Retail Marketing and Branding: A Definitive Guide to Maximizing ROI, 2nd Edition

CHAPTER 15

FACT-BASED PROMOTION MANAGEMENT

Gabriele Bavagnoli, Clarisse Magnin-Mallez, Tarek Mansour, Stefano Zerbi

Next to regular prices, promotions have always been the most important drivers of value perception for retailers, and the recent economic downturn has increased the relevance of promotions for shoppers' choices of stores and items. After years of futile attempts to cut back on promotions, retailers are now actively pursuing aggressive promotional strategies again. As a result, almost a third of all revenues in grocery retail come from special offers in most developed markets. A full 50 percent of these are the result of discount promotions, and promotions absorb up to 50 percent of category managers' time.

There is no denying that promotions are what consumers want. In a recent survey, 25 percent of shoppers said they were actively looking for special offers that enable them to buy their preferred brands despite tight budgets. But even excessive demand does not guarantee success. More than a quarter of all price promotions do not result in higher revenues, but only in decreased margins. According to more conservative estimates, only about 10 to 15 percent of promotions are really profitable – if all commercial and operational costs are taken into account. The principal reason for this comparatively low success rate is a somewhat casual approach to promotion design and execution. Many retailers opt for “last year's offer” or “what our competitor just ran,” or simply ...