LONDON: More than half of grocery promotions in major markets don't make any money for the brands involved according to a new Nielsen study.
Its research across the US, UK, Germany, France, Italy, Spain and Canada found that FMCG manufacturers were spending some $500bn a year on this tactic but 60% of the cut-price deals on offer did not break even, Marketing Week reported.
"Most FMCG players acknowledge the ineffectiveness of trade promotions but until now their efficiency has largely been a matter of guesswork," noted Paul Walker, leader for sales effectiveness in Europe for Nielsen.
"Understanding what is and isn't working is allowing us to help our manufacturer clients become more strategic, less tactical and ultimately get more from their trade investments," he added.
Promotions were most likely to lose money in the perishable foods and ambient foods categories, Nielsen found, while those in the pet food, health & beauty and homecare categories were most likely to make money.
In the UK the leading supermarket chains have all been cutting prices and pressuring suppliers as they seek to counter the threat from discounters such as Aldi and Lidl, an approach that one retailer argued actively works against brand loyalty.
"One month Ariel is on offer, the next month Persil and customers just switch between the two. There is no brand loyalty they just buy what is on offer," said Rupert Thomas, Waitrose marketing director.
But a new 'pick your own offers' promotion Waitrose has introduced could be set to change that. Members of its myWaitrose loyalty program can choose ten items from a 1000-strong list on which they will get a 20% discount, even if these happen to be part of another offer.
"Customers get 20% off the lines they really want, that they buy every week," said managing director Mark Price. "It's giving for the very first time customers the power over pricing."
He added that the scheme had the potential to change completely the current way of thinking about promotions, moving it away from customer acquisition to customer retention.
Data sourced from Marketing Week; additional content by Warc staff