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At Storewise, we pride ourselves not only on our platform, but also on the deep wealth of industry knowledge and experience we offer to our partners. Storewise customers gain access to seasoned technologists, former grocery operators, CPG professionals, and support specialists ready to work together and strengthen their businesses.
One such expert in our network is President of Price Dimensions LLC, Jon Hauptman.
Jon is widely known as one of the industry’s leading price experts, and frequently speaks at major industry forums, addressing retail trend implications for operators across channels. His insights are regularly featured in major market newspapers and national publications, including The Wall Street Journal and USA Today. Jon has also been a guest on NPR's Morning Edition.
As a Storewise Advisor, Jon graciously contributes his insights below:
Independent supermarkets are continually looking for ways to cost-effectively differentiate from competitors. One way is providing shoppers with a strong promotional program featuring relevant offers with attractive savings/values that draw patrons to their stores and in turn, increases sales and profit.
Unfortunately, many independent supermarkets are not taking full advantage of the power of promotions. They’re simply repeating historical promotions and hoping performance will somehow improve versus the last time they ran them. Now is the time for retailers to take greater control over their promotional programs to maximize promotional effectiveness, enhance value image, and drive profitable sales growth. And a great place to start is by embracing the following six actions.
1. Promotional Planning
Over the past three years, since the beginning of the COVID crisis and corresponding supply chain and out-of-stock challenges, promotional planning has been extremely difficult given uncertainty around whether products would be available when promoted. However, now that wholesaler order fill rates are improving and the consumer-packaged goods production is slowly getting back to a new steady state, it’s time for independent grocers to apply new promotional planning disciplines.
• Timing– Retailers can take greater control over their promotional planning process by creating an annual promotional calendar with specific weekly or bi-weekly themes/events. While meeting with vendors and brokers, retailers can determine where and when CPG monies can be best applied in support of their events. Ideally, weekly ads can be created at least six weeks before the event, with only minimal adjustments for fresh items/prices as printing dates approach.
• Budgeting– A key part of long-term promotional planning is creating promotional budgets indicating how much retailers are willing to invest in each event, e.g., to reduce prices on front page offers, etc. It’s also important for retailers to evaluate actual investment after a promotion or event ends and incorporate findings into future promotional budgets.
• Themes and item-selection – Many retailers simply repeat the same promotional events every year and hope that performance will improve versus year ago. However, simply repeating the past is not the way to drive sales growth. Hope is not a winning strategy. Instead, future growth will require retailers to develop new, creative promotions that appeal to today’s target shoppers, e.g., larger households with children.
2. Promotional Savings Thresholds
Retailers recognize that temporary price reduction (TPR) shelf tags attract shopper attention. However, shoppers lose trust in these indicators if the promotions they’re flagging do not provide an adequate savings. TPRs should offer a minimum 10% savings (or at least $1.00 savings on high ticket times over $10.00.)
This is a key vulnerability for many independent supermarkets at which it’s quite common to find dozens or even hundreds of TPRs providing a minimal, insufficient savings, thereby reducing the overall appeal of the retailers’ entire promotional offerings. We never want shoppers to think, “I don’t pay attention to the tags because they don’t really save me much money”.
3. TPR Pass-Through
Independent retailers typically have access to hundreds ofTPR offers from their wholesalers at any one time. Many retailers then apply set pass-through rates determining how much of the vendor allowances will be passed on to shoppers via price reductions, e.g., 50% pass-through, 75% pass-through, etc.
Retailers have an opportunity to apply more rigor to determine the best pass-through rate for each offer by considering such factors as promotional savings (is the savings meaningful for shoppers), historical performance of similar promotions, etc.
In fact, retailers have several options around how to approach a single TPR offer, e.g., if a 50% pass through on a specific TPR offer would yield only a small savings (less than 10%), then a retailer may decide to:
• Pass through a higher percentage to increase the promotional savings.
• Request deeper (but less frequent) TPR cost reductions from the vendor.
• Keep all the funding (pass through 0%) and continue selling the item at regular base price.
4. Promotional Evaluation
Best practice retailers routinely evaluate the impact of each of their promotions and can use these benchmarks when making decisions on future promotions, i.e., “measure and adjust”. Technology/tools can be very helpful to automate the promotional evaluation process. Common evaluation techniques and metrics include:
• Determining promotional sales lift – the incremental number of units (or percentage of units) sold due to the promotion, i.e., above and beyond what the retailer would have sold if the promotion was not executed. Often calculated:
• Average weekly sales during the promotion MINUS average weekly sales during a pretest period (e.g. six weeks)
• Average weekly sales during the promotion MINUS average weekly sales during the same weeks, a year ago
• Determining the promotional impact on item and category gross profit dollars.
5. In-store Merchandising Support
Front endcaps are the most valuable real estate in the store for strengthening that store’s price-value image. These endcaps should present the best promotional values available that week, highlighting the low promotional prices along with the savings amounts on each display. Shoppers standing at the front of the store should be able to look across several endcaps, see great savings on each, thereby reinforcing the value image of the entire store.
Additionally, retailers should liberally build floor and side-stack displays featuring other promotional values, with each display featuring a large sign with the price and savings highlighted. Not only will this action continue to strengthen price-value image, it will also drive strong sales of the items on display.
6. Weekly Ad Circular
Retailer weekly ad circulars remain an effective vehicle for highlighting great prices and attracting shoppers to their stores. Even as distribution of weekly ads has shifted from home-delivered to available on retail websites, the value of the ad is still strong. Best practice retailers follow a few key practices to keep their ad circular effective, e.g.,
• Availability– They ensure that a printed version of the ad is available at the entrance to their stores for those shoppers want one.
• Density– They’re rethinking ads filled with hundreds of products densely packed together in favor of somewhat fewer items per page with each item offering a great value. Reducing item count typically helps shoppers appreciate what’s in the ad, without becoming overwhelmed.
• Savings highlighted – They’re also adding savings amounts to promotional prices for a few items per page, to remind shoppers of the great savings the store provides.
Promotions can and should serve as a key component of a retailer’s growth strategy. In today’s increasingly competitive retail environment, simply repeating historical promotions is not the path to growth. Instead, retailers can differentiate by proactively designing promotional offerings that are specifically designed to support retailer go-to-market strategies, support retail themes/events, provide great value, and effectively highlight those values inside and outside the store.
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