Shoppers PO'd Over BOGOs

I'm going to come out as a neanderthal on this one, I assume, but this story doesn't do much for my opinion of the Washington Post. In a sense, any volume discount or promotion 'discriminates' against those who don't buy the volume needed to get the discount, but that's the whole idea. Buy more, get a discount. It used to be called marketing, merchandising, or promotion. Now it's called discrimination. I sympathize with the elderly and singles, but if they haven't saved up enough money to buy two bottles of Tylenol or whatever, they have bigger problems than this. At some point, we have to say "enough is enough" - This is how the promotion works, period.

Al McClain, CEO, Founder, RetailWire.com

Oooo, what careful wording - "should it be raised by customers". Dear oh dear oh dear. Does this mean it's OK if no one spots it or questions it? Does that make it any more ethical or acceptable? We have spoken so much recently about the increasing numbers of single person households, whether seniors or not, that this kind of deal falls into a grey category that puts the onus on shoppers to stand around dividing the number of products on offer by the "special" price to see just how special it really is. Whatever would retailers do if all their customers increased the amount of time they spend in the store in order to decrease the amount of money that they spend? I can see it now - take a ticket when you enter and either leave by an agreed time or pay a penalty. We really can't have shoppers cluttering up the aisles all day/evening long and making it too crowded to achieve the level of footfall that is needed for profitability. Particularly if they are to be seen adding, subtracting, dividing and deciding, let alone questioning and arguing. That really wouldn't be good for business at all, now, would it?

As for taking their business elsewhere if not happy, we have also discussed this many times before. This is not always an easy or convenient option, particularly for people who are on a limited budget i.e. can't afford lengthy, expensive car journeys or for the elderly and infirm. That is, for the people who are least likely to be buying in bulk anyway.

And finally, I would just like to point out that in the UK these offers are, even more appropriately I think, called BOGOFFs (Buy One Get One Free). I'm sure you can figure out the double entendre without me spelling it out.

Bernice Hurst, Contributing Editor, RetailWire

There's an interesting discussion about BOGOs and the ROI of promotion on Wharton's site. Click here for the link.

It's interesting that shoppers are becoming so savvy about our promotional games. This is not the first time I've heard of people raging against BOGOs. There was recent research on this, I think by Mona Doyle. Anyway, in an area with a high senior count, why not discounts for seniors on certain days? (Then you might get complaints from the 20-somethings, of course.)

BOGOs can be tricky. Just ask Safeway, which not that long ago paid out $1.5 million after being taken to court over interpretation of which products were included in the offer. The Wharton piece, if you go to it, has some interesting things to say about how Kellogg started measuring the profitability of its promotions. My favorite line in the article was when the author wondered if we were heading toward the day of "pay nothing, get two free."

Warren Thayer, Editor & Managing Partner, Frozen & Dairy Buyer

This is a good example of where manufacturer and retailer objectives can diverge. As Phil Lempert suggests, manufacturers want/need to move volume; it's critical for their success. At the same time, retailers want volume, but they also have to serve the needs of their target customers. And, small households are becoming a larger and more attractive target segment.

In terms of serving shopper segments, the retailer always has his own brand/private label to use to deliver "greater value for money." After all, look at what Aldi and Save-A-Lot are doing.

There's also the option for a retailer to have a day-of-week or time-of-day promotion that can serve the needs of seniors with more time than money.

Certain promotions will always work better for some shopper segments than others. This is an increasingly important fact of life in a fragmenting consumer market. Putting too much emphasis on one promotional strategy can only divert creative energy from developing other strategies to serve different sets of needs.

Anonymous

BOGOs are only one part of the discussion. What I find more disturbing to many shoppers and very short-sighted on the part of some manufacturers is the trend toward buy-two-get-one. This is a transparent attempt to build short-term sales and profitability. Long term, I think it will drive people to alternative brands that offer greater value.

It may also drive them to other supermarkets. But it is more likely to drive them to alternative formats like drug stores. If seniors are already there for medications and other needs, they're probably going to pick up other items and eliminate another trip. Telling people they can shop elsewhere is simply going to further decimate center store sales in food stores.

Len Lewis, President, Lewis Communications, Inc.

I wonder if the club stores will be targeted next because they focus on bulk / multiple pack sales. Are they discriminating too? Or is this just another case of people whining because they can't have everything exactly their way?

I look forward to following this story!

'kirkbrown'

I don't think Al sounds "like a neanderthal" at all. Both manufacturers and retailers have the freedom to structure promotions that appeal to certain consumer groups. And other consumer groups have the freedom to respond. As a one or two person household consumer, BOGO pricing has been a pet peeve of mine for a long time. My own response was to buy the item I wanted anyway, then make a point of handing the "Free" item to someone in the checkout line who could use it -- preferably within sight of the front end manager. I've noticed that my own Jewel doesn't use BOGO pricing very much now.

Ben Ball, Senior Vice President, Dechert-Hampe

I'm probably going to be considered Cro-Magnon for my comments, so I'm right there with you, Mr. Neanderthal.

Isn't one of the fundamentals of business the notion that you can't be all things to all people? Another, that you need to meet the needs of your most important customers? So, if I'm a food retailer in the 'burbs, then BOGO's are a great way for me to bring value to my most important customers, likely larger families who have the storage space (and let's set aside the concept of cherry picking, else we get into the discussion on promotion effectiveness). If I'm a store manager in a downtown area of that same chain, I need to recognize who my customer is and work with HQ to get an exception to the BOGO adds in order to meet the needs of customers who can only carry so many bags the eight blocks to their apartment. Always, the focus is on meeting the needs of those people nice enough to pay my salary while responsibly (gasp!) utilizing the trade funds provided by the manufacturer to drive mutual volume in the spirit of the way we agreed upon.

Beyond that, I need to recognize that every move I make will annoy somebody out there; discontinuing the worst-selling item in the store can still lead to some angry calls to HQ. We live in a world where the spoiled Boomers want Hummers with 100 mpg. Retailers need to realize this, and that disaffected consumers can be vocal (or simply the topic of lazy journalists with nothing else to write about inaccurately today). They need to run their business in a manner that meets the needs of their most important customers and be disciplined about maintaining their focus on that. Caving to a vocal minority does nothing except confuse all consumers and leads to ruin.

'Redleg'

People in this country have their heads screwed on backwards when it comes to concepts such as rights and discrimination. There is no "right" to pricing equity. And "discrimination" isn't always wrong, only when it's done because of prejudice against race, religion sex or age. Al has it right. BOGOs DO discriminate among consumers, and there is nothing wrong with that. The fact is that families are more valuable to a retailer that singles or seniors. If they want to take advantage of BOGOs, they should make room in their freezers.

'BrandManager'

Blaming manufacturers is a convenient place for retailers to hide. If seniors are, in fact, complaining to retailers about "discriminatory practices," isn't it safe to assume that retailers would then be "complaining" to their suppliers? While I agree that enough is enough and you do have to draw the line somewhere, I also concur with the statement, "If consumers feel as though they're not being heard...there are still options."

Supermarkets, like any other business, succeed (or not) because of the choices they make. Hopefully, these choices reflect consumers' needs in their respective communities. Shoppers also get to make choices, especially with their wallets, because "there's always another supermarket to shop at."

Michael Aarons, Director of Client Services, RLR/Jarrin Advertising & Marketing

Let's remember that our futures lie with the perception of shoppers -- if they feel that brands and retailers are "ripping them off," they WILL go elsewhere. As the demographics of America continues to shift, we find ourselves needing to shift the paradigm of how we deal with shoppers: older shoppers, more ethnically diverse shoppers and more technologically enabled shoppers. We can fool ourselves thinking that a few cents either way won't make a difference...but just wait until handheld PDAs and phones that are equipped with comparative pricing from different retailers are commonplace in all shoppers hands. Want to see the future of value pricing at POS? Go to froogle.

Phil Lempert, CEO, Consumer Insight, Inc

Why stop at BOGOs? Wouldn't all bulk retailing (Sam's Club, Costco, BJs) be "discriminatory" under this premise?

I think it all speaks to an utter absence of economic literacy... the customers who create savings through economies of scale are the customers who SHOULD pay less. The expensive customers (that is, the low-volume ones) should pay more. Its like griping that I can't buy at wholesale... well, that's the point. I wouldn't be a profitable customer for a wholesaler to have. I think the Post really dropped the ball by failing to run this one by anyone who's at least completed an ECON 101 course.

'mfbenson'

Calling it "discrimination" seems a bit harsh but it's certainly not customer friendly. I think the answer lies in the retailer's market position. If they're playing in the high volume, low price arena, then the store's answer to complaints about the policy is probably "take it or leave it." I would hope a retailer could find a solution for a large customer segment other than "there's always another supermarket."

Perhaps a seniors segment of the loyalty program that automatically gives that particular group the special would answer the problem, but if you make an exception for seniors, you're still discriminating against younger people, or singles, or maybe vegetarians, or even lactose-intolerant people. I believe most retailers will be more successful if they focus on what's best for their customers and less about what's best for them.

Doug Fleener, President and Managing Partner, Dynamic Experiences Group

It is interesting to me that supermarkets have the ability to handle a BOGO promo but yet can't manage to coordinate the advertised price, shelf price and scanner price. If the seniors want to worry about something, I would suggest that they pay more attention to what they are actually being charged for what they buy. I find regular "errors" on my grocery receipts and they tend to run 10 to 1 in favor of the merchant. I don't know why everything isn't buy one get one free when they steal so effectively with the scanner.

Ed Dennis, president, Dennis Enterprises

I believe there are two issues here. If the BOGO is initiated by the manufacturer to move additional product, the manufacturer and retailer certainly have the right to require the full purchase in order for the customer to receive the deal.

However, many BOGOs are initiated by the retailer and advertised in order to pull existing and potential new customers into the store. Refusing to honor the deal price on a single unit purchase only serves to dissatisfy a current or new customer. How detrimental can that be to a retailer?? Do it often enough and you may not need to be concerned with this issue as your business will have gone down the street.

'taz'

I'm a single person (mid thirties) who has to AVOID BOGO's because of space and the inability to consume perishables before they, well, perish. I wind up NOT buying the item because I'm too angry at the money I'm losing by not being in a position to take advantage of the BOGO. I submit that retailers would push more product if they offered the same discount per unit as they do with BOGOs - if the point is to move merch, why limit customers' buying opportunities?

Lara Solomon, Student, Zicklin School of Business

Stock piling impacts more than seniors or singles. It impacts apartment dwellers and students, too. IF a retailer is inflexible in how he handles promotions, he will ultimately be his own worst enemy.

That said, my experience as a single person suggests that retailers do honor this segment of the market with comparable prices for promotions like buy one get one free, charging me half price for just the one item.

'MSRaymond'

Every purchasing incentive usually "discriminates" against someone. Incentives such as the current auto owners for a repeat purchase, BOGOs, coupons, etc. all favor the user. There is nothing new about these practices except that they get more pregnant each year. The way the scorecard is kept today, manufacturers and retailers have one primary focus: increasing sales any way the can. Since seniors and most singles don't represent high-volume usage, they aren't appealed to via BOGOs because the mindset of American marketing is geared to the fast-turn focus.

If a retailer or a manufacturer wants to appeal to seniors or singles, they can offer "affordable" or "internally desirable" promotions that are designed to get into such still worthwhile pocketbooks.

Gene Hoffman, President/CEO, Corporate Strategies International

I suppose I stand with the Neanderthals - Sometimes discrimination among shopper segments is the point.

But I also have observed that BOGO promotions can do damage by undermining consumers' value perceptions and creating confusing or inconsistent purchase "rules" that leave some shoppers feeling dumb or messed-around-with.

My heart doesn't exactly bleed for the young or old single shopper who feels he/she cannot afford to stock up on promoted items. Those individuals are entitled to shop in accordance with their own best interests. However, the retailer who chooses a promotion that makes some of its customers feel bad deserves the consequences.

James Tenser, Principal, VSN Strategies

To clarify Phil Lempert's comment, shopper-targeted BOGOs don't often come from manufacturers (they do offer retailer-targeted BOGOs, though). What's done with the savings from the manufacturer is the retailer's business and always will be. Ever notice that BOGOs usually happen in groups? When a supermarket puts together a BOGO promotion, they select several items from several manufacturers and feature them prominently together in a themed ad. The economics are determined by the category managers involved, who use manufacturer deals to finance the sale.

I've also got to congratulate Len on his great definition of the supermarket business: the "transparent attempt to build short-term sales and profitability." Shoppers already know that their store is out to sell more stuff and make more money -- no transparency needed.

In the 80s in Pittsburgh, we ran BOGO sales in which shoppers could save over $60 off regular retail prices if they bought every BOGO item. Lots of batteries and vitamins in those sales because they have so much built-in profit. Anyhow, sales exploded each time, and this was during a recession. It was the right promotion at the right time for the right customer.

Used judiciously along with a mix of other promotions, BOGOs continue to achieve their sales objectives. Shoppers can take advantage of the promotions that are applicable to them. Getting peeved when BOGOs don't pertain to you is like getting peeved about discounted dog food when you don't own a dog. After all, shouldn't those dog food savings be available on exactly the items you buy?

M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

Not much to add here, except to express my dismay at the attitude that seems to prevail among some segment of the population that if someone else is offered a good deal that they are somehow being ripped off! Some comments above evince this very attitude and I believe the anger is quite misplaced. If a product is worth buying one day at $X, then it is still worth buying at that price the next, even if buying two would cut the effective price in half. If you don't need two, it isn't a discount at all, and the price for one remains fair.

Jeff Weitzman, CMO, Buysight, Inc.

Such a huge discussion about something quite ridiculous. I think I am missing something here. So, if Chevy offers a $5,000.00 rebate off a 1-ton Suburban and that's two much vehicle for me (and of course too expensive) they are discriminating against me because they don't offer me the same $5,000.00 off of a Cavilier? Why, for goodness sake! That's not fair! Waahhhh!!!

It reminds me of the comment I once heard from an old groceryman - "If you don't like the price of the oysters today Mrs. Goldstein, don't buy them!"

What should retailers do? They should run promotions that are successful and profitable. If they weren't either, they wouldn't run them.

And the rest, awww Hogwash! (Sorry Sir, but you'll have to go to the local feed store to buy that!)

'Scanner'

Discrimination against senior citizens? Sure it is. Just like its discrimination when I can't get a senior citizen discount. Seems everywhere I go seniors are given a discount. This is discrimination towards young people. They are getting the BOGO item for free. If they don't want it, then donate it to the food pantry and take a tax deduction for the one paid for.

David Livingston, Principal, DJL Research

Two quick comments.

One -- consider the source. The Washington Post (and journalists, in general, and come to think of it, a good chunk of the legal profession) thrives on faux discrimination. It doesn't impress editors or sell papers to write how all is well under the sun.

Two -- if this is a real problem, grocers would send vans to senior centers for "bonanza shopping trips," encourage buddy-buying programs and escort the seniors around the BOGO offers in the store.

'bmartyna'

I know this is an old thread but since it still is a hot topic... I am surprised that not one of the esteemed panel members brought up a big reason BOGOs continue to be popular for retailers. That is................Wal-Mart. Wal-Mart does not match or honor BOGOs or other "gimmicks," in their words. Check anyone's Wal-Mart price strategy and you will find BOGOs.

'jozell'