Collaborative Promotion Optimization - When it s Not About Price. Dr. John L. Stanton, St. Joseph s University

Transcription

1 Collaborative Promotion Optimization - When it s Not About Price Dr. John L. Stanton, St. Joseph s University

2 When I took my first retailing course the mantra was: location, location, location both for the store and for the shelf.

3 Things changed slowly As retail stores moved further out of town, and consumers were willing to drive a little further, location became a little less important. Some retailers used to say their primary shopping area was 1 mile down from their store, at the same time people were driving 20 miles to shop at Walmart. Businesses began to focus more on price. How do I get consumers to drive to MY store? If it wasn t location anymore, what was bringing people to the store? Low price.

4 The mantra changed Now the effort was spent on figuring out how to get the lowest price. Naturally, it was presumed consumers wanted the lowest price. It was amusing to me that the very people who argued for having the lowest price were executives who drove a Mercedes!

5 Some major changes Retailers put pressure on manufacturers to come in with lower prices. Manufacturers buying into the low-price model used various methods to reduce the price of the product on shelf. This began the dramatic shift from spending money on consumer promotion to trade promotion. Retailers used their weekly circular to advertise their prices.

6 Food retailers acted more like. car dealers! When a person considers buying a car, they often don t think about buying the cheapest car available on the market. They think about what kind of car they want, and want that car at the lowest possible price.

7 Consumers now think about what kind of store they want to shop The era of one store fits all is over. There are many different types of stores and just like cars and consumers are deciding what type of store they want to shop at. Consumers who shop the Walmart, are looking for different benefits and attributes than consumers that shop at Whole Foods. In the prices at Walmart are very different from the prices of Whole Foods.

8 Now Price is still important but It is more important to match the price with the retailers strategy and image.

9 Now something almost new is changing the modus operandi: The Internet Now add to the equation the Internet, or price transparency. What was once a difficult task of comparing prices amongst food retailers, can now be done online often with the help of the retailers.

10 Many retail web sites are showing the prices of competitor prices. Now the advertising a low price is only useful if the lowest price is in the stores you are interested. Failure to do that makes your price say look we are not the cheapest.

11 Online Grocery Consumers Have Options - Instacart Some online retailers do not limit consumers to just one store. Consumers can shop from multiple stores all from the same website and have everything delivered at once. SJU Food Marketing

12 What about no stores at all? How could this effect pricing?

13 Groceries on the Street

14 WHAT IS THE STORE VIRTUAL STORE 14

15 Amazon Fresh

16 Amazon Fresh - Recipe Pages Build Basket With Options To Add All Ingredients to Cart Are You Going To Go To Another Page or Another Store For A Cheaper Ingredient? Source: RNG research & analysis; Amazon Fresh 16

17 What does HSN sell?? Cookies (25) Entrees Appetizers (33) & Sides (15) Food Beverages Storage (77) (14) Fruits Bread, & Nuts Muffins (13)& More (7) Meats Brownies, & Poultry Cakes & Cupcakes (92) (55) Chocolate & Confections (50) Mixes Coffee (45)& Tea (20) Sauces & Seasonings (10) Seafood (9) Your Price Is Not Even Being Consider!!! Sweet & Salty Snacks (36) Donatella Arpaia 5 lbs. Veal Shallot $60

18

19 I could get a loaf of bread while I am pumping my gas or drive over the supermarket and get it 15 cents cheaper The New One Stop Shop SJU Food Marketing

20 Technology is enabling new ways of engaging with shoppers. Rise of smartphone usage has created a new level of transparency. Major opportunity to provide product and sourcing information. Well established in Japan, QR codes are now picking up momentum across Europe and North America. Can drive loyalty by enhancing the shopping experience, offering instant discounts, getting shoppers to proactively engage with brands and products. January 2011: Aldi is the first retailer in Germany to pro-actively offer traceability information for fresh meat on smartphones.

21 Retailers are using technology to promote Private Label both in and out of the store. Recipes at Ocado s website are directly linked to the private label ingredients available from the online shop. Tesco s website offers cheaper alternatives - in the form of private label - for branded products. Loblaw s Recipe Box ipad app for its President s Choice private label.

22 Just as location is still important today. However the role that price plays may be very different in the future than the role it plays today. There is no question that price will remain an important factor in consumers choosing brands.

23