More items sold on temporary price reduction than ever

Sales are the number one priority for your customers. They have to keep driving traffic to their stores or the economics just don’t work. It is very important for suppliers to be engaged with driving sales and supporting their customers. We are training the consumer to shop for items on temporary price reduction more and more. You need to understand the impact on your items and how to manage this trend. 

Are you playing the game?

We know the number of items on sale, in store special or any other form of temporary price reduction continues to increase. Retailers must keep the traffic coming into the store and the front page of the weekly flyer is still the most effective tool they have. Investments in loyalty programs, the shopping experience and new offerings are there but when they need volume, retailers revert to item and price.  
    

Ads need to be a part of your business plan. The better prepared your business is, the more effective they can be to drive your sales at a reasonable cost. It is unfortunate because we are training the consumer to buy on special more than ever. Walmart has even moved away from their famous every day low price strategy in Canada to offer deep discounts on the front page of their ad.

Be prepared

It is very important to track the ads in your category. You should understand how often the items go on sale and what the level of discount is. This includes all spaces in the ad. We focus on the front page but there are many more items inside that deliver important sales and more margin to retailers and suppliers.
    

There is a great app called Flipp that can make this process easy for you. Select the stores you want to follow and each week you simply search for the items you want to track.  In just a few minutes you can see all the ads.
    

If you are selling to national chains it is beneficial to look at the other regions as well. You might see something in another region that would be good for you.
    

When you review the ads, look for ideas such as bundling items or multiple pricing that might work for your products. Often this will be an opportunity to promote items that would not warrant the space on their own or allow for a slightly higher retail.

Develop your promotion plan

Often suppliers think they need to wait for retailers to request an ad. If you subscribe to this philosophy you will only be on sale when they want it, not when it works best for both. You need to be proactive and develop a promotion plan to present to the category manager. You might not get everything you want when you want it but it is better to lead the discussion. Often they are busy and especially for inside items a suggestion will end up getting the space.
    

The best place to start your plan is with last year. What happened and when? If there were successful ads, slot them in again. You should also review your ad tracking to see when they advertised your competitor’s products. These might be opportunities for you. Consider the best time for your business and the item -- does it fit with the retailer’s plan?
    

One important number to understand in planning ads is what retailers refer to as the “X factor.” This is the multiplier on ad relative to regular weekly movement.  For example if the item sells an average of 1,000 cases per week and this increases to 5,000 cases on ad, the X factor is 5.  This is very important for ordering ad inventory. Predicting ad inventory is one of the toughest challenges for you and the retailer. Too little results in out of stocks with lost sales and unhappy consumers, too much is excess inventory that costs money and takes up space. You should spend time looking at ad volume to ensure you can predict the volume as accurately as possible. In your promotion plan consider all blocks in the ads. Two inside spaces can deliver as much volume as a back page slot, with more margin.

When you have an ad

When your item is planned for an ad you should do three things:
1.    Make sure you have the appropriate level of inventory
2.    Go to the stores to check the execution
3.    Follow up after the ad to assess what worked and what could be done better

Once you understand the place in the ad and the level of discount you should have an estimate of sales. Review this with the retailer to ensure you are both thinking of similar numbers. If you are not close you need to do more work to get close.
    

You need to have the inventory available that the retailer has planned for the ad. If you do not, then the sooner you let them know the better. Do not wait or you will cause them more grief. You should also have some safety stock, depending on the lead times and shelf life of your item. This is more realistic for some items than others. When you get the purchase order for the ad stock, review it to make sure it is in line with your estimates. The communication between category managers and buyer is not always perfect.
    

The week the item is in the ad you should visit stores whenever possible. You will be judged based on the sales from the ad. If the stores do not execute you need to know so you can communicate to the retailers. If you see issues early on there is time to react. Do not assume everything works properly. I have seen many examples where an item does not ship from the warehouse because a flag in the system is wrong or there is an issue with the item number. You improve your value to the customer if you are the eyes and ears for them.
    

Following the ad, it is good to assess the level of sales relative to the projections and some consideration for the good and the bad. If possible, what would you change next time? Perhaps more safety stock or a different booking process for stores to have more input into inventory going to them? There are many things that can impact the performance of an ad. The better prepared you are to talk to your customer the better the experience will be the next time.

 

If you are prepared for ads, they can be a boost to your business that does not break the bank. If you have other ideas for developing a promotion plan or if you have any questions please give me a call at (902) 489-2900 or send me an email at pchapman@gpsbusiness.ca

 

Publish date: 
Thursday, March 31, 2016

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