The promotions offered by the supermarkets affect customer appreciation and should reflect their preferences. However, retailers struggle with low or even negative returns on promotions. Being able to determine the promotion effectiveness is crucial to prevent ineffective promotions. Determining the items that respond best to promotions, while understanding regular price elasticity vs. promotional response, cannibalization, and affinity, can help grocers determine the best promotion strategies, factoring in business goals and vendor funding to create optimal offers.
Although price occupies the prime place of importance for the buyer, some customers in the end opt to trade convenience for price, selecting stores closer to home, or in proximity to the workplace. Grouping stores for optimal pricing performance can increase profit with the right price for the right customer at the right store. Localized pricing also helps retailers to become more shopper-centric and compete more effectively against relevant competition.
As for the behavior regarding out-of-stock items – whether a shopper responds by buying another brand, buying in another place or buying on another day - responses turn out to be practically one third for each one. The result is that when the customer opts for a substitute product the supplier loses, when a customer decides to buy the product elsewhere the supermarket loses, and foregoing the purchase harms both.
It is important to note that though most customers end up not buying a product when it lacks a price display, some customers uses the price checker (if available in the store) and others ask for the price at the cash-register. Ultimately it’s critical to display the correct price of all items where they are easy to find.
Price optimization can help to support and shape the behavior of the shopper, and more importantly to develop and deliver on a Brand Promise that is sustainable and hard to beat – and price is just one component of that. Relevancy is the key, and retailers can use the power of technology to be relevant and stay relevant.