Bigger is often better when it comes to retail promotion innovations: Amazon’s Prime Day and Kroger’s Cart Buster (also known as mega sales) are cases in point.
“Their mega sales are fantastic, so whenever they have one, taking advantage of that is a huge saver,” Laurie Hise, founder of the Passionate Penny Pincher site, tells CNBC Make It. “Just get on their sale cycle and follow it.”
A new study in the Journal of Marketing assesses these innovative types of events and the effects they have on consumers. Retailer-Themed Super Saver Events (ReTSS) differ from normal day-to-day promotions on several dimensions: They have unusually deep immediate discounts across a broad range of categories; they use a uniform deal format and a common savings theme that is unique to the retailer and communicated through mass media; and they may produce different effects in terms of consumer visits and purchases. Anecdotal evidence suggests that traffic and basket-sizes do increase during the ReTSS period and that such events are “the engine behind revenue growth.”
We demonstrate that, through increased awareness and interest (larger perceived monetary and non-monetary benefits), these ReTSS yield different outcomes than regular sales promotions. Analyzing 44 Retailer-Themed Super Saver Events operated by the largest Dutch grocery retailers over four years, our research team finds a substantial increase in retailer visits and purchases during the events, especially among nonprimary customers and hard-discount shoppers. The larger part of this lift stems from the use of an overarching event theme. Consumers buy less in anticipation of the event and visit the store more often afterward, but for smaller baskets – typically leading to a null effect in terms of profit. Thus, although not a panacea, ReTSS can be a valuable defense tool by strengthening the retailers’ share of wallet among light customers and preventing them from permanently defecting to discount stores (such as Aldi and Lidl).
How should retailers incorporate these results? To answer this, our research team looked at differences among events. We found that the more successful events are sufficiently large in scope (number of products on discount during the promotion) and offer the right balance between raising awareness and expectations and honoring promises by offering (deep) enough deals. As for format, whereas percentage-off discounts and BOGOs—which clearly emphasize the monetary advantage—appeal most strongly to consumers, ReTSS with uniform prices seem more profitable for the retailer. Although advertising matters, the key to success is not increasing the advertising budget per se. Instead, the media resonance of the savings theme is of critical importance. This is not surprising, given that most of the incremental gains come from nonregular customers who may be more responsive to sources other than the chain’s communication. Hence, apart from creating a unique and easy-to-recognize theme, retailers should strive for more earned rather than owned media impressions and focus on how to make the theme go viral. We also find evidence of wear-out and urge retailers to craft novel themes. Turning the event theme into a brand of its own and/or using market influencers to promote it may prove fruitful. When it comes to profitability, much of the outcome is determined by how retailers and manufacturers split the bill. The insights provided by the study can aid both manufacturers and retailers in negotiations on how to divide the costs of these promotional events.
Read the authors’ slides for sharing this material in your classroom.
From: Jonne Guyt and Els Gijsbrechts, “Evaluating the Effectiveness of Retailer-Themed Super Saver Events,” Journal of Marketing, 84 (March).
Go to the Journal of Marketing