Predictable Promo Plans Give Consumers the Ho Ho Ho This Christmas

23/12/2013 10:39 GMT | Updated 19/02/2014 10:59 GMT

Retailers' reliance on promotions has not only trained shoppers to buy whatever is on deal, but their apparent complacency in promotional planning is allowing shoppers to predict when their favourite items are going to be discounted. Christmas deals predictors are springing up on shopper forums and websites offering advice on how to save money to great effect, so people wait and buy for less. And rightly so.

Christmas is traditionally one of the busiest times for the UK high street as retailers seek to entice shoppers into stores and online to spend. Big discounts are being offered by retailers in an attempt to get shoppers out in large numbers and spending with them. In some product categories Christmas shopping accounts for a third or even higher proportion of annual sales, so failing to deliver during this period is "not an option".

Our Global Pricing Study reveals that the retail sector is facing one of the biggest increases in price pressure (second highest only to Travel and Hospitality out of 16 surveyed industries).

In the UK, growing proportion of sales is on promotion. For instance, more than 55% of all consumer goods volume is now sold on deal, which is twice the European average. A lot of retailers are stuck on promotional hamster wheel, running more and more deals each year in an attempt to hit (industry favourite) "like-for-like" sales targets. And as some of the buyers put it, 'No one has been fired for running too many deals, but a lot of them have for not matching competition quickly enough'.

On the other side, suppliers are under pressure to fund these, often unprofitable, deals and to fuel retailers' price wars with their own money. To make matters even worse, contracts usually contain clauses for additional payments from suppliers based on volume sold, hence a promotion that has not been profitable to begin with triggers even more funding at the end of the year.

Promotional planning is constrained by myopic KPIs and there is usually no time for proper analysis of true impact on profitability and influence on shopper behaviour. The pressure to deliver sales upside is high and as some buyers put it "short term is tomorrow, long term is next week".

Retail industry's worst kept secret is that promotional planning doesn't start with clear business objectives and robust strategy on how to get there based on piles and piles of shopper insight. Because everyone is "very busy" it is usually as sophisticated as 'let's do what we did last year and throw in some more deals in order to hit our like-for-likes'.

Therefore it is not surprising that this trend of repeating promotion year after year has been picked up by shopper forums and websites offering advice on how to save money. The most recent addition is the Christmas Deals Predictor, which states:

"[Retailers']... marketing calendars are remarkably consistent, that's why...[we]...can forecast what's coming with a relatively high degree of confidence. So once you've done your Christmas list, use the calendar to see if you should wait - then pounce when it's cheapest. Please spread the word."

Marketing planners need to understand that when it comes to promotions, very often 'less is more' - fewer promotions could lead to higher sales. It is important to have robust commercial frameworks in place for planning and reviewing promotional performance. Retailers need to understand what each deal is delivering and not only for items on sale, but also at brand level and for the wider category. Repeating the same promotions year-on-year without knowing which ones deliver and which ones don't is not a good way to plan.