Once a brand is on the shelf, the work begins to convert shoppers. To do so, businesses must consider price, promotions and position on shelf.
Establishing a price point relies on striking the balance between a brand being competitive yet profitable. Defining the category norm and where your brand falls within the established benchmark, as well as to what extent it’s possible to deviate from that, is central to this equation.
Only one in five FMCG products are sold at a price that is 50% above the category average – if a brand is to thrive outside of the accepted price parameters, it must be with good reason.
100 leading FMCG categories - % packs sold by price point expressed as a % of category average price in 52 w/e 23-Feb-20 (exc. Xmas)
All periods are indexed against the average category price in 52 w/e 23-Feb-20 Source: Kantar, FMCG Panel
Current retailer strategies are squarely focused on everyday low prices. That means fewer discounted products and a renewed need for brands and suppliers to justify any and all promotional activity.
There’s a golden range for discounting. Promote too much, and you’ll eat into your margins. Not enough, and the product won’t be eye-catching for shoppers.
We know that offers regularly boost shopper conversion to a brand threefold. It’s important to note that the risk of not promoting is greater than the potential to “train” people to only buy at a lower price.
The key is that the sales uplift must be great enough to compensate for the discounts given away to shoppers. Deep discounts – typically those over 40% – mean that the boost in sales isn’t enough to compensate for the value lost from the category. The opportunities for those brands that get it right are clear. In an average FMCG promotion, 28% of the increase in sales volume comes from shoppers shifting from rival labels, a win for the promoted brand, while 24% comes from shoppers buying in greater volumes than they otherwise would have done, a success for retailers and brands alike.
Shelf positioning is the final piece of the puzzle, the aim is firstly to be in a prominent and logical place in a store. For example, are shoppers looking for Hobnobs snack bars next to the chocolate biscuits or the more health-oriented granola bars? Our data tells us that people tend to look for products arranged by occasion, rather than branding. Once in the right section, the second mission is to achieve the coveted spot at the shoppers’ eye-line. Competition is of course tough and success here will come back to brands’ ability to demonstrate strong sales to retailers and contribution to wider growth.
