
Building a Winning Promotion Strategy in Today’s Retail Market
Over the years, promotion strategies have evolved to become extremely sophisticated. Retailers are faced with the challenge of delivering promotions…
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Learn MoreAs inflation continues to burn strong late into 2022 (and with no more government aid coming to soften the blow), more and more consumers are being forced to adjust their shopping behaviors. During previous inflationary cycles, many consumers made one or more of the following changes to their shopping behaviors:
Thus far in 2022, inflation-weary consumers around the globe are indeed making many of these same choices. Recent research from NPD Group indicates that in the first three months of the year, US consumers made 5% fewer shopping trips than the same period last year, and they purchased 6% fewer items during those trips. And their confidence in their purchasing power has not grown much, if at all, in the past few months. According to CNN, 8 in 10 consumers surveyed in June said they were planning to rethink or even reduce their product spending in the next three to six months.
In addition to shopping and purchasing less, US consumers are definitely trading down, and they are doing so in increasingly large numbers. More than four in 10 shoppers surveyed by FMI indicate they are buying more store brands than before the pandemic, and 77% said they intend to continue in the future.
In the UK, consumer behaviors are also shifting. Recent research by McKinsey reported that fully 70% of British consumers have changed their shopping behaviors because of inflationary pressures. Trading down is now common practice, according to the report, as more than a third of those changing behaviors are now testing private label brands. UK spending on non-essential items has also been trending down, holding at about 80% of pre-pandemic levels, with much of that spend shifting toward work-related expenses (e.g. fuel for the commute), according to Reuters.
McKinsey further reports that rising prices are now the number one concern for consumers across much of Europe, with inflation outweighing all other concerns (COVID-19, Ukraine, extreme weather/climate change, immigration, etc.) combined in some countries. In the UK, 67% named rising prices as their primary source of concern; in Spain 55% are most worried about rising prices; in France, 54%.
While these changes in consumer behaviors present challenges to retailers in virtually every category, promotions represent our greatest opportunity to influence those behaviors to our advantage. Influencing these behavior changes, however, begins with consumer trust. When budgets are squeezed, shoppers most often turn to brands they trust for both fair prices and for value. Earning their trust in challenging times requires careful promotion planning and analysis. In our experience at XCCommerce, clients have the most success leveraging promotions to influence consumer behaviors when they include these three objectives in their promotion strategies:
There are of course countless permutations and variations to these tactics that make it challenging to design promotions that effectively influence shifting behaviors. But if we focus on promotions that add meaningful value to our target shoppers lives and make it easier for them to navigate the difficult times, we will engender greater trust.
And more trust leads directly to more loyalty and greater lifetime value – the most important metric of all.