This time last year much of Australia’s eastern seaboard was in extended lockdown. Consumers unable to spend on leisure and travel were treating themselves with premium liquor products, often ordered online. Basket spends were up as average weight of purchase (AWOP) skyrocketed. Exceedra’s Project Yield indicated the primary role of promotions was to nudge AWOP and trade up further.
Fast forward twelve months and things look quite different. Despite the continued growth of e-commerce and a (muted) return to the on-premise and to entertaining, economic dark clouds are gathering. Inflation, rising costs of living, sky-high petrol prices, and interest rate rises have all contributed to a downturn in con
sumer spending. Anecdotally, in the past few months consumers have begun downtrading in beer, wine and some spirits; sticking with brands they know and trust and experimenting less.
This calls into question the role of promotions and whether price-off can still generate AWOP or whether it is simply reducing basket spend on items consumers already planned to buy. In the short term, achieving premiumisation is going to remain a challenge. On the bright side, the rebound of entertaining means opportunities for occasion based marketing around AWOP, cross-category bundles and premium products.
The current environment means brands and retailers need to get more – or at least, the same – from fewer consumers and trips. Promotional strategies therefore need to be revisited and adjusted for the current environment to ensure consumers aren’t just being traded down and revenue isn’t being given away. Organisations need to get closer to baseline performance, and to identify where genuine sales and margin uplifts are coming from in order to have a complete picture of promotion ROI. Footfall, revenue and margin can be better linked to execution. ‘Consumer’ promotions involving widgets, according to Project Yield, are already less likely to be noticed and taken up by consumers than price discount and additional product related promotions, and may be less impactful on consumers simply looking to save money rather than get something extra that is unrelated.
A rethink on the role of promotions in a cautious consumer environment may be in order.
Exceedra is an Associate Member of the Drinks Association.