Promotions are a key elements to lift sales. They boost volumes, stock customers, get market shares up, a great way to push inovations and make customers test your products. Nevertheless, too much promotions could be something devastating.
- It alters the price perception of one product. I am the first one to say it. When I used to purchase Pampers Diapers to my son full price without promotions I used to feel ripped off, and stupid not to have bought an extra one in a previous promotion. Over 50% of the diapers sales are under promotions. And there are no inovations either to try out...
- It kills your product range: The customer don't choose between a first price, private label, leading brand, organic brand or premium brand: It choose the best price. Most of the time leading brands under promotions are way cheaper than private labels... So it makes it more difficult to work on your category strategy in terms of product range.
- It higher operationnal costs for both suppliers & retailers: You need to print brochures, plan promotions, finance discounts, most of the time be more aggressive in pricing to make sure you are the cheaper during the promotion.
- You don't create loyal customers you transform them in promotion hunter: you have professional customers that only buy on sales. They know that in Jannuary they buy their clothing soap, in february their Nutella, in April their cosmetic products, in March their Italian products... They know each retailers anniversary events. They collect coupons everywhere. They only buy the cheaper products under promotions, most of the time the goods you sale with negative margins. Do you really need those customers? When you see what I am picturing, maybe not. But if you don't have them, you are sure your sales are going to plummet.
I have already discussed the topic. But the trend is not yet to change. Olivier Dauvers shared with us the last information about the trend.
P12 Nielsen : encore une fois, la promo s'envole : 17,6 % du CA sur P12 2015 vs 16,9 % un an plus tôt. #Promodependance
— Olivier Dauvers (@Dauvers70) December 24, 2015
That's a +4% increase... In 2016 the trend will be the same. So it will important to see the strategy retailers will have in order to limit this rise and control it, because trust me, it is not controlled yet.
