Promotions can change the value a consumer puts on a brand

Promotions can change the value a consumer puts on a brand

In the latest quarterly food pricing barometer for just-food, manufacturers across most of our seven markets continue to increase their use of promotions.

In the fourth quarter of 2013, the largest increase was seen in Italy, where 30.4% of food was sold on deal, versus 28.5% in the last three months of 2012.

Spain and the UK saw a reduction on volume on deal for the food goods in our basket.

Research and ongoing analysis by IRI of categories and promotional trends across categories suggests promotions no longer have the desired effect on volume sales. IRI's latest analysis shows that, while the volume of food on any promotion was up by 0.6% across the whole of Europe in the fourth quarter of 2013, volume sales dipped by 1.1%. 

Long-term deals do reset the shopper's perception of what a product is worth and it can be hard for brands to recover. 

As more countries start to change direction on their use of promotions and ask for advice about promotional optimisation, the inability of promotions to drive sales volumes and margins is increasingly evident. 

Like the previous quarter, the price of the average food basket in our barometer continues to rise. This is true in every country except Greece, where prices are declining, and The Netherlands, where they remain stable. 

It is likely some of this increase is being driven by the rising cost of private label, which the barometer also shows is a phenomenon in every European country and the US. 

As retailers move to more quality private-label items, they are also closing the price gap between their own brands and the higher priced national brands.

Shoppers still sticking to strict budgets, even if that means they cannot buy their favourite brands every week. They are receptive to promotions that are clear and simple for them to understand and have a real perceived value. They want more consistent pricing so they know a product will not change price from one week to another.   

Promotions can still boost sales - one-off, deep deals for example that are perceived as a real offer – but manufacturers must hone their strategies to ensure that they get sufficient return on investment.