Retailers embrace bulk discounts

19 July 2011

NEW YORK: US supermarkets are changing their promotion strategies to fit the mindset of the post-recession consumer, with bulk "10 for $10" style offers proving popular for products as diverse as socks and lemonade.

The New York Times reports that large grocery chains including Pathmark and Kroger are focusing on promotional offers that offer multiple items at a discount rather than one or two, in a bid to appeal to newly value-conscious shoppers.

Below-trend economic growth and high unemployment - with the jobless rate having risen to over 9% according to latest official figures - have led to households making budget cutbacks.

A recent study by Acosta Sales and Marketing reported that 23% of shoppers are making fewer grocery trips and are spending less per trip than a year ago. Acosta also indicated that 84% of shoppers now prepare a list before shopping.

"In order to get someone to buy something that wasn't on the list, or to get them to buy more of what's already on the list, there has to be some incentive to get them to move outside their typical behaviour," Bill Melnick, director for strategic planning at SAI Marketing, told the newspaper.

John T Gourville, a marketing professor at Harvard Business School, added that bulk pricing strategies of this kind rely on "the power of suggestion," rather than representing better value.

"Even though shoppers usually do not have to buy the suggested amount to get the discount, they do anyway," Gourville said.

Research by Cub Foods parent company, Supervalu, tested the same items in the same markets, measuring sales of 5 for $5 against 10 for $10 offers. The results showed that shoppers tended to purchase two more items when the deal was 10 for $10. 

By contrast, 1 for $1 offers resulted in a double digit sales drop.

"When they see a 10 for $10, they'll see that as a value, and they'll stretch," Tom Lofland, a Supervalu director, commented.

Data sourced from New York Times; additional content by Warc staff