Consumer product companies and grocery retailers have leveraged the power of promotions for decades, attracting consumers and building enduring relationships with them. The approach encompasses various marketing strategies that retailers and consumer product companies employ to boost sales volume and overall turnover. A variety of tactics are leveraged, such as product and packaging modifications, advertising initiatives, alterations in product placement, and other point-of-sale (POS) campaigns.
But when costs and inflation increase, such promotions become particularly valuable, relieving consumers’ wallets while maintaining competitiveness and fostering lasting customer loyalty. The approach is then narrowed down to short-term price reductions – where regular shelf prices of selected items or entire shopping baskets are significantly marked down for a predefined campaign period complemented by extensive advertising.
Understand the True Purpose and Impact
Thanks to product designers and managers in the consumer products industry and those responsible for grocery retail marketing, many different promotion types have emerged in recent years. Even though there is a high number of variants and different mixed forms, promotions can be broadly categorized into three main types:
- Filling up (household) stock encourages higher-than-normal purchase quantities for each shopping trip by offering multipacks, product bundles, larger packaging sizes, and refills.
- First-time purchases compel consumers to try new or alternative products with trial sizes that feature smaller quantities than the standard product.
- Traditional price-off offers promote a standard size product at a discounted price for a specific period with the support of a marketing campaign. They can be combined with other promotion types, including product bundles and multipacks.
Close Interactions and Dependencies
If you look at the range of products advertised through promotions, it’s clear that branded products dominate leaflets, online offers, and flyers distributed by large grocery retail chains. In fact, the proportion of promotions with branded products often reaches 90% or more in many established markets.
Considering these factors, consumer goods companies and grocery retailers must cooperate up to a certain level. Grocery retailers benefit from established brands because they can help ensure a broad group of consumers will notice the advertising and perceive promotional items as attractive. Consumer products companies, in turn, need grocery retailers to place new products at the point of sale and secure a competitive position for their core brands.
Although both consumer goods companies and grocery retailers are interested in the success of jointly planned promotions, their actual objectives differ significantly. While retail companies are primarily running promotional campaigns to increase visit or purchase frequency and optimize cross-selling initiatives, consumer goods producers usually view expanding or securing market share as their primary goal.
Acknowledge the Importance of Technology
Given the critical nature of promotions, the right technology can help consumer products companies and grocery retailers realize mutually beneficial and optimized outcomes to increase their share of wallet, margin, and overall revenue. For example, technology can help streamline the promotion process, improve planning and execution, and measure campaign effectiveness.
Working with leading consumer products companies and grocery retailers worldwide, SAP developed and continues to update a portfolio of solutions that can address market requirements, business challenges, and ever-evolving needs and expectations.
Price Promotions Solutions for Grocery Retail
Retailers using SAP solutions are well-equipped to be able to address complex challenges in the promotion management process. They can increase inventory turnover and reduce food waste by leveraging real-time, data-driven insights into the evolving market landscape, supporting the promotion process, and driving smooth, error-free interactions.
With the SAP Promotion Management application, which is part of SAP Customer Activity Repository, retailers can plan, manage, and analyze their promotional events. The application helps streamline their promotion processes, access real-time data, and accurately evaluate results. In addition, it can gather data and integrate with the demand data foundation module of SAP Customer Activity Repository to help drive data integrity across multiple applications.
Retailers can use enhanced planning capabilities from SAP Customer Activity Repository to help optimize promotion effectiveness and profitability. They can create coupons, define promotional advertising vehicles, specify promotional offers by location and language, and manage promotions by type, tactic, and incentives. Furthermore, they can exchange data across various SAP applications and support what-if simulations to help identify scenarios predicted to yield the best financial performance.
Additional capabilities that further complement the promotion process in grocery retail include:
- Omnichannel price and promotion service that can enable retailers to enhance the shopping experience with consistent pricing across all sales channels.
- Retail promotion analytics that can provide valuable data-driven insights to help guide future decision-making and promotion optimization strategies.
Price Promotions Solutions for Consumer Products Companies
For consumer products companies, SAP solutions help support promotion management and trade spend, which, in total, comprise the majority of business revenue. They can provide a tailored approach to promotion planning, execution, and control – enabling increased focus on revenue, volume, and profitability for themselves and their retail partners. Modern analytics capabilities are also included, such as statistical forecasting, optimization, post-evaluation, and innovative machine learning tools.
Take, for example, the SAP Trade Management solution. It can facilitate the design of promotional plans, fund management, and claims settlement while offering performance analysis to help gauge the effectiveness of trade promotions.
The solution can allow businesses to shift their focus from short-term measures of promotion effectiveness to longer-term, mutually defined targets, including category growth, sustainable volume growth, and margin growth. Additionally, it can empower sales leaders to sense and predict potential risks to revenue, volume, and profitability in real time, align their strategies with retailers’ broader business objectives, and make fact-based decisions for activities best aligned with targets.
Unlock the Full Potential of Every Promotion
In today’s competitive landscape, the ability to decode and master promotions is a strategic imperative. With the right technology and solutions in place, consumer product companies and grocery retailers can unlock the full potential of their promotions, driving revenue, enhancing margins, and securing their place in the market.
Dirk Dreisbach is chief business enterprise consultant for Business Transformation Services, Consumer Products and Retail Industries at SAP.
Dmitry Melnik is a vice president at SAP.