Many people called 2010 ’the year of the promotion’ - the emphasis on promotions grew, even compared to 2009.
Shoppers certainly noticed the difference - IGD's Effective Promotions for Shoppers research, published in December 2010, revealed that two thirds (64%) have detected a growing number of promotions over the past two years.
In the lead up to Christmas 2010, almost a quarter (23%) of shoppers told us they expected to spend less on their Christmas meal than the previous year, more than those telling us they anticipated increasing their spend (17%). Many may have hoped to eat as well as usual over Christmas while also saving money. It was certainly possible to do so; whether by stocking up on the many buy-one-get-two-free deals available in November, signing up to a retailer’s Christmas saving scheme, or opting for a joint of meat at a greatly reduced price.
With the festive bubble behind us, and a year of potentially low growth and muted consumer confidence ahead, wise-men and women will reassess their promotional strategy in light of shoppers’ reactions to the heightened focus on promotions.
Growing shopper expectations
Our research found that shopper expectations grew as a result of the increased focus on promotions.
Many shoppers expect certain promotions to either return regularly, rotate with other similar promotions, evolve as a variation on a theme, or remain as permanent features, and expect every category to have at least one promotion at any point in time.
"They had it at 25% off before, so I’ll just wait a couple of weeks and it’ll be on offer again."
Female, pre-family, BC1, Harrow
When these expectations are not met it can lead to deep disappointment. More importantly, however, these expectations could increasingly undermine the effectiveness of promotions. Having become conditioned to expect regular deals, the sense of urgency that a promotion is often designed to inspire could be dulled. In this scenario, shoppers may defer purchase until a similar or better promotion returns.
Measure promotion effectiveness
It has never been more important, therefore, for grocery companies to measure the effectiveness of their promotions.
Our research goes on to identify the promotional mechanics that are most effective for three different strategies: encouraging product trial, incrementing sales volume, and encouraging brand switching.
Changes in shopper attitude indicate positive news for the grocery industry. For example:
- There is evidence to suggest that shopper confidence in retailers’ promotion strategies is growing, with slightly fewer suspicious of prices being inflated following a promotion
- Likewise, our research indicates that grocery companies have improved the clarity of promotion details
The challenge for the industry
One of the key challenges for many grocery companies will be how to protect category value and customer loyalty in an increasingly promotion-led market. Feedback from our shopper research suggests that product reliability, brand heritage, and category specialism will be important levers for manufacturer brands to use in pursuit of these aims.