative (1.6%) saw higher sales than a year ago, and a rise in market share.

“Only M&S, Waitrose and the Co-op seem able to fight off the rise of the discounters and attract more shoppers, which is set to become even harder in the second half of 2016 as both Aldi and Lidl open more stores,” said Watkins. “The Co-operative Group, for example, has opened more convenience stores to capture a greater share of ‘little and often’ shopping trips, typically no more than 10 items.”

Market Share – Nielsen

Nielsen April Share

Due to Easter falling earlier this year and not in the latest four-week figures, sales value was down 5.1% and volume down 3.6% versus the same period a year ago – which did include Easter.

Watkins commented: “Looking across the last eight weeks, to negate the Easter impact, value growths were still down 1.3% and volume down 1.1%. Prices are lower than a year ago and there’s been little sales momentum at the supermarkets since Easter, not helped by the cool weather. Some sunshine over the next few weeks could be the kick-start for sales growth the industry needs.”

However, RVS believe that this is only a re-adjustment to the market. There are always changes in the way shoppers see the way they shop. EDLP has been there or there abouts for some time. It was a plank on which Asda was built. However, ASDA rapidly learned that it was not enough for the UK market. Every time they have consolidated around a price platform (we are stopping promotions so give us the money you would normally spend in base price….) they have found they had to give store theatre to drive volume.

There is also the issue that brands have much of their investment based around swings in volumes, and EDLP has always lead in the past to reduced volume sales. This will certainly hasten the kind of product engineering that Which? seem to hate – when you pitch a price point you are always going to give less for the money.

What brands need to do is to improve the theatre in and around their brand on retail shelves, not waiting for retailers to wake up to need. This is likely to take some time.

The Profits in the Detail

Where are we?

We are going back to the 1990’s in the way the grocery trade is structured. Back then the major retailers had around 50% of the market. Savvy industry commentators are expecting this to be the place they end up, with all that ensues in the way brands will need to restructure their sales approach. If you want growth you will need to talk to more retailers and more buyers, who are all demanding more money than last year – often in the certain knowledge they will deliver less
Brands are also going back that far with shoppers as the number of stores they shop in is increasing up to nearly 4 a month. The brand destined for success needs to be visible in as many as possible. Back then shoppers were coming from a background of shopping in local butchers, green grocers and bakers. Now it is more likely to be for other types of meal or larder fill.
Effective distribution (working for your core shoppers) must come right at the top of your agenda, as must targeted messaging – reaching your core shoppers on the way to, or as they, shop. Targeting these will improve brand growth, the effectiveness of marketing investment AND your profile with the majors, all at a significant ROI in the year you invest.

Is price really the big issue?

Right pricing is the approach brands need to take, for the multiple they are negotiating with, since most people shop for convenience. Retailers need discounting to boost the image of their stores. Brands need to find the best way to profit from the footfall generated by all this noise.
The neglected loyalist can be reached in other ways than discounting, so a growth strategy needs to be developed by retailer that builds loyal shoppers for your brand. That objective will not be reached by discounting. The key value for discounting is volume, and building alongside retailer plans. So investing where you get the best value discount ROI is vital.
However, the Lidl/Aldi small store/restricted range format has bags of room for becoming local to many more people, as does the Waitrose/Booths end of the market. And don’t forget Amazon with their millions of existing customers, and Ocado with a now-profitable model with much more scope for growth and range extension than the Tesco store based supply.
All this adds up to more choice for shoppers, and a greater need for retailer differentiation. The Workshop looks at what this might be.
We can confidently expect that the majors, with their me-too strategies, will remain under pressure for some years to come.

Workshop Contents

What are the measures that brands and retailers need to focus on?

(Ideally these illustrations are drawn from a brands own data – illustrations we offer free contact )
Brands Need;
  1. To identify new benchmarks for success with their retail partners and within the company to get long term change. Two only are vital – stock cover and locating core shopper areas, and the stores in them. These two measures help driving hundreds of thousands of pounds value (millions for big brands)
  2. To identify the most profitable investment outside of discounting to gain growth. This requires investing in parallel in all distribution channels (including food services and online) in core areas
  3. To have a measure to evaluate the ROI from their discount activity – and be able to target better the next activity they undertake.

1. Benchmarking for success

 Do you know where your core stores are? They are the stores that really overperform for their size, and allocated shelf space. They are also the ones that struggle to keep their shoppers happy when demand ramps up.
What typifies them?
They sell more from the same space as their similar sized colleagues
They are much more likely to run out of stock at critical times

 Core measure 1

Stock cover (what you get when you divide weekly stock with weekly sales.)
sales price and stock
Stock cover is a mirror of sales success/shopper demand. However sales success will be limited if stock cover drops below a level at which an individual store can keep shelves full. You need to learn by product, the stock cover each product needs, and at that point you can see exactly which stores need to give you more space, and which really need central negotiation. Like this brand.
The Y axis is average sales y store. The X axis is distribution (how many stores are you in). By and large the high stock cover is the brands with lower sales.  Retailers do not range by anticipated demand, but by store size. Brand space is allocated by retailers based on their perception of your brand strength.
They often get this wrong. The grey blobs are own brands – and you can see that typically they perform less well, and have greater stock cover than the brands.
Bongrain relay
Yes, and these core stores also have the potential to respond really well promotionally – see this profile which is for thousands of products. They need more stock to be able to succeed. On the other hand the standard allocation leads to poor stores having excess stock simple because they don’t sell it.

Core measure 2

Coreness – how well does it perform vs similar sized average stores. Core stores cluster together as core people cluster together, and you can stick pins into them on a map.
 Seabrook map
 Core stores will always have the least stock cover, the greatest risk of being out of stock and a disproportionate share of your business. There are clients much more skewed than this. Your core stores can become category drivers for your retailers. 
Core Store Strength
Core stores are core simply because they have a much higher percentage of the right kind of people in their catchment area. This means they could be situated regionally (As this brand was) or geo-demographically, such as along the South Coast where older, better off people might buy you.
One more thing – perhaps obvious – but core stores are much more sensitive to promotion offers whether money, or other appeals. The average core store across many thousands of products can give you a 10 times uplift, while non-core delivers 2. Most stores fall under the heading of average or poor stores. Core stores are a much higher percentage of your business the moment you incentivise their shoppers. Promotion performance
So you can identify a core store either by poor stock cover or higher sales.
Tesco have now expressed their stock objective in stock turn terms. ie 4 days stock out of 7 on the now expanded shelves (stock cover .44) knowing what you know – will this meet the needs of their shoppers for all brands. Will increased availability overcome additional variety.


Core Stores have the potential to do much better than the average, and you can identify them because they are struggling
If you advertise they are the stores that will deliver you the uplift OR they will irritate your existing customers simply because the new users empty the shelves
DISCUSSION Asda have removed any and all store specific ability to support local demand. How much do you feel that this has contributed to their faster than average rate of decline for your brands. They no longer respond to reasonable requests for demand related allocations.
Is their supply chain actually fit for purpose? What can be done to overcome this barrier?

2. What are the most profitable investments outside price to gain growth?

Step 1 Satisfy your existing customers
Identify the level of stock cover that does not result in out of stocks – and the brands that need the help, and where. Use these insights to drive both immediate action and central negotiation.
Work with core stores on profitable actions to build their growth. (See three step approach)
Step 2

Retailers are very poor at managing your brand. Make sure you get at least what they offer you, and target more relevant products in core stores. Click on details to regain £680,000 per annum from stores that should sell – but don’t. (see the variability in stores selling in the chart above).

You can support them in a variety of ways that do not include field visits. Here simple additional central allocations will deliver £680,000 additional annual sales.
missing stores
Step 3
Going for Growth
Understand that any good shopper marketing investment into core areas will deliver great returns.
On pack promotions bring in new core users, that discounts don’t. If you want to build, discounts won’t do it.
Click here for shopper marketing ROI that you can gain if you understand supply and demand targeting  >> Case Studies

What about new products?

Mintel data shows the number of new food launches fell 33.6% year on year [12 months to June 2015], an acceleration of a three-year trend that saw food NPD fall 18.7% in 2014, and 10.7% in 2013. The last time food launches grew was in 2012. On top of this the market for brand innovation is shrinking fast as discounters take increasing shares of the market, and the major retailers shrink in proportion.
New products have to work fast or they will be dumped fast. We believe you will need to add promotions to build new core users. Check out the Case Studies to see example uplifts and ROI.
Step 4 Allocating your current budget
Strategically, you may want to allocate more investment overall to core areas, and to supply chain initiatives with the majors to build stock, in particular promotionally.
Different retailers will give you different ROI from investment in discounting. This can all be measured, as can any other directed activity, to identify best practice.


Retailer evolution and the demise of the National Account Manager

The retail landscape in the UK is changing dramatically, and brands will be forced to change the way they interact with, and invest in them, if they hope to rise to tomorrows challenge.

The opinion of a current expert in retail sales, Brian Moore is that the current position has to result in a gradual loss of market share from Kantar’s current levels of 73.5% for the Big 4, to a combination of the discounters, Waitrose, online and emerging formats.

Brian suggests that this slide may eventually be halted at 50% share of the UK grocery market, leaving the four major retailers operating on ROCE levels that provide an adequate reward for risk, and maintain acceptable share prices.

What then are the challenges that face the brand wanting to grow?
The tools used by NAM’s are chiefly price based. Discount offers, and investment behind this, such as for additional space and retailer sponsored activity, such as couponing in the case of Tesco, and supporting POP. Increasingly it is very difficult to have any impact on retailer outgoing price, in particular for companies signing the retailer version of GSCOP where brand price in may well be linked to a retailer price, so NAM’s lose any pricing control on normal price. Retailers can price match without any reference back to the company.

What tools remain to be used that let you do better, for less?

1. Discount Promotions
In the 1990’s this was easy. Then the majors offered guaranteed growth year on year, and you even received further growth after a discount promotion as people who found they liked, stayed. Happy Days.

So over-investing in them was (nearly) a no brainer. Many Marketing techniques all but disappeared (such as couponing) when investment in retail price promotions was so easy, and so powerful.

Sales Directors report that the big three reasons for discounting are volume, penetration and pleasing the retail partner.

All these have now disappeared as benefits. If you want “free” growth, you need to be in the discounters, and profitless volume will take some justifying when you can re-list sample packs with them. Targeting volume can even hasten the demise of a company. I remember one NAM telling me that the month that Terrys of York went bankrupt he had the largest bonus he had ever received. Simply because it was based on volume, not profit.

Penetration gained, typically non-profitably, when the market in a major retailer is declining is a nonsense. Which leaves pleasing retailers. This might be hard to sustain in the typical boardroom. If you want to be cost effective in promotions and to build long term growth you need to look outside of price to reach those of your shoppers that value you. Interestingly, if you get this right it will also please your retail partners.

2. Retailer Sponsored Promotion Activity

This would include in store sampling, club card couponing etc etc. Best here to realise that if it actually returned adequately you would not be able to use it as own brands and previous brand triallists would fully book week in and week out. In general they are simply other means of extracting your budget.

How many National Account Managers look outside of these two? Often they will point you to a third;

3. Additional Space

Now actually, additional space can have benefits as it builds stock and presence on the floor. However, given the lack of return per promoted unit, the typical poor implementation, and the hugely inflated cost of such space, it is often hard to see why a profit conscious company would do this.

If all you want is unit sales – the discounters offer a really useful alternative for getting permanent additional space. Meanwhile, the latest Tesco re-range will increase both your space AND stock . With the commensurate lessened need for added promotion space.

Sensible sales departments will use additional space investment into other channels unless they definitely see either a long term gain OR if they get an instant additional profit over the top of the cost.

4. Shopper Marketing Initiatives

Throughout the past 20 years these have consistently delivered remarkably good results. However, most NAM’s have very little experience since the techniques basically date back 20 years. They were also the very first place that retailers looked to get additional investment in. So shelf talkers, bus stops, and various types of shelf signage are an undiscovered country. As are on-pack messaging, banded packs, all delivering benefit wherever they appear, and adding value, not removing it.

This is a core area that brands need to re-explore since there are so may new ways of delivering.

So Where are we?

The major retailers have imposed their vision of how to grow, on their suppliers, for the past 20 years. Had this been an unqualified success, they would not be where they are today, and neither would the brands.

So far NAM’s have had it easy. I know they won’t see it this way, but the retailer vision, as delivered by NAM’s has dramatically skewed the way that brands manage their business from start to finish. They carry additional stock and work in progress, and attendant storage and investment, to handle random promotion events that they may know about, or they may not. This adds pressure to costs and margins.

So far, what the NAM’s wanted, they got. Typically, they are under no pressure to measure the impact of, and return from, their spend. It is often merely lost in average margin.

At a time when so much data is available to Sales to measure, it should be criminal (and I do mean criminal) for this not to happen. Moreover, letting the supplier, such as dunnhumby, measure the impact of your activity based on marketing measures is also criminal, in both cases the company is being actively mislead into spending (investing).

Meanwhile the rest of the company, including Marketing, are being hounded for their ROI measures. In my experience, the Sales Department can actively prevent other Departments from gaining access to “their” store by store epos data. A resource that can be used to measure the impact of almost anything at least as well as Nielsen, for much less. I recall looking at a couponing campaign for a major brand where we managed to get some pre-data, but post data was impossible to get. Those in charge of access were simply too busy for six months.

Or were they too nervous of what might be found? Such as the fact that a major deep cut promotion in Asda had actually removed stock right back to depots.

And the fact that a number of stores the coupons were dropped round did not stock – even though these were core areas for the brand shoppers, and the information was freely available, but of course, to another part of the same company.

Result, internal analysis of the activity showed it had not been successful. It’s not that the coupon was not persuasive, it is just that the Sales Department ensured it would fail, and prevented that information coming to light. Not deliberately, I am sure but by actively discouraging external light being shone in the way they were managing and investing company monies.

Planning a way Forward

This is the era of big data, not small spreadsheets; NAM’s will absolutely need to understand the return from their activity. When they do this, they will understand that rolling back the clock to look at cross retailer initiatives such as on pack and couponing will regain their place. They have all the data, they just don’t know how to use it. With properly managed epos data you can;

Identify the sweet spot for promotion discounting, and allocate properly product to core stores (yes you can!)
Identify core areas and improve availability and shelf space where it will offer the greatest return, and maintain these stores for long term benefit
Identify products that cry out for small store ranging – an area few major retailers actually understand
Measure the impact of any and all sales or marketing investment behind core stores
Pick up Nielsen distribution, ROS and Kantar “who buys your product” insight
Use a retailers own data to develop targeted change for guaranteed results
If you are not doing this, why not?

Support Marketing objectives; The customers for any brand cluster together. For a growing brand perhaps 15% of stores will provide 50% of sales. Even very large brands would be 15% = 35%. And these are definitely not simply the largest stores, they are the stores where most of a brands customers visit. All the stores in these areas should stock, since the 4 stores on average that each shopper is now visiting would benefit from stocking the brand. Field Team callage on the top 200 is volume speak, and not brand growth speak. There are many ways of building distribution. Typically very few of them are explored by the average Sales Department.

One example of this is the recent successful MBO for Seabrook Crisps where 30% of the Tesco stores in core areas were actually non ranged. Stores that had chosen to stock. Simple contact processes (not Field Marketing) both gained, and sustained these stores. This also meant that any Marketing spend has a much greater chance of gaining return, and the individual store managers you impress this way will be very much happier. Meanwhile these opted to stock stores have now become official stockists!

Be aware of all the available techniques and don’t let prejudice overcome facts; I sat in meetings with a Marketing and Sales Director where the former was not even aware that store by store epos existed. On the other hand the National account team denied that there were ever stock outages because theirs was a “slow moving product” despite photographic evidence to the contrary. Many Sales Directors are not aware that, in varying forms epos sales by store is available from all the majors. Sales Directors are not used to looking outside their teams for insight. This will need to change, simply because you cannot get sufficient insight into your market with just your own data, it needs to be benchmarked.

Sales Departments will need partnerships in the next few years. Establishing permanent change in the base product sales can be achieved in many other ways than simply cutting the price. If all you know is cutting the price and doing what the retailers dictate you will rapidly run out of runway.

Develop Independent Shopper Marketing; The essence of this discipline is to use investment to build your core shopper. This should oversee both Path to Purchase Marketing (alongside Brand Building investment) and retailer based spend. In this regard it must sit between Sales and Marketing, a great way to position it might be to a Commercial Director. The essence of Shopper Marketing has to be to measure and build. To know what works, and develop these strands over time.

My view is that Shopper Marketing should be tasked to deliver positive ROI this year, which is where it differs from Marketing, and long term by outlet growth as well as short term (where it differs from Sales). Of course, it is easy to do this. Some of our best results are at 30/1. But you can’t do this unless you have influence over Sales and Marketing. The impact of a couponing campaign is much greater if you combine it with gaining more stores in your core areas. And yes, this applies to ALL sizes of brands.

I don’t have a National Sales background, though we do deal with people in this role all the time. So I’m going to leave the last word to Brian Moore. His company runs training programmes for them, as well as delivering a regular news feed that is an excellent source of retailer feedback. Brian says;

Within this intensively-competitive, high-stakes environment, the emphasis will be on quality improvement and cost reduction, literally making every penny count. In an era where even the short term is unpredictable, the Big 4 NAM will be expected to forecast demand, and optimise returns on resources in the medium to long term. The NAM will also need to justify trade investment budgets that can stand comparison with sums allocated to equally important major customers, given that any growth will be at the expense of colleagues managing the other three players.

Top up Shopping or the next meal – can retailers tell the difference?

Convenience stores are the most used format for top-up shopping, with 60% of shoppers visiting them for this type of trip, according to IGD’s latest ShopperVista research. This is because their network is widespread, making them easily accessible for most people.

However, competition to capture total top-up spend is intensifying, as shoppers now visit a number of different types of store to meet shopper missionstheir top-up shopping requirements. As well as convenience stores, some 42% of shoppers now also use supermarkets for top-ups, as well as 31% who visit food discounters and 22% who use high street discounters. This is a summary of the relative importance of the key shopping missions

The convenience channel is ahead for staple top-up items such as bread, milk and eggs with 50% of shoppers using c-stores for topping up on staples, whilst 32% use supermarkets and 18% use food discounters.Asda

However, IGD data shows that when it comes to topping up on fresh foods such as meat, fish, fruit and vegetables, the supermarket is the most used channel. Some 29% of shoppers use supermarkets for a top-up shop on fresh foods, against 18% who use convenience stores and 18% who visit food discounters. Other channels used for fresh food top-ups include specialist stores such as greengrocers and butchers, farmers’ markets, high street discounters and hypermarkets.

HiM research showed that the average value of the shop in convenience stores was also going up BUT this is mainly a result of the big spenders increasing their basket size.

Obviously top up shop is a phrase that is designed to conjure up an image of shopping carried out between major shops, perhaps for staples. However, with the increasing variety of convenient stores I question if there is enough distinction made as to where, and what, the next meal will be.

The Personal Journey

Much is made of the shopper buying for the family, and relatively little attention paid to the occasions when, and where, they buy for themselves. There is also a significant distinction building up between the way people behave when they are buying for someone else and the way they buy without the added pressure of the family.

This applies in spades to lunchtime in urban areas, where healthy snacks outperform standard confectionery.

The rapid growth of concierge services shows how convenience as a service has to become more responsive to local diverse needs. It becomes the way that they can stay in a growing business without the purchasing resources of the majors. It is also, incidentally, the reason why the one size fits all for the majors is likely to impact next on their convenience offering.

Asda already discovered that their mini Asda approach to their Netto stores does not work. The recent moves by Tesco to completely close down local variety will come back to haunt them later.



Behavioural economics for beginners

It really doesn’t matter whether you are the ultimate consumer or the gatekeeper, you don’t optimise economically the way you buy. You respond to what you see based on cues that you have grown to know, and pick out when you see them.

A bit like the cocktail party effect for eyes.

So actually if you want people to change what they buy, you need to change what they see.

The easiest place to change what people buy is actually at the point that they make a buying choice. They may be at the point where they still have a great deal of choice, such as the supermarket, or just at the tail end of a selection process. It matters not.

At which point you can offer them an incentive to change their mind, or assist them to make it up. This can be a cut price that they can claim at the checkout (in store or on line) but you can see how well an individual offer stands out in the picture. Or you can offer something else of value that costs a lot less but has a high intrinsic value. Tesco Extra supermarket aisleOR they have to send away for. They have the intent to redeem but, mostly, they don’t.

This does not, of course, lessen the value of the offer at the time that you made it. That’s freedom of choice. You can judge the value of this because Which? don’t like it. So it obviously works.

If you want to trigger serious change, you need to seriously stand out. Through our we run on pack (or any other communication) offers that change minds. We also track through both sales performance and shopper response.

Looking back over 10s of thousands of redemptions and the sales uplifts and feedback that delivered them from on pack offers we notice the following;

  1. A useful offer has delivered the sales uplift which was the equivalent of an 80p drop in price for the cost of .05p per pack
  2. The average uplift was 20% in sales, with the average redemption under 3%
  3. Analysis of the results showed that this brought people into the brand untouched by price discounts. Over half of all claimants were new and came in from competitors. Despite running alongside price promotions.
  4. Claimants actually proved to be remarkably loyal. A tracking study showed that 50% more first time claimants were still buying 6 months later compared to existing users along for the ride.
  5. Claimant loyalty reports (the Ultimate Question) have proved to be remarkably prescient. As witness the sweetener that people didn’t like the taste of, that was discontinued a year later. It was the only one we have found with a negative NPS score.

You do, of course, need to know your market to select the offer you make, since some people are very much more sensitive to this kind of approach than others.

But when you can get benchmarked reports, really good value lasting sales uplifts AND an e-mail list of confirmed supporters, ALL for much less than the average cost of a discount, why do brands not use it more.

Unfortunately no one has yet written a treatise on the behavioral economics of owning a brand.

Smarter is as smarter does

waitroseRetailers are often confused as to what constitutes a promotion. Basically, they are seriously fixated in simply giving money away.

So let’s here it for a retailer finally looking outside of the casket.

Waitrose said the launch of its ‘Pick Your Own Offers’ promotion has helped to drive sales, with total provisional divisional sales (excl fuel) for the week ending 20th June seeing a 2.3% increase on the previous year.

The scheme offers loyalty card holders 20% off ten products of their choosing, from a list of its most popular branded and own-brand products.

Waitrose marketing director Rupert Thomas said: “Among the most popular choices from the list of nearly one thousand lines are essential Waitrose bathroom tissues, Waitrose British blacktail free range eggs, Waitrose cherry vine tomatoes and essential Waitrose British chicken breast fillets.

People rushed into press to denigrate this approach. A letter in the Grocer this week opined;

The actual mechanic and required commitment will turn folks off. Waitrose shoppers won’t really care because they can get 20% off their toilet paper for the next 3 months…..

Most people entirely miss the point here. The older shopper is more into theatre – and this offer gives you theatre in spades. They are also more into reading, they grew up with it, something Millennials often find hard to understand.

With a shop of £50 you could save a tenner, and have fun deciding how you actually “spent” the discount.

There are two huge advantages to Waitrose in this flexible approach to running discounts;

The first is that they will get a behavioural economics view of what really matters to their shoppers. Shoppers could choose to reduce the cost of staples, but in the knowledge that they would not necessarily save an enormous amount per purchase. OR they can reduce the cost of those little luxuries that make life right – bringing them down to nearer the everyday price. Looking at the list above you could see a mix of strategies here.

The next step might be, of course, to pick a few of those that fit into the luxury category – and offer them direct via e-mail to people keen and eager to listen. As Waitrose don’t get all the insight that Tesco receive, this is really a no-brainer for them.

The second advantage is that this approach spreads the demand burden over 1000 lines and not just a handful. This makes it easier to manage by the supply chain who ofte3n struggle in Waitrose in particular.

It’s the sort of approach that shows Waitrose understand their shoppers better than the commentators do, and certainly better than Tesco the rest.
Win Win in my book