IRI identifies 4 elements key to driving productive promotions
CHICAGO - CPG marketers rely heavily on promotions to drive growth, and in 2015, the reliance on merchandising activities escalated across nearly half of CPG categories. Despite this increased investment, lift from merchandising support declined across 58% of CPG categories, according to the latest IRI Times & Trends report “Merchandising for Growth: Connecting the Dots for Maximum Activation.”
The report also offers a strategic approach to pricing and trade projected to result in a 1% to 2% sales lift and grow industry sales by up to $12 billion, while improving margins, building customer loyalty and delivering a lasting competitive advantage.
“The reality is that CPG marketers are investing heavily in promotional efforts in the hopes of spurring brand, category and industry growth,” stated Susan Viamari, VP thought leadership, IRI. “Unfortunately, the results of those efforts are not what marketers had hoped because volume is flat to negative nearly across the board.”
The bottom line is that ineffective merchandising programs are leaving substantial sums of money on the table across CPG aisles. CPG marketers that take a more comprehensive approach to price and promotion — beginning with the creation of a solid price-pack architecture — will deliver surgically executed competitive strategies and win big, Viamari suggested.
PPA is influenced by the following four elements:
Portfolio strategy: It isn’t necessary to promote all brands. Instead, assess the role of different brands and identify those that are likely to benefit from promotional activity;
Brand strategy: Having a simple and clear value proposition is absolutely critical. If it’s premium, it’s vital to maintain premium price positioning and apply those same principles for a value brand;
Channel dynamics: Marketers must focus on emerging channels and segment their customer base to determine which channels and which customers are most important to each of their brands; and
Consumer needs: Marketers must understand which brand attributes are most valuable to their key consumers and reflect these attributes in all promotional materials.
“With a clearly defined PPA in place, marketers can turn their focus to striking a balance between everyday pricing and trade pricing,” Viamari said. “It’s imperative to know the objective of any pricing action and how it fits into your larger strategic goals. It’s time for manufacturers and retailers to walk away from their old pricing strategies and turn toward a more sustainable financial future.”