Home' National Liquor News : NLN APRIL 2016 Contents 24 | APRIL 2016 NATIONAL LIQUOR NEWS
So far in the Retail Rules series we have covered the retail objectives
of traffic, frequency, basket penetration and AWOP. The last topic
to be covered in the series is customer spend.
WHAT IS SPEND?
Spend refers to the amount customers spend in a particular transaction.
Can be by product, category or total basket. The latter is often also called
The typical retail goal is to increase Spend, which may also amount to
an increase in average weight of purchase (AWOP), but not necessarily.
Spend is one of the most important objectives for retailers, but increasing
spend often flies in the face of the much-relied-upon discounting tool.
Discounting and price promotions reduce your product spend. It's hard
to discount your way to higher category or total transaction spend unless
you're encouraging customers to buy more items to make up the difference.
Linked to this, manufacturers want to maintain or increase spend on
their products (but not at the expense of volume). Retailers theoretically
care more about category and transaction spend, and don't care where it
comes from as long as they make margin on it.
WAYS TO INCREASE SPEND
Get them to buy more of the same thing:
In order to increase customer spend you need to increase the price paid, 'two
for' and 'three for' offers can do this as long as your overall price increases.
For example the single unit price may be $1, the two for price may be $1.50
and the three for price may be $2. The total basket spend across these items
is increased, but obviously the spend per unit is decreased.
You can also up-trade the shopper to a bigger item; the shopper will
however expect a discount on the up-trade. For example, if I'm buying a
one kilogram item for $10 then I expect the two kilogram item to be $15
to $17.50, not $20.
A number of promotional mechanics add stock weight but do not increase
spend. Adding bonus percentage of the item, for example a larger pack size
that is '25 per cent extra for free', or a 'bonus free item' are examples of this.
Other examples of increased AWOP but not spend are 'two for the price
of one' and 'buy one get one free'. Naturally, in categories with high ticket
values such as consumer electronics, these are tactics that are unlikely to be
employed (but may possibly be on accessories).
Get them to buy more across categories:
Complementary items can be bundled for a discounted price to increase
the number of items purchased. 'Get a cookware set for $99 (instead of
$200) when you buy a brand X oven' is an example of this. Occasion based
bundles are another example. Liquor retailers could offer a party starter pack
of a case of beer, bottle of Jim Beam white label, a bottle of Coke, a bottle
of Sauvignon Blanc and a packet of chips for an overall dollar amount, such
as $99. In convenience, a BBQ pack might look something like three soft
drinks, a bag of ice and several packets of chips for $20.
Get them to buy the more expensive version:
This could be an up-trade of something they already planned to buy to a
more expensive brand or model, or switch selling the shopper to another
Retail Growth Objectives
Part 5: Spend
IN THE LAST MODULE OF HER SERIES, GFK'S NORRELLE GOLDRING DISCUSSES THE RETAIL OBJECTIVE OF SPEND.
brand. If switch selling, make sure the product you sell them still entirely
meets the customer's needs. In either case this technique requires staff
interaction and understanding the customer's needs, what the customer
had planned to buy and why.
Sell them something additional that's related to what they are
This is 'incremental selling'. In theory it's a no-brainer as long as you
base it on the appropriate occasion, but it's surprising how infrequently
it's employed. The classic 'would you like fries with that?' technique, in
liquor should be employed any time a bottle of full strength spirits goes
over the counter. For bourbon and scotch the easy sell is Coke, for Gin
it's tonic and for Vodka it's soda.
To increase spend you need to understand your current average spend
levels by transaction and category. Simple basket analysis can facilitate this.
So that's the five retail growth objectives. Next up, we'll be starting on
the six point of purchase (POP) drivers.
ABOUT NORRELLE GOLDRING & GFK: Norrelle Goldring
is Shopper Lead APAC at global consumer research and retail
datahouse GfK. She has 20 years' experience in retail research
and marketing across manufacturer, retailer and agency roles with
companies ranging from Diageo to Coca-Cola to Vodafone Stores.
Norrelle helps improve shopping experiences by understanding how
and why people buy things. Call Norrelle on 0437 335 686 or email
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