Panic price offers lack consumer relevance
As retailers seek to retain their existing customers during the recession, there has been a major upswing in price promotions, according to research by GI Insight, which also found that many such promotions are largely irrelevant to their recipients.
The company found that 57% of UK consumers have noticed a very significant increase in the number of price promotions and special offers they are receiving through direct marketing channels - but 68% also said that the majority of these offers are completely irrelevant to them.
In other words, the company warned, more than two-thirds of the effort, creativity and budget being devoted to special offer campaigns is being wasted because it is incentivising purchases that the recipient will either never make, or perhaps would have made anyway.
It is true to say that, thanks to one of the deepest recessions of recent decades, consumers are becoming far more price conscious. Some 35% of consumers said that, in the past year, they have switched down-market to a 'value' supermarket for a significant portion of their food shopping. The equivalent proportion among clothes shoppers was even higher, standing at 39%.
Although this may not mean that all of their supermarket or clothes shopping spend has switched suppliers, it still represents a significant loss of revenue for the premium providers and an equally significant gain for value outlets.
According to Andy Wood, managing director for GI Insight, "One way in which these companies have been trying to keep or win custom is by ramping up their use of incentives and price promotions, usually in the form of coupons (i.e. money off a particular product) or vouchers (i.e. a discount when spending goes over a certain amount)."
For example, premium supermarkets have been creating special offers to return a level of value to existing customers and keep them engaged, while value supermarkets have been using price promotions to try to attract even more customers away from premium stores - even if it is for only a small proportion of their spend.
"The current flurry of activity around discount and price promotions may be wasting a considerable proportion of its potential," warned Wood. "Fortunately, one-third of retail marketers are getting it right, taking advantage of the data they have gathered to personalise their coupon and voucher activity. Those who make the most use of the ability to vary and personalise text and images are likely to stand out in the marketplace and see soaring redemption rates."