Retailers and suppliers are approaching the cost-of-living challenge largely from opposite sides. Retailers are promoting low absolute prices, while suppliers are offering value when purchasing large volumes. Both are trying to maintain market share and profitability while making it easier for consumers to live on a tighter budget.
So how do you formulate a plan for 2024 that meets consumer demands, retailers’ requests and a supplier’s own objectives?
These five elements are critical:
- Leverage the retailer’s strategy and communication to align your objectives with theirs
- Match and counter competitor promotions
- Offer an affordable option, which we refer to as a ‘Mini Price’ offer
- Use large quantity offers that create strong brand affinity and block competitors from selling to your consumer base for an extended period of time
- Maintain a focus on premiumisation by promoting high value-per-serve products
1. Align your plan with the retailer’s strategy
Increasingly, retailers dictate the types of promotions they prefer, and they impose many limitations on what suppliers can and cannot do. Some retailers may focus solely on loyalty card promotions, eliminate multibuy offers, or require participation in category-wide promotions. Understanding a retailer’s strategy is vital for suppliers.
While it is generally beneficial to participate in retailer programs, there is often room to negotiate special arrangements. Factors such as a strong working relationship, being a significant supplier, category dominance, or offering a unique niche product can provide leverage for securing a tailored agreement. Having said this, suppliers can benefit from the massive communication retailers make around their preferred strategy. Often these messages are amplified by mainstream media. Align your promotions and benefit from all this attention.
2. Capitalise on Competitor Promotions
The primary advantage of running promotions as a branded supplier is to gain sales from competitors. The Accuris benchmark study consistently validates this fact. In its 2022 edition, Accuris revealed that approximately 68% of the uplift generated by a promotion is attributed to competitive steal. In other words, over two-thirds of the additional sales resulting from a promotion come at the expense of competitors who are selling less. It is therefore crucial not to be absent when your competitors are promoting. Ensuring your presence in every category promotion offered by retailers is vital. Whenever there is an opportunity for competing brands to participate, you should proactively secure your spot.
The data is clear: failing to be present when your competitors are actively promoting is the fastest way to a loss of market share. Position yourself where your competitors are and offer a compelling product – not necessarily your hero pack – at a competitive price whenever your main rivals are running promotions. By actively engaging in category-wide promotional activities, you can protect market share and avoid losing out of shopper’s attention for your brands.
3. Embrace the Era of Mini Prices
Inflation rates in Western markets have reached levels unseen for decades, creating ongoing challenges for many consumers to manage their budgets. While inflation is projected to be lower in 2024 compared to 2023, many individuals will still face financial constraints. In response, retailers are consistently emphasising the allure of what we labelled ‘Mini Prices’. Tesco sells well-known toothpaste for a mere 80p, pasta for 29p – a truly Mini Price. Leclerc in France promotes items for €1 with a few additional cents or even for €0 plus ‘a few cents’, all in the name of Mini Prices. Albert Heijn in the Netherlands entices customers with over 100 products priced below €1 – once again, Mini Prices take the spotlight.
As a supplier, it is essential to incorporate a super-accessible offering within your portfolio. Consider options such as smaller sizes of your flagship brand, limited-time offers on secondary brands, introductory deals on new packaging or flavours, or strategically introducing a specific product price-matched with hard discounters. By embracing the concept of mini prices, you position yourself favourably in the market and meet the evolving demands of cost-conscious consumers. Stay competitive and capture their attention with irresistible affordability.
4. Large Quantity Offers
As escalating prices force many households to seek alternative options like own-label products or discounters, national brands find themselves in a defensive position. While innovation and brand building are a long-term solution, they may not provide immediate relief. Competitively pricing well-known brands becomes increasingly challenging amidst rising cost of goods and heightened price sensitivity among shoppers. However, strong brands can avoid being caught in a direct low-price comparison by offering “more for less”. The strategy revolves around increasing the effort required by shoppers to access exceptional prices.
Imagine this: to unlock a fantastic discount, purchase two or even three, four times the quantity you had originally planned! Enter the realm of large multibuy promotions or big deals offers on large packs of products. On a per unit basis, the offer is competitive with the rest of the market, but shoppers are required to spend two or three times the money they normally would spend in your category on any given trip. These offers encourage consumers to significantly increase their consumption of your brands while blocking sales from your competitors for months.
5. Maintain your Premiumisation Strategy
If you have a segment of your product portfolio that caters to the premium market, it is highly recommended to continue supporting it with suitable promotions. About 74% of shoppers have the same purchasing power as before the current inflationary period (UK, F&B Inflation Insights, Attest Ltd., November 2022). They can still be targeted to elevate their spending and pay a premium for superior products, especially when presented with attractive offers that allow them to stock up on preferred brands.
Consumers continue to socialise, celebrate special occasions, and partake in activities like barbecues and picnics, where they desire quality brands. Promotions such as Coke’s buy 5 for a special price on their small 150ml cans, Heineken’s Birra Moretti and Beavertown beers, or L’Oréal’s skincare offers exemplify brands that persistently run promotions targeting price-insensitive consumers. These strategies result in increased shopper expenditure and add value for supplier and retailer alike and to the overall category.
Join this Accuris webinar to discover how these five pillars are used in the soft drinks category for promotional planning – Register here
Accuris provides modelling and analytics, as well as software and consulting, to help suppliers and retailers track and improve the effectiveness of promotions, pricing and assortment strategies. Their clients are consumer goods companies across Britain and Europe, including many regional champions and two-thirds of the top 10 FMCG multinationals.
