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The way out of price promotion trap leads through small but systematic steps. And through digital transformation.

The specialized conference for series Retail in Detail focused on the most pressing topic of the Czech retail, how to reduce overflow and inefficiency of promotional campaigns in the field of FMCG. Despite the growth of the economy, consumer confidence and wages, there still exists an unaccountable raising share of goods sold in discount promotions – more than 50%. All that in situation when Czech consumers put the factor of price just to the fourth place within purchase decision-making factors. More than 160 suppliers, distributors and retailers, thus discussed the results of market analyses and searched the ways out of the promotion trap with the help of practical examples from abroad and inspiration from the sphere of digital technologies and e-commerce.

The morning program focused on the impact of (in) efficient promotions on retail business, brands and customers, based on the key analyses and research data. The introductory overview built on a large sample data from the survey Shopper Trends was presented by Karel Týra, Commercial Director, and Michael Čepek, Senior Consultant of the Nielsen Company.

In the Czech Republic wages and GDP are growing by 4 % a year. This, together with low levels of unemployment, is stimulating consumption. The index of consumer confidence in the Czech Republic is the highest in Europe: 97.6%. Consumer optimism is reflected in the higher retail sales which increased by 2.1% last year. In spite of the fact that price appears just on the fourth place among the key factors in purchase decision of Czech shoppers, the share of goods offered in price promotions still continually increases – from 35% share in 2009 to more than 50% now. For comparison - in Germany it is only 23%.

Tobias Schediwy, Consumer Sector Lead CEE-META, and Ladislav Csengeri, Consumer Panel Services Director Czech & Slovak Republic, both from GfK focused on the short-, medium-and long-term impact of promotions on loyalty to products and retail brands.

GfK analysed 63 511 purchases and related "purchase journeys" of consumers, including long-term impact of promotions on 150 categories. Price promotions change shopping behaviour, customers start to become the King of the market, however for suppliers and traders it is very far from win-win situation. In the short term effect the volume of promoted brand purchases has been growing, but in the long term, the brand value is reduced. Excessive price reduction has also very negative effects, leading to food waste: people buy larger quantities of cheap food and then throw them away.

Ondřej Žák, Senior Manager, Advisory Services for Retail and FMCG, of EY devoted his presentation to effective promotions and consultancy which gives prime consideration to the customer. A customer, producer and retailer have very different perceptions of promotions. The effectiveness of promotions depends on how well we manage to meet the expectations of these three groups. The Czech Republic belongs among the three countries of Europe with the biggest share of promotions, however deep price promotions do not often deliver the intended effect.

Francoise Acca, Senior Consultant, ECR France presented an inspiring case study of five-year lasting whole industry initiative. In 2011 ECR France launched the initiative, aimed to change the promo situation. However, it was necessary to break away from the technical tools, and start from the very beginning- a search of the sense of promotions. On the basis of surveys and discussions among retail business partners and manufacturers they have created a set of 19 documents containing the definition and objectives of promotions and follow-up recommendations agreed by both parties. Representatives of the companies associated in ECR initiative have signed these documents. Then they started a series of trainings for higher and lower managers responsible for promotions both the side of production and retail. Francoise Acca has assessed the performance as very positive: "We wanted to achieve the improvement of the situation and we did this in spite of the different plans of the companies on the French market. We engaged the right people, the key success factor was that the changes were advocated by CEOs / Managing Directors."

How can digital revolution positively impact on retail promotions – that was the topic of Michal Nýdrle, founder of the Kindred Group, the largest digital marketing group in Europe. Using examples of the activities of several companies he defined their common success factors: the use of digital trends and the possibility of personalized offer. To find the way out of the trap, retailers were recommended to focus on 55% population penetrated by smartphones. "Learn from the best e commerce players how to do personalized offers. Use i-beacons. Work with data: Your own and those from third parties. Live the future, not the past".

A new generation of loyalty platform as an alternative to price promotions was introduced by Josef Machala, Loyalty & Acceptance Manager, MasterCard and Oldřich Kubišta, Director of operations, Cinema City. Master Card has been introducing a new generation of the loyalty platform Priceless Specials, which automatically awards the customers paying by MasterCard in the network of retail partners with a percentage of the purchased amount that is directly returned back to the account. Priless Specials is in operation for less than a year, but already the Czech customers in this system paid over CZK 180 million at 1 350 shopping outlets and saved thus over CZK 5 million.

Zdeněk Nový, Managing Director, COOL Ticketing and Petr Sláma, Business Development Manager, Kofola described their path to measurable and attractive consumer promotions using mobile coupons: "We must not be afraid to innovate, to analyse and to cooperate with those who can do it. Mobile coupons Cool ticket provide the targeted and ad hoc offers, immediate feedback, connection of channels, and a detailed evaluation of the promotion results," recommended Petr Sláma.

The afternoon discussion was opened by the cease study of Billa Austria, presented by Manfred Litschka, CEE Sales Director of TCC. The campaign focused on the emotional side of promotions and created loyalty through emotional attachment with customers. In the beginning Austrian Billa mapped their customers´ needs in group discussions and have found a great tendency to family events and emotional and educational programs for children. Therefore, the characters from the electronic game and movie Angry Birds were selected as the best promotional tool. Billa offered customers the opportunity to collect plush animals through the electronic Club cards (for free as a reward for received points). Finally they distributed over 6 million of them. Without any price discounts of goods, they achieved a huge sales increase, as well as the growth of market share and brand awareness of Billa.

The following case study concentrated on the effectiveness of category hair cosmetics promotions using data from loyalty system of Drugstore chain Teta. It was performed by Peter Kriklan, Retailer Services Director, Nielsen and David Vejtruba, Marketing Director, p.k. Solvent (Teta Drugstore): "In future we would like to learn from suppliers, how to change our view of promotional schemes. We're not going to repeat any similar promotions with a lower depth shortly after each other. Together with P&G we are now testing the program of better premium segment visualisation in the stores as an efficient way of non-price promotion."

The concluding panel discussion brought recommendations, shared by representatives of retailers and suppliers. They agreed that at least 40% of promotions are poorly targeted. There is a need to deepen the cooperation of suppliers and retailers, and to manage promotional activities based on forecasting and data sharing.

"Price promotions are just one of the tools. You need to go back to the basics, to what is our service. Define what role promotions have to play in all activities. Search, how to combine the interests of suppliers while they are participating in the services and added value for customers," concluded David Vejtruba from the retail chain Teta Drugstore.

For more detailed information contact
Barbora Krásná, Partner
+420 222 749 841, Barbora.Krasna@BlueEvents.eu

Media contact:
Lukáš Koutník, Blue Events
tel.: 730 804 077, e-mail: lukas.koutnik@blueevents.eu

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