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NATIONAL LIQUOR NEWS SEPTEMBER 2016 | 41
ABOUT NORRELLE GOLDRING AND 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 email@example.com.
value for their 'basket' from a retailer, rather than
lowest absolute price, and value can be computed in
a number of ways (traditionally quality divided by
price, but also staff service, range size, convenience
and a number of other store selection drivers). In
categories such as domestic appliances and consumer
electronics, where shoppers require tangibility -- to
see, feel and touch the items and get a gauge on how
big they are and how much space in the home they
may really take up -- they may have searched product
prices online but the stores they choose to research
and ultimately buy from will be based as much on
range breadth (points of comparison) and staff service
and knowledge, as the price.
So how to use price responsibly to achieve retail
objectives and provide shoppers with an overall
PRICING STRATEGY: UNDESTAND
EACH CATEGORY AND
Not all categories need to be price promoted heavily.
Using category management principles, the role of
the category should help determine pricing strategy.
Typical category roles are destination, preferred/
routine, convenience and seasonal.
• Destination: A destination category is very
important to the retailer's target consumer and should
help define the retailer's overall brand positioning --
in-store it should be inspirational and engaging. The
retailer should have the best product offering available
on the market -- breadth, depth and quality -- and
priced accordingly (good, better, best). An example
destination category in liquor might be whisky.
• Preferred/routine: In these categories, the retailer
positions itself as a good and reliable provider that
shoppers go to when they try to fill specific needs.
Category is used to help define the retailer as the
preferred choice by delivering consistent superior value
to the target shopper. This is the trusted retailer that
consumers go to when they try to fill specific needs
-- for instance in appliances, one that's committed to
having a complete range of IT, MDA, and SDA in the
market. There is usually strong price competition and
a lot of promotions -- the retailer wants to be top of
mind for these products and to carry a wide range of
competitive offerings to offer choice. In other words,
preferred/routine categories are where the pricing is
most competitive. Retailers need to make decisions
with these categories whether to pursue everyday low
price (EDLP) or whether to pursue high/low pricing.
• Convenience categories: Round off a retailer's
assortment and guarantee a comprehensive offering at
the store. Convenience or niche assortments contain
items that are less important to the retailer's target
shopper group. The retailer carries these items to
provide 'one-stop shopping' for its customers, which
stops them from having to go to another store.
Therefore, the retailer carries only a limited assortment
at average or slightly above average prices, an 'every
day price'. Convenience categories receive much less
attention from retailers than other categories, but will
be strategically placed to be picked up to fill the basket.
Impulse categories may be included here.
Seasonal categories are included in the assortment
either for a short time or with a boosted range, and
are meant to satisfy seasonal demand, fans and heaters
are examples. They create a temporary or seasonal
consumer benefit; seasonal impulse categories are
meant to generate unplanned purchases. An example
might be a convenience store ranging Easter eggs, or an
appliance retailer giving handheld fans higher visibility
leading into summer. They will be priced attractively
but not at rock bottom. Visibility plays an equal or
more important role.
Therefore it's evident that the role of price for
categories differs depending on their role. Some
categories don't require heavy price promotion
(convenience categories, destination categories).
In developing a price and promotion strategy (price
points, promotions mix) and building a promotion
for a category, the following is a short starter list
• Best responders: Which brands and SKUs
respond best to promotions. Under-promotion means
brands won't grow, but over-promotion will damage
brand equity. Manufacturers can help retailers with
• How high/low: Promotion depth versus
frequency. Consistent shallow promotions typically
don't garner much shopper reaction (although they
may possibly increase overall value perceptions), but
on the other hand deep discounts can be hard to make
profitable unless the increased short term traffic and
transactions are considerable.
• Promotional frequency: The proportion of
baseline sales versus incremental sales. Percentage
of sales on promotion versus off promotion. Danger
signals if more than 50 per cent of a category's sales
volume is on promotion.
• Cannibalisation: Source of volume. When you
discount, to what extent do the sales negatively impact
sales of other products? What's the true incremental
volume and value result, taking cannibalisation into
account? Did the promotion result in incremental
category sales or just a brand switch?
• Price perceptions: At which price points are
the products considered too cheap and you lose
credibility? At which are they too expensive and you
lose sales? Brand/price trade-offs and other pricing
research methods can help you understand this.
Achieving a good and profitable response to price
promotions is about understanding price in the role
of each individual category and developing pricing
tactics and price points to suit.
Price is not
this will drive
if you shout
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