Behold Black Friday! Does discounting work?

Since the first-ever coupon was distributed by Coca-Cola in 1887, promotions have become an expected part of our shopping trip. One hundred and thirty-fours years later, the sales promotion is alive and well, and used constantly to attract shoppers.

Marketing website Black Friday Global estimates that Black Friday sales are 1,331 percent higher than average-day sales in Nigeria and 1,952 percent higher in South Africa, the continent’s two largest economies. In Nigeria, the average Black Friday shopper spends about $60 U.S.; in South Africa, it’s just over twice that amount per shopper. Africa it seems has fully embraced the US discounting festival.

Retail was hard hit in 2020 by trading restrictions, with FMCG by its nature being more resilient than other sectors. That said, supressed consumer spending has meant 69% of SA shoppers have switched to lower cost brands trading off their usual choices, including Private Label, which has gained significant ground.

In 1992 Jack Welch (renowned CEO of General Electric, Author and Business Leader) described a key trend of the day: “The value decade is upon us. If you can’t sell a top-quality product at the world best price, you are going to out of the game”. This feels however like it is even more relevant in 2021, almost thirty years later! Even premium brands have had to enter the discounting fray to defend market share, while trying not to undermine their value proposition relative to competitors.

Everyday Low Pricing, usually the preserve of a few has become a phrase we are all used to seeing in-store, across countries and channels. Brand owners have been pressurised to participate and across categories price cuts, fluctuations and discounting in one form or another propositioned on every platform available.

Price fluctuations can be confusing for shoppers, especially as they’re likely shopping across channels, who each also have their own promotional calendars. Medium to longer term however – where to from here for brand promotions? If you do not talk value, all you have left is price. The very notion of value in fact has become confused and is now used as a sales pitch.

Price vs Value
The more you focus on the value of your product or service, the less important price becomes – Brian Tracey

The most important distinction between price and value is the fact that price is arbitrary and value is fundamental. This is probably easiest to illustrate when it comes to share price and assessing whether a company’s shares are under or over-priced. For brands, what fundamentals are in place that make it difficult for competitors to breach the space you occupy? The intrinsic brand benefits, both functional and perceived, the brand heart space and points of affinity built with consumers over time. A brands relevance both in terms of the performance it delivers, as well as culturally.

Promotions that are focussed on strong brand associations help to build consumer connection and value, even if they include a special pricing offer. By keeping prices relatively stable but supporting brands with value-added promotions, marketers can maintain or even increase long term brand value and avoid cheapening brand image. How can you add or offer value other than a price concession?

Brand owners need to focus on what their brand associations are and ensure offers remain in sync with these. Look at how to build rather than trade value, balance risk and increase opportunity to connect with the consumer and shopper.

Invoking Care
Care enough to create value for customers. If you get that part right, selling is easy. – Anthony Innarino

Another increasingly important component is to activate your brands ‘citizen’ or social quotient. What adjunct or associated causes might your brand support? Not to merely piggy-back on or use as a token gesture, but what might your brand be able to really get behind long term, to commit to and to contribute to, to making a difference. There are dozens of great examples of this done right, and this strategy has the potential to not only be memorable and impact sales but build affinity and loyalty longer term. It can completely revitalise a brands proposition and with it, its trajectory.

There is a world of need out there and many great causes worth progressing. If something is important for your consumer, make it equally important for your brand. Standing up for a cause, a movement, a value or citizen organisation, or standing against discrimination of any kind, inequality or unfairness can mean like-minded consumers will stand up for your brand. Care more and people will care more right back.

What type of Promotion is most impactful?
Everyday low pricing it seems attracts a more muted response than more overt, limited-duration promotional activity, that’s boldly communicated across platforms. The most popular promotion is a straight Rands off or % off offer. It’s easily understood, computed and acted on by shoppers. Multi-buy promotions are also popular (2+1 or 3 for 2 Offers) in spite of requiring an upfront investment by the shopper, but can mean that with pantry loading, sales down the line are then negatively impacted.

Freebies, whether it be Buy-one-get-one-free, a related gift or a coupon toward a gift remain attractive and Loyalty benefits are seen as a bonus of shopping in that particular channel. Shoppers will swop channels to get better prices on essentials, negating retailer intentions to drive loyalty and offer personalisation with their programmes.

Most South African’s *60.1% (*PAMS) apparently, shop from broadsheets with * 59% (*Shopper Intelligence survey 2020/21) of category purchases being pre-planned before they have set a foot in a store. While 17% of purchases were triggered by the broadsheet, another 19% of purchases were triggered by a combination of either TV, print media including posters, social messaging and radio. So, an effective 36% of pre-shop plans to purchase a particular brand are a result of the combined marketing communication around the promotion, and this excludes the opportunity to attract the balance of the 41% when they are physically in store, even though they had not planned to buy your brands category.

Well over a third of shoppers indicate their category purchases were a direct result of a promotion.

Increased multi-deals have impacted shopper behaviour. Clicks reported in its half year results in February 2021 that on average their shopper basket size was +11% and they saw a 12 % increase in the participation of value promotions representing 42% of retail sales. The Shoprite group reported a +13.6% increase in basket size, even with a -3.2% decline in shopper visits. Both retailers have favoured multi-buy and combo promotions (* Source: Trade Intelligence Value Promotions Webinar)

The role of Loyalty Programmes
Loyalty programmes, while important, are ubiquitous and their importance more around the shopper data they furnish the retailer with than actually building loyalty and driving shoppers to prioritise a retailer. In SA, while Pick ‘n Pay’s Smart Shopper is the most used programme (*8.5M), Shoprite and Checkers X-tra Savings programme have by far the most members, with this base having been built relatively quickly by comparison. (12.7 and 7.6M respectively, totalling *20.3M, representing around a third of the countries population) *Source: TRUTH & BrandMapp.

Targeting & Timing Promotional activity
Many marketing efforts focus on promotional activities that support the launch of new products. Promotional strategies may play a crucial role in the early stages of the product life cycle, and determine to a large extent the diffusion of a new product but they can play an important role in enhancing brand positioning and keeping it relevant and top of mind – even if there is no new news.

“The big idea” remains key and if this is compelling, culturally keyed in and relatable it has the potential to significantly impact sales, and attract new users. Creative POS execution, well executed as intended can boost brand presence and elevate visibility. Then if the same creative is used well on social media and in other channels, the promotion is amplified and the scale expanded in the target shopper’s mind.

For brands with a seasonal bias, the focus for promotional spend is likely to be for when demand is highest, but stepping out of this cycle may mean enhancing volumes during traditionally slower months.

In Conclusion
Household indebtedness, low economic growth and high unemployment are common across southern Africa. The driving need for value and the best possible price prevails. The power of choice and control is firmly in the hands of the shopper with price comparison easier than ever before and multiple channels available across formats and locations. Brand vibrancy, differentiation and relevance needs to be achieved in a disrupted landscape against this backdrop. Not a small challenge.

Communicate boldly and with confidence, don’t compromise quality, elevate what you can, get creative where it counts, and proceed with caution on pricing strategically. Above all, deliver, demonstrate and communicate value – ultimately why you’re the best possible choice.

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