Changing the promotional game?
Over the last year we have talked a lot about promotions and the way they work, or don’t work, in driving the right kind of shopper behaviour. So, it is interesting to see Waitrose announce they are planning a new promotional approach, which MD Mark Price predicts will ‘revolutionise’ promotions around the world.
What exactly are Waitrose planning to do…
Well, Waitrose loyalty card holders will be able to pick 10 products from a list of 1000 branded and own label products. They will then receive a discount of 20% each time they buy one of those 10 products. The product list will be updated every 3 months. This scheme will run in addition to the standard promotions that Waitrose will still run.
So, why do this and how could it help in today’s promotionally driven market?
Firstly, it is a response to a fundamental issue with most FMCG promotions. Typically shoppers are rewarded for being promiscuous. The more promiscuous they are, the more they get rewarded. Whether that is switching between brands or retailers or both. As an industry we have implicitly told shoppers to shop around. And they have done so. You get the behaviour you incentivise.
The Waitrose initiative is attempting to change that dynamic. Shoppers get additional rewards for being loyal. To Waitrose and the brands they choose to select. As a shopper, you don’t need to worry about when these brands are next on deal. Just go into Waitrose each time and you know you will get at least 20% off.
Secondly, it offers more control for the retailer and the manufacturer (and the shopper for the reason mentioned above). Most promotions are seen by all shoppers, meaning you have little control over who buys you, how much they buy, and whether they will buy you again next time. Not good for the brand and not good for the demand planners and supply chain trying to manage the availability of stock. More predictable demand makes everyone’s lives easier.
Thirdly, it may allow Waitrose and some of the participating brands, to slowly retrain shopper expectations of levels of promotional discount and what a fair price for a brand is. Slowly moving shoppers away from half price to 20% discounts is worth an enormous amount of money to the industry.
Waitrose are managing risk by continuing to run normal promotions. However, if this is successful, expect a rebalancing away from promotions that any shopper can participate in, however often they buy the brand or come to the store, to promotions that have lower discounts, bought by more loyal shoppers.
The final interesting benefit to the shopper, will be the potential financial and, for many, the emotional reward, associated with picking your Top 10. How do you pick them? Do you go for products with a higher cash discount, but that you might buy infrequently? Or do you go for smaller cash discounts that you get on lower priced, but regular bought products? Or some combination of the two? The better you play the system, the more you save. And the better you will feel about the savings you make.
Middle class dinner parties will be dominated by discussions about everyone’s Top 10. Who has made the smartest choices? Is this going to be the new one-upmanship? Forget about the size of your house or what car you drive, how good are you at picking a Top 10…?
So, the underlying principle behind the new approach is sound. The biggest risk, of course, is whether it works financially. It is a risk, but one that is worth taking. If it does work, the reward for Waitrose, and potentially the industry, is high.
On a separate note, our article for The Grocer goes out tomorrow. You can find it in the ‘Comment & Opinion’ section. We also have a link to it on our website http://www.insight-traction.com/winning-in-key-consumption-occasions/
Have a great weekend and speak to you next week.