CPG Promos Not Generating Lift Like Before

Discussion
Feb 01, 2011

We know that consumers are looking for deals. They are clipping
coupons from various sources at an increasing rate. So why are retailers selling
consumer packaged goods (CPG) not getting the same sales lift they once did
from the steady stream of promotions being funded?

"We do believe there’s a level of promotion fatigue out there," Susan
Viamari, editor of SymphonyIRI’s Times and Trends, told Advertising
Age
. "Promotion has been very high in the industry over the past
couple of years, even though we did see a moderation in the growth. CPG manufacturers
need to evaluate everyday pricing strategies."

The other issue, Ms. Viamari
said, is that mass promotions do not account for the individual financial challenges
that consumers face.

"Because more than a third of consumers are having trouble buying groceries,
that option of stocking up just because something is on special is not a very
easy option," she told Ad Age.

Many brand marketers and retailers
are having to reassess their promotional practices in light of diminishing
returns.

Those moving to social media and daily deal services such as Groupon
and LivingSocial may find that the hoped-for lift from these sources is not
there either.

Research by Infegy’s Social Radar found, for example, that while
consumers talked more often about great deals being offered last year, those
discussions did not translate into overall higher sales for the products being
talked about.

Ad Age also reported on a survey by researchers at Rice University
that found nearly one-in-three businesses found using Groupon to be unprofitable
and that consumers became less responsive as more deals were offered.

Utpal
Dholakia, a marketing professor at Rice who conducted the survey, told Ad
Age
, "My theory is that as time passes there’s a little bit of jadedness
about using Groupons because then they become just like any other coupon."

Discussion Questions: Why do you think promotions of CPG products are becoming less effective? How much of the problem do you think is related to consumers’ current economic state?

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10 Comments on "CPG Promos Not Generating Lift Like Before"


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Fabien Tiburce
Guest
Fabien Tiburce
10 years 3 months ago

The article hinges on a foregone conclusion that promotions = coupons/discounts. That conclusion is flawed. Promotions have lost their effectiveness precisely because CPG manufacturers equate promotions with discounts. Stop chasing discounts (or at least don’t strictly focus on discounts) and focus on the “message” to the consumer. Are special displays and signage being used? Does the promotion motivate the customer to purchase or re-purchase the brand? Does it create a sense of excitement? And perhaps most importantly, is this promotion you are paying for being executed at store level properly? The CPG industry loses 5% of sales annually paying for promotions that do not get executed at store level.

Focus on the message and ensure the message is consistently executed at store level. Sales will follow.

Ryan Mathews
Guest
10 years 3 months ago
There isn’t a single answer to this question but there are clearly several contributing factors. The first is, in fact, promotion fatigue. I’ve argued for years that marketers and retailers were undermining their own efforts by over-promoting price. This constant over-promotion has eroded the credibility of price-based offerings and inevitably lowered the consumers’ interest and trust in deals, promotions, coupons and loyalty discounts. Next, the economy has clearly had an impact on buying behavior. As more former lower-middle class workers slide down the economic ladder they simply aren’t in a position to buy the way they used to, say, pantry loading deal merchandise for example. It doesn’t matter how good a deal is if you can’t afford it. Third there are demographic factors. Empty nesters; dual income households; single member households; and the elderly just don’t buy as many CPG products as traditional households used to. As these cohorts swell many manufacturers are going to have to rethink their offerings. There are social factors as well, notably the move to “fresh” and “organic” products and… Read more »
Gene Hoffman
Guest
Gene Hoffman
10 years 3 months ago

When promotions become fatiguing, when clipping coupons seems prudent or necessary, when consumers become weary and financial pressed, the vitality CPG company promotions becomes less effective and retail sales slip. As current world events cause commodities and energy to become more costly, rising product prices will further chill the impact of promotions.

Dr. Stephen Needel
Guest
10 years 3 months ago

I think it’s an issue of the nature of the promotions–they are often not very compelling. I’m looking at my coupons from Sunday and seeing $0.35 off Tide, $0.25 off Bounce, $0.25 off Charmin (not to pick on P&G). These are not high value promotions that make me want to rush out and buy these products. Promotions may have worked better when prices were higher and the coupon values also higher.

Also have to agree with those above–multiple product purchase requirements may not be appropriate in this economic environment.

David Biernbaum
Guest
10 years 3 months ago

Promotion fatigue is one reason but it’s also because almost all retailers run almost the exact same promotions on exactly the same staple items all at the same time. Retailers have gotten away from promoting items that are more interesting.

Gordon Arnold
Guest
10 years 3 months ago

This article accurately defines the problems faced by retailers that are using promotions to address supplier high inventory levels or slowed inventory category sales instead of customer buying habits. Many retailers have been fooled into thinking that we are in a 4+ year recession. Recessions have a life span measured in months with single digit declines. Depressions live for years with steady double digit declining results, like where we are now. Smart retailers are stocking and promoting market needs and looking at impulse displays loaded with need inventory to increase average ticket size.

Bill Bittner
Guest
Bill Bittner
10 years 3 months ago

To some extent, the question is answered in the article. If promotions are proliferating across the market place and consumers know that there will be another one soon, why do they need to stock up now? With everyone offering discounts, it is not a matter of “fatigue” as much as it is “so what?” Combine that with the comment about how much they have to spend and it only makes sense that consumers are willing to use their money to buy the additional items that are featured this week instead of buying deeply into a single item. With so many deals appearing so frequently, the smart consumer is spreading their spending across them all.

Gene Detroyer
Guest
10 years 3 months ago

Maybe the consumers’ cupboards are just plain full. Not every CPG company can have 5% growth when the market is growing no more than the rate of population growth., and likely less. When you put together a plan to grow in excess of market growth, it is the incremental business that either makes the plan or breaks it. By definition, and most accounting foolishness, promotions are incremental business.

Consumers are not going to buy more overall, because products are on promotion. They are simply going to shift their buying. In today’s environment, there is no longer incremental consumption. The consumers’ buying side is fixed and the CPG companies are expecting too much.

Dan Frechtling
Guest
10 years 3 months ago
In explaining why lift per promotion has fallen, Ryan, Gene and David describe important elements of fatigue. Susan Viamari, the author of the SymphonyIRI report that quantified this fatigue, goes further to say marketers need to tailor shopper marketing to individuals rather than broadly such as TPRs. This raises a few questions about tailoring: 1. What kinds of tactics cause this fatigue? FSIs, TPRs, displays and features are mentioned because they are legacy spray and pray vehicles. But digital offers used excessively are also culprits, according to Gregg Ambach of Analytic Partners. Mass email in particular desensitizes shoppers. We’ve found lowering frequency of delivery, carefully selecting which offers to include, and shorter expiration periods all improve response. 2. What kinds of shoppers experience this fatigue? Mostly, those who are bombarded with irrelevancy. Analytics applied to individual purchase history, mass response and cross-category patterns grow incremental lift and improve shoppers’ self-reported satisfaction. Furthermore, analytics applied to individual promotion history tells us which shoppers are the deal enthusiasts who don’t generate incremental lift. 3. What kinds of… Read more »
Kai Clarke
Guest
10 years 3 months ago

You cannot get consumers to purchase more with less. Our unemployment numbers speak for themselves. With over 10% of people not working, and many more underemployed, we have a large percent of consumers who simply cannot afford to purchase products on impulse, or purchase products that they do not necessarily need. This results in lower take away on promotions across the board.

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