Monthly Archives: May 2017

Postscript to : “The Rise of Everyday Low Pricing – A Slippery Slope”

Postscript to  “The Rise of Everyday Low Pricing – A Slippery Slope”

1/2 Price Promotions Contradict Everyday Low Price Perception 

In our recent article (26/04/2017), we commented on Coles rationale for its EDLP strategy: “to give customers trusted (fair) pricing, they know is not going to change.”

We also expressed a view, that the increased level of 1/2 price promotions, sends a contradictory message to customers.

So, why would Coles buyers disregard the Coles marketing strategy to strengthen customer perception of fair pricing? Quite simply, buyers are doing what they are told.

Rather than fund another advertising campaign, it’s expedient for Coles to attract non-regular Coles shoppers, using 1/2 price supplier funded promotions.

Once in store, Coles hopes they become regular customers, attracted to 4000 EDLP products and a more appealing total value proposition, (price, range, quality, store proximity/presentation, shopper trolleys/baskets, staff, checkout efficiency).

Our view was confirmed in comments by Wesfarmers MD, following release of Coles sales results, for the March 2017 quarter.

Coles Comments on Deep Discount Promotions

Wesfarmers MD, Richard Goyder :

“I think Coles is in pretty good shape at the moment in terms of customer perception, the investment in our stores, in pricing and in service.

The strategy to move more products across to every-day low prices was about cementing trust in Coles pricing, according to Mr Goyder who said the business was as “promotionally heavy” as it had ever been.

We Would Like to ……..

“There are more [deep discount promotions] than we would like … because it ultimately breeds distrust,” Mr Goyder said.

“We can’t move the entire range to every-day low prices … but there are some products that move around dramatically (on 1/2 Price Promotions) and we would like to move away from that.”

Quite clearly, Coles recognises the contradiction with the EDLP perception.  However, the alternative to cutting supplier funded deep discount promotions, is to self fund a further EDLP advertising campaign.

The choice of words “We would like to move away from that” (1/2 Price Promotions) is hardly convincing of intention to cut deep discount promotions. We interpret this as “when Woolworths cuts 1/2 Price promotions, we will follow”.

We don’t see any sign of the war to win more regular customers ending for some time.

The challenge both Coles and Woolworths are wrestling with, is how to attract and keep, both price conscious and higher value, brand loyal shoppers, with consistent appealing overall offers.

 

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Trade Promotions – Cause for concern

Take a look at Trade Promotions fast facts

  • Consumer goods businesses spend 15% to 30%
    of sales on Trade Promotions
  • 56% of promotions don’t produce any sales volume increase
  • 67% of promotions don’t break even
  • Trade spend increased 10.8%, while gross sales
    declined 3.7% (4yrs to 2013 – AFGC)

Brand owners are under constant pressure to price promote products, with retailer terms causing increased business risk.

tpm360 lets you restore balance with customers, enabling your business to focus on those customers, products and promotion events, that drive value – essential for sustainable business success.

Let tpm360 turn concern into confidence

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What can tpm360 do for your business?

tpm360 is a highly accessible promotions management tool, for businesses grappling with disjointed spreadsheets and unwilling to take on, complex, resource taxing solutions.

tpm360 is Accessible in every sense:

Expect rapid results and ROI without resource drain

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1. PLAN

Sales budget

Your sales budget is your road map, to achieving acceptable business and profit growth, key drivers for business value growth.

  • tpm360 lets you prepare your sales budget, taking into account past performance, by customer, brand, product and territory.
  • Budget by sales volume and $ revenue, for normal and promotional sales.
  • With product costs linked to pricing, you have a real time view of
    • acceptable margin/profitability limits,
    • which customers are giving best value, relative to trading and promotion terms


Sales forecast

Once your sales and marketing budgets are approved, they are commitment against which actual performance is monitored.

  • For best practice planning and control, variances resulting from the dynamics of the trading and competitive environment, require updating of a rolling forecast, at least monthly.
  • Using Actual Sales data from your ERP system, or external retail scan data, your sales budget, commences your forecast.
  • tpm360 enables you to update your forecast, by proactively reviewing the affect of promotional changes, required to as far as possible, stay within budget.


Account managers can feel confident. All data is easily accessible for sales and promotions planning

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2. EXECUTE

ROI Assessment

The key to committing to promotions, is the ability to assess the Return on Investment (ROI) of potential promotions and ensuring they are within policy limits.

tpm360 lets you quickly:

  • Benchmark promotions history as a guide, for promotion type, discount and duration.
  • Assess Promotions ROI, with a view of Incremental Sales and Profit Contribution for planned promotions.
    • ROI view takes all trading terms and promotional rebates into account, to assist your pricing decision process.

 

Promotions Approval and Status Monitoring

  • Promotions approval alerts, ensure financial control of spending levels.
  • Once a promotion is created it’s status is monitored, through to closure.
  • Statuses can be set and colour coded for easy monitoring, within the promotions schedule and within the sales forecast.
Confidently Manage, Promotion ROI, Approval and Status

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3. CONTROL

Rebate accruals

  • tpm360 Rebate accrual function, ensures you avoid the unpleasant surprise of finding out promotional costs have blown out, long after promotions ended and sales have been reported.
  • On creating a promotion, the forecast cost is known and on approval, ready for accrual by Finance, in the month product sales are made.
  • Promotion rebate accrual ensures proper margin reporting and control, pending receipt of customer claims.
  • Accruals can be updated as actual data becomes available, until customer claims are received and processed.

Actual ROI review

  • Actual promotions effectiveness and ROI can be assessed, when a promotion has ended.
  • Reviewing actual ROI is essential, with history updated for future forecasting and as a basis for claims validation.
  • tpm360 enables this process to be performed, using customer or purchased external scan data, or your own sales data.
Feel Confident, Always Knowing how Sales, Spending and Profitability are tracking

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4. REVIEW

Performance analytics and reporting let you track sales, promotions,
spending and customer profitability to forecast, with multiple filter criteria.

Performance analytics

The tpm360 KPI dashboard ensures constant focus on key performance measures, by Account Manager, customer and brand, such as:

  • Promotional spend $ and % of sales, compared to budget and forecast
  • Sales – actual and forecast sales, compared to budget and last year
  • Gross profit %
  • Promotion effectiveness – incremental sales volume and profit
  • Promotions efficiency – promotions cost %

Plan review

Continuous performance tracking to budget and rolling forecast, may require review of your promotions plan.

  • tpm360 Performance analytics and reporting, allows you to easily home in on those areas of your plan that need review. Examples are :
    • Customer promotions not achieving forecast,
    • Correcting of overspending,
    • Adjust the promotions schedule, for changes to the marketing plan
    • Redeploy spending from one customer to another, delivering superior results.
    • The effect of reviewing plan inputs are immediately reflected in the sales forecast and promotions plan, as you commence the next cycle of Plan > Execute > Control > Review, a continuous process, to ensure you optimise promotions spending, sales and profitability.
Identify key trends and actions required, from KPI performance drivers and reports

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