Knowledge Bank Blog, Pricing & Promotions

New Normal #6 Promoting with Purpose

What would you rather eat right now – an apple or a bar of chocolate?

Many of you are likely to have chosen the chocolate.  You know the apple is the healthier choice.  It is better for you in the long term.  But the chocolate gives you the immediate reward.  It will (along with a few more bars…) only hit your waistline in the future.

In modern society many of the good choices you make will not benefit you immediately.  If you do a great job at work today you won’t be promoted tomorrow.  If you make a pension contribution today you won’t be able to retire tomorrow.

Scientists call this a ‘delayed return environment’ because you can do things for a long time before your actions deliver the intended return.

This is a real challenge for us.  Our brains did not evolve for a delayed return environment.  On the African savanna, we weren’t saving for an apartment by the sea to retire to.  We were out hunting for the next meal.  Or trying to avoid being the next meal.  We have evolved to prioritise the present over the future.

There is logic to this.  The costs of a good habit (e.g. going to the gym regularly) are in the present.  The reward (being super fit) is in the future.  Whereas the reward of a bad habit (e.g. smoking) is in the present.  The cost (e.g. risk of lung cancer) is in the future.

An immediate reward now often leads to a delayed cost in the future.  An immediate cost now often leads to a delayed reward in the future.

Why are we talking about this?  We see this tension between immediate and delayed rewards in the FMCG world.  There are plenty of examples.  Decide to sell in Amazon?  Immediate (sales) reward.  Prices driven down over time?  Delayed cost.  Charge suppliers big listing fees?  Immediate (profit) reward.  End up with an over ranged store?  Delayed cost.

We think the biggest example of this is promotions.  Run a price promotion and you get an immediate sales reward.  Run another and you get another sales reward.  But over time the costs kick in.  Re-setting shopper expectations of a fair price to pay?  Delayed cost.  Falling brand equity?  Delayed cost.  Bigger comparatives next year?  Delayed cost.

So how can you make promotions deliver an immediate reward and a delayed reward?

Be Purposeful.  This is about taking a proactive approach to promotions not a reactive one.  A reactive approach tries to fix a problem.  Got a short term sales gap?  Run a price promotion.  Under threat of being de-listed?  Run a price promotion.  Base price too high?  Run a price promotion.  It solves the problem in the short term, but often stores up trouble in the longer term.

A proactive approach is about going after opportunities.  It starts with the shopper behaviour you are trying to drive.  Are you trying to drive penetration?  Or volume?  Or trial?  One of the simplest, but still best, examples of a purposeful promotion is the lunchtime meal deal.  It is trying to get shoppers to buy 3 items.  It is offering a bundled solution at a price point.  It is consistent, so you are training the right shopper behaviour.

Be Different.  Think about the basic ‘rules’ that most promotions follow.  Firstly, they are focused on this purchase (getting shoppers to buy now).  They have little consideration for future purchases (getting shoppers to buy again).  Secondly, a price discount is the main incentive to buy.  Thirdly, they could be run by any brand.  Anyone can run a half price.  You can do it this week.  Your competition can do it next week.

So how can you be different?  Firstly, consider future purchases not just this purchase.  McDonald’s Monopoly promotion is a great example.  Scratch and win a free drink next time you come in.  Secondly, offer shoppers a different incentive to buy.   The Innocent Big Knit campaign is a great example. Thirdly, do something that can only be done by your brand.  The Waitrose Excitable Edgar activity is a great example.

Be Disruptive.  This is about the cut-through of your activity.  Many promotions are low impact.  The shoppers who see the activity are the ones who were going to buy you anyway.  At full price.  The Discounters show how to disrupt.  The Aldi ‘Super Six’ activity is properly disruptive – something that has become (another) reason for shoppers to keep coming back.  The ‘Middle of Lidl’ is another example.  Accelerated by the fact that you know the stuff won’t be there next time.

Disruption isn’t about who can get the most space or who can shout the loudest.  It is about doing things in a differentiated way.  What has more resonance with shoppers?  A cluster of Innocent bottles with a load of other juices on a gondola end?  Or a set of Innocent bottles in the home shelf with knitted hats?  We think the latter.

The old normal = discount was king.  The new normal = differentiation is king.

Promotions that deliver an immediate and a delayed reward.

Like the chocolate covered apple we are about to tuck into…

Feel free to forward. Have a great weekend. Speak to you next week.

We are an FMCG strategy consultancy. We help companies win with shoppers & retailers – Category Strategy, Channel Strategy, Shopper Marketing Strategy and Retailer Engagement.