The Business Blog

Launching new (or revitalised) products may be the exceptional part of a brand manager’s work, for the real stock-in-trade is attempting to boost sales of existing brands. In fact, this statement should read ‘boost profit contribution’ according to the theories, but as mentioned elsewhere, sales volumes are easier to measure than profits, and market share is a nice competitive concept. There are in fact only three objectives the brand manager can have, namely

- to increase the size of the purchase (make me buy more)
- to increase the frequency (make me buy more often)
- to increase the penetration (make me buy when ordinarily I would not), which can be split into: more trials, and more switches. Trials are of product categories I do not normally buy; switches are changes of brands.

Any particular promotion may involve a combination of the three.

In the interests of making a scientific observation, I took a stroll round a nearby supermarket to see what kind of offerings brand managers were making in the spring of 1997. There are a couple of important things to note about my expedition: firstly, I am expressing my own reactions, to which I am quite entitled, and I am not supposing that any particular person might behave in any particular way. (I mention this because there are people who believe it is politically incorrect to attribute behavioural patterns to social groups.) Secondly, my conclusions are in two senses invalid. The only arbiter of success is the sales figures (or profit) that are attributable to the exercise – it is the aggregate effect across all consumers that counts. Also, as I did not buy the things I noticed, I cannot suppose that I would react the same way if I had actually been shopping. Finally, it is not always clear whether a promotion is the work of the manufacturer, the store, or a combination of both. The flexibility provided by bar coding makes the difference difficult to discern; specially printed packets might suggest the manufacturer is the source, but with the largest retailers, even these can be specially prepared.

The first thing I noticed was just how many promotions there were. As stated, I cannot speak for anyone else, but following a shopping list usually restricts my own view to those items on it. Also, three members of the public, seeing me with a notebook in hand, asked for advice, and although no member of staff challenged me, I do not think I will do this again. In no particular order, I selected:

- Frozen Oriental Express Veg Mix, normally $1.45, now 99p until the end of the month
- Mini Muesli (single serving) 23p
- Persil, 3kg $4.69, with Free Comfort (2 litres) worth $1.79
- The Store’s Honey 89p for 227 grams, but only $1.35 for 454 grams
- Ready-to-Eat Jelly, down from 35p to 25p
- Finish Dishwasher powder 1kg $2.99, get 800g of the same free, worth $2.29
- Variety pack cereals, normally 6 packs, now 8 including two packs free
- Gordon’s Gin, buy 2 bottles, $1 off each
- Luxury Quilted Toilet Tissue, nine roll pack – buy 1 get a second half price while stocks last

Later, imagining that I had bought these items, I mused as follows:

The $2 off for two bottles of gin increased the size of purchase, the question now is what effect it will have on the frequency. Presuming our home consumption of gin is neither compulsive nor routine, it is possible that we may get through it a little faster for having plenty around, or be less likely to have a period when we have none in stock. It might be worth it from the brand manager’s perspective, though the discount is bigger than it seems in terms of forgone revenue, because of the excise duty included in the price.

It is difficult to see how buying the discounted luxury quilted toilet tissue will make any overall difference to our total consumption (!); it could represent a small triumph for the store manager who is temporarily increasing contribution if enough people go for a bigger spend. It depends upon how many people visit the store over an extended period ¡ª in the extreme case, if every shopper goes for it, next month’s toilet tissue sales will be minimal. This suggests a straight swap – a ‘trade-off as it is known – between size of purchase at the expense of frequency.

Neither of these promotions is likely to increase the penetration – increasing my total spend on an item increases the perceived risk, which is the basic barrier to switching in the first place. The marked-down frozen stir-fry vegetables were designed as a penetration improvement. The idea made sense; indeed, it rang a bell, and when I got home, I discovered in the freezer a similar packet bought several months ago. The brand has some work to do on the frequency front.

The mini muesli seemed a great idea, a nice low risk, penetration attempt which might in turn lead to regular use of bigger size packs. Breakfast products are a complex area, since children have a large say as to which cereals appear on the table. I would speculate that variety packs have a pretty high penetration (that is, most households consume them at one time or another), but suffer from low purchase frequency compared to larger cereal packs because they are seen to be expensive. Therefore, this is probably a frequency attempt – to get variety packs back on the shopping list until someone decides they have to go – but there are additional complications, as the variety pack contains various brands each of which has its own independent – and potentially mind-boggling – status with its consumers.

The promotion of the fabric conditioner with the washing powder appears sensible. It is the practice of manufacturers not to identify themselves, so the choice of the preferred brand of powder acted as a guarantor for the conditioner, and – since conditioner is not essential – efforts which encourage its use are to be applauded. In contrast, it is difficult to reason out the dishwasher powder; who would buy a one kilo pack simply to get an additional 800 grams free, who would not buy the one kilo pack anyway?

Of course, the honey made sense. Thanks to the shelf display (and possibly the fact that I recognise 454 grams as 1 lb) I could see that the larger jar was cheaper (by 24%, though I only worked this out when I got home). I fancy that the large jar on the breakfast table may encourage overall consumption – though the price difference might just be a reflection of the relative costs of bringing them to the market. After all, honey actually costs nothing to make! If this is true, it represents a missed opportunity perhaps, for there is no reason why a price should relate to a cost, provided consumers will pay the price. With ready-to-eat jelly, I was left wondering if consumers will only pay 25p if that price appears to have been reduced from 35p. What exactly is the total purchasing proposition of a tub of ready-to-eat jelly?

Filed under: Business |