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Merchandising Trends: Over-reliance on Price-Only

"Innovative marketers have exciting new opportunities to create campaigns that reach shoppers in the home, on the way to and in the store; combined with the near limitless opportunities of integrating online and offline initiatives," writes John McIndoe, senior vice president, marketing, IRI. "But to take advantage of these opportunities marketers must take some risks."

Perhaps gun-shy following the cut-throat price battles of the recession, marketers indeed appeared to be risk-averse in 2012 and, based on data in IRI's latest merchandising report, this manifested in heavy reliance on habits learned during tough economic times, including price-only merchandising. This approach was popular despite evidence that sales lift from price-only merchandising is generally much lower than from other tactics, such as a combination of feature ad and in-store display.

According to the report, price-only merchandising support increased across 51 percent of CPG categories in 2012. Display-only merchandising activity also escalated during 2012, with increases occurring across 59 percent of categories.

In fact, the only merchandising tactic tracked by IRI to see a deceleration in activity in 2012 was combined feature and display. This type of support declined in 67 percent of categories.

These shifts in merchandising emphasis have not yielded wholly favorable results for marketers. While the magnitude of lift achieved with merchandising support varies across tactics and categories, IRI has monitored rather drastic changes on the whole and during the past couple of years. In 2012, average lift from merchandising support declined across 80 percent of categories within the multi-outlet plus convenience geography. Similar to industry average, the grocery and drug channels have seen average lift fall across 70 percent and 73 percent of categories, respectively.

Part of the argument in favor of supporting the use of feature merchandising and features combined with displays points to consumer pre-planning behavior. According to IRI's MarketPulse Survey, nearly three-quarters of consumers are making CPG purchase decisions before entering the retail environment. In other words, price-sensitive shoppers are building their shopping lists based on circulars and other ad vehicles, then are often reminded of deals when they see the items displayed in-store. During the past year, 38 percent of categories supported by feature-only and 49 percent of categories supported by combined feature/display achieved triple digit sales lift.

There are many more insights on merchandising trends in the latest IRI Times & Trends Report...

Please use this form for an instant download of IRI's Times & Trends report, Merchandising Trends - Supporting the Value Proposition, or to request other information. We also welcome your inquiries and feedback on the topics discussed in this Tip.

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