Retailers should focus on three types: traditional discounts, multibuys and bundles.
By Brett Dworski
CHICAGO, Ill. — Jason Lobel began his presentation on c-store promotions at this year’s NACS SOI Summit with a series of questions for the room full of hundreds of retailers. “How many of you run 10 to 50 promotions a month?” he asked. About a third of the room raised their hands.
“How about 50 to 100?” he asked. Maybe 20 raised their hands.
“Dare I ask, 100-plus?” Crickets.
Throughout his presentation, “Promotional Effectiveness: Trips & Incrementality,” Lobel, CEO of SwiftIQ, a retail analytics company, emphasized the role of product promotions in c-stores’ long-term success. He said the industry needs a blueprint for building promotions that scales across all retailers, regardless of region or store size.
“Ask yourself if you have a good handle on funding and promotions,” he said. “If the answer is ‘No,’ it may be because you’re using the wrong measurement tools for the modern world.”
Here are five insights on c-store promotions from Lobel’s SOI presentation.
There are four drivers of successful promotions: demand forecasting, return on investment measurements, data-powered sales activation and individual store assortments, Lobel said. These four buckets can contribute up to 9% incremental growth if retailers maximize their potential, he said.
Promotions are often needed for struggling categories, which, for c-stores, are cigarettes, packaged beverages, beer and snacks and candy. These sectors have dropped 4%, 4%, 4% and 8%, respectively, in c-store trips over the past year, according to Lobel. Essentially, fewer people are heading to stores with the intent of buying these products. While this is due to a variety of factors out of retailers’ control—such as ride sharing, surging fuel prices and taxes on soda and cigarettes—it’s still crucial to use promotions to give these sectors a boost, Lobel said. “What we’re seeing is that shoppers are buying less categories and units per trip,” he said. “We want them to do the opposite.”
3.Elements to monitor
There are certain elements of a promotion to monitor once it’s up and running to see how it’s performing. These include unit and total dollar sales, basket units and price, take rates, source of volume, margin dollars and relative performance (vs. other brands or stores), Lobel said. It’s also important to consider what affects a promotion’s performance. This may be how long the promotion runs, the timing of the promotion, how many other promotions a retailer has running simultaneously and how much signage was used. “Signage is crucial to success,” he said.
C-stores should focus on three types of promotions: traditional discounts, multibuys (two-for-ones) and bundles (multiple products packaged together for a single price), Lobel said. C-stores have historically thrived when they’ve been the first to market and promote a new product, such as Juul, which sparked e-cigarette sales in its early stages. These types of promotions may also boost sales if continued, Lobel said. Tactical displays may also help. Placing a modular ice bin near the register on a “pizza Wednesday,” for instance, may drive beverage sales on a day that consumers are already heading to your store to purchase pizza, Lobel said.
5.Dayparts are key
Considering which daypart an item belongs to is crucial when pairing it with another product for a promotion, Lobel said. His example of using ice bins on “pizza Wednesday” could work because food and packaged beverages are often bought during the same time of the day—lunch or dinner. “High margins are correlated with dayparts,” he said. “Sandwiches and canned drinks are 50% more likely to be purchased together, while candy and coffee are 55% less likely to be purchased together.”