Ineffective Merchandising Programs Are Leaving Substantial Sums of Money on the Table across CPG Aisles; New Pricing and Promotion Strategies Needed to Drive Growth
CHICAGO – Nov. 10, 2015 – CPG marketers rely heavily on promotions to drive growth, and in 2015, the reliance on merchandising activities escalated across nearly half of CPG categories. Despite this increased investment, lift from merchandising support declined across 58 percent of CPG categories. The latest IRI Times & Trends report “Merchandising for Growth: Connecting the Dots for Maximum Activation” details the increase in merchandising programs and their reduced impact on driving sales. The report also offers a strategic approach to pricing and trade that will result in a 1- to 2-percent sales lift and grow industry sales by up to $12 billion, while improving margins, building customer loyalty and delivering a lasting competitive advantage.
“The reality is that CPG marketers are investing heavily in promotional efforts in the hopes of spurring brand, category and industry growth,” says Susan Viamari, vice president of Thought Leadership, IRI. “Unfortunately, the results of those efforts are not what marketers had hoped because volume is flat to negative nearly across the board.”
The bottom line is that ineffective merchandising programs are leaving substantial sums of money on the table across CPG aisles. CPG marketers that take a more comprehensive approach to price and promotion—beginning with the creation of a solid price-pack architecture (PPA)—will deliver surgically executed competitive strategies and win big. PPA is influenced by the following four critical elements:
- Portfolio strategy: It isn’t necessary to promote all brands. Instead, assess the role of different brands and identify those that are likely to benefit from promotional activity.
- Brand strategy: Having a simple and clear value proposition is absolutely critical. If it’s premium, it’s vital to maintain premium price positioning and apply those same principles for a value brand.
- Channel dynamics: Marketers must focus on emerging channels and segment their customer base to determine which channels and which customers are most important to each of their brands.
- Consumer needs: Marketers must understand which brand attributes are most valuable to their key consumers and reflect these attributes in all promotional materials.
“With a clearly defined PPA in place, marketers can turn their focus to striking a balance between everyday pricing and trade pricing,” adds Viamari. “It’s imperative to know the objective of any pricing action and how it fits into your larger strategic goals. It’s time for manufacturers and retailers to walk away from their old pricing strategies and turn toward a more sustainable financial future.”
About the Report
The latest IRI Times & Trends “Merchandising for Growth: Connecting the Dots for Maximum Activation” is a free report available from IRI. To obtain actionable insights and recommendations around high-gain price and promotion strategies, tap into IRI Market Advantage™, IRI Trade Planner™, IRI Business Value Drivers™, IRI Price & Trade Advantage™ and IRI Growth Consulting. To download the report, visit: http://www.iriworldwide.com/en-US/insights/Publications/Merchandising-for-Growth.
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IRI fundamentally believes that delivering differentiated growth for clients requires deep, highly integrated partnering with a variety of best-of-breed companies. As such, IRI works closely with a broad range of industry leaders to create innovative joint solutions, services and access to capabilities to help its clients more effectively compete in their various markets and exceed their growth objectives. IRI is committed to its partnership philosophy and continues to actively enhance its ecosystem of partners through alliances, joint ventures, acquisitions and affiliations. The IRI Partner Ecosystem includes such companies as BlueKai (an Oracle company), The Boston Consulting Group, comScore, Datalogix (an Oracle company), Experian, GuestMetrics, GfK, Ipsos, Kantar, MasterCard Advisors, MaxPoint, Millward Brown Digital, Mu-Sigma, Oracle Social Cloud, Rentrak, SPINS, Univision and others.
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