The 'broken' shopper marketing industry
22/02/2018On a global research made by Nielsen (2015) 6 out of 10 grocery trade promotions lose money, with the average loss per promotion showing a negative trend... A similar pattern, if not worse, is found in Greek market as well. While some categories, like detergents, sell more than 80% of their volume on deal, it is hard not to see why consumers are no more loyal to any brand or retailer, which in turn make the promotions activities a money-losing machine.
Over the last decade, a big chunk of brands' investment has moved to retailers' trade promotions, shifting the investment weight from brand marketing towards the newly-generated shopper marketing. Most companies didn't even have a shopper marketing department 10 years ago (many don't still), but the past few years we increasingly see those departments not only develop, but also having a pivotal role in a brands strategy and spending.
For more, the highly competitive grocery retail market has pushed retailers to aggressively invest in promotions. In the majority of promotions of course, it is the CPG brands that are asked to pay the bill, which they usually do. At any given time, we may see up to 2.000 SKUs on promotion in a single store, most of which are promotions paid by brands - quite a big price to pay.
Shoppers are also being trained to this vicious circle. They stock up and wait till the next BOGOFF (buy one get one for free) will come up. Maybe not at their retailer of preference, but still within their reach... Worst case, if not their favorite brand, then for sure another one, will lure them with a no-miss offer.
Few brands and retailers have managed to succeed in meaningful differentiation versus competitors, offering superior store experience or great product performance, instead of just a deeper discount, winning the value-equation game.
For the above, and few more reasons, we consider the shopper marketing industry 'broken', with a large amount of money being invested blindly, either directly from CPG brands or via retailers. One may claim that aggressive promotions drive trial for brands, putting fast and easy their product in their consumers' hands, but unfortunately this is cancelled by the promo intensity we see in most categories. In the majority of cases, short term sales are the measure of success a shopper marketing campaign has, neglecting few interesting KPIs that may change the verdict of whether a campaign has been successful or not, like: opportunity cost of money spent in universal promos, cost of getting a new customer trying the product, returning - new - switching consumers, retention & repurchase of converted consumers are some of them...
Digging in the root causes of the above we have come up with few very interesting facts that create the illusion for shopper marketers, that the only way to grow their sales and market shares is invest more and more on promotions. If you are interested, take a sneak peek at the below infographic and continue reading our next blogpost on Physical to Digital gap.