Latest sales data shared with us by our major clients shows a growth in volume for many household every day products. However, underlying the impressive performance in sales is the rise in the importance of promotions in delivering sales.

At the start of 2008, some brands were selling over 70% of their volume on deal, with only 30% of volume delivered at the RSP. Today, these brands are moving closer to 80% sold on-deal as consumers shy away from buying products at the full price.

Getting your promotional fix

For brand managers, promotions were the sure fire way to ensure you met your volume targets, with 1 to 2 promotions per year needed to deliver the sales and volume targets.

Promotions have been so effective that brand managers today rely on them heavily as part of the overall marketing plan for a brand. Consumers have also become addicted to the in-store offer, and as they have become more wide spread, patterns emerge where consumers only buy certain brands when on offer.

The retailers also adore the promotion. New news and the chance to be showing the consumer that they are providing value are a drug which the retailers cannot get enough of.

A dangerous mix of consumer, brand and retailer pressure is therefore driving the increase in promotions. Many categories now survive on everyday promotions. For instance, the yogurt fixture always has several brands on-deal and brands which operate or want to operate in this fixture have to operate totally differently in how they develop marketing plans.

Less advertising, more promotions

Over the years, analysis of marketing plans we see for new product launches shows a slow decline in the spend on advertising, and an increase in in-store promotions.

As well as providing consumers with perceived value at shelf, promotions also drive consumers to change their minds at the fixture and swap brands. Position, size of promotion and length of promotion are all strategically important in delivering more volume. 

Straight to Promotion NPD

Several clients have reported that NPD now has to go straight on promotion to get shelf space. In developing a marketing strategy for your new brand promotions now have to be the building blocks of your launch plan.

Several pieces of NPD have failed to secure promotional slots in the first few months of launch, resulting in delisting and eventual failure.

Promotions are here to stay and must be embraced

For all in the process of launching new products, taking a high-brow stand against promotions is not possible anymore. Promotions are critical to longer term success and the economics of your product therefore needs to take this into account.

Pricing research also needs to look differently at your product. RSP’s become pretty meaningless when the majority of your volume is sold on deal. New research models deal with price and promotion together, allowing you to identify the sensitivity of promotions and price hand in hand.

Promotions are here to stay. Ensuring that you fully understand them and their effectiveness is critical. For more information, call Chris Sinclair on 01865 728272 or email chris.sinclair@tora.co.uk