Unit sales are flat across most CPG catego-
ries and trade promotions continue to decline
as a key factor in driving incremental vol-
ume, according to findings in a new Hot Topic
Report from Acosta, a leading full-service
sales and marketing agency. According to
Acosta officials, this decline leads to more
unprofitable sales for manufacturers, yet CPG
manufacturers continue to allocate an average of 15-20
percent of gross sales to trade promotion.
“Trade promotion is weakening as a mainstay of shop-
per marketing as it’s not delivering the results manufac-
turers had come to expect,” says Colin Stewart, senior vice
president at Acosta, based in Jacksonville, Fla. “As such,
a promotional hamster wheel has been created, in which
many CPG manufacturers tend to repeat an old strategy,
but see less resulting gains. The wheel continues to spin
and spin, until manufacturers adapt their strategies to the
reality of today’s shopping landscape.”
Acosta’s Hot Topic Report, Reversing the Diminishing
Returns of Trade Promotion, outlines three key factors that
keep the “hamster wheel” spinning:
Weakening Promotional Value: Over the last five
years, the everyday price of items has been on the rise,
and consequently, promoted prices have been as well.
Thus, higher average prices, coupled with shallower promotions, have resulted in lower promotional lifts.
Promotional Saturation: Because of the lower
returns on trade promotion spending, manufacturers are
only exacerbating the problem, often earmarking more
trade dollars for everyday low price strategies. Thirty-six percent of shoppers rank paper circulars at the top
of their list for impacting their shopping trips and what
products they purchase, despite younger generations preferring digital to print, and newspaper deliveries continuing to decline.
Shopper Behavior: Today’s savvy shoppers will
channel surf, wait for the next promotion, check a price
online or switch to private label before spending more
than they expect on a product.
“It’s clear that shoppers are not reacting to traditional
trade promotion as they have in the past,” Stewart says.
“Rather than perpetuating the hamster wheel, CPG manufacturers should focus on establishing a new promotion
playbook, and maximize investment in trade promotion through a renewed focus on the fundamentals that
drive base sales: collaborative planning, shopper-centric
promotions, integrated sales and marketing, and trade
*Source: IRI Reviews, Total U.S. Food, Calendar Years 2009 – 2015
Promotional lift is
at its lowest
in 5 years,
Despite lower lift, CPG manufacturers
allocate approx. 15-20% of gross sales
to trade promotion.
64% of shoppers will shop elsewhere for
competitive pricing and hold o; purchases
until certain products are on sale.
THE CPG TRADE PROMOTION HAMSTER WHEEL
ES TABLISH AN
EXIT S TRATEGY
Hot Topic Report:
Reversing the Diminishing Returns of Trade Promotion
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