Nielsen shares ways to work with promotions
Promotions and discounts “race” continues to gain momentum on the Russian FMCG market: the share of sales of promotions in the largest categories of goods has long exceeded 50%. And in such categories as shower gels, coffee, chocolate bars, dishwashing detergents, powders, bleaches it averages 70%, and this trend has not peaked yet.
But is price the only factor that determines the success of brand's sales? Of course not, and this can be easily verified by comparing the contribution of price and non-price factors to sales dynamics.
According to Nielsen which evaluated the effectiveness of prices, promotional and marketing tools in 2018 accounted for similar levels of price creation at roughly 54% and 46%, respectively. However, the amount of investment in each of them is markedly different.
The advertising market in Russia is growing from year to year, and in 2018, according to AKAR, its size reached 400 billion rubles annually. Of these about 150-200 billion rubles fall on the FMCG market. Moreover, Nielsen reports that total investment of the industry in discounts on various categories of FMCG goods is about 500 billion rubles.
In Urves you will always find relevant promotions. High-quality products are offered on favorable terms which, of course, imply attractively low prices. Urves’ marketing professionals and sales analysts carefully approach the issue of developing promotions by fine-tuning the cost of products. The stock of promotional products includes those that are in high demand such as products of L’Oreal Paris, Garnier, Glade, Duni, AOS, Nivea and others.
Promotions certainly became a new norm
Today, promotions “control” FMCG market and this trend is only intensifying. Discounted goods can be found in almost any retail outlet with 86% of stores using it as their primary marketing technic. On average, 42% of products in largest categories of goods are constantly sold at a discount. But increasing discounts’ depth and frequency does not always lead to higher sales.
There are a large number of effective non-price tools. For the FMCG goods market, TV and online advertising, trade marketing activity, increasing distribution efficiency, and working with the assortment remain important drivers of sales — all of them have repeatedly proven their effectiveness. There are also more specific tools for increasing sales; for example, high-quality packaging increases the visibility of the product and can increase sales by up to 5.5%. 41% of consumers today are willing to pay for the environmental friendliness of purchased goods, despite the fact that a couple of years ago this trend was new for Russia. Sponsorship of sports teams and events (including e-sports) on average provides a 2.5–3.5-fold return on investment, which also makes it an effective way of non-price competition (this was especially noticeable last year when FIFA World Cup 2018 took place in Russia)
Of course, one should not disregard promotions’ effectiveness, and it is impossible to reverse the current price reduction trend, simply by switching to non-price sales management tools. The question about the need for promotion tools does not have a two-choice question — to conduct it or not to conduct it. The answer lies in the use of all available tools — both price and non-price ones. But the important part is to use them wisely by constantly analyzing the results and reshaping the rules for a brand or distribution network. Urves effectively employs such analytical strategies and thus delivers consistently high-level performance.