Discounting - Conclusions
Given the RTT’s belief that the current landscape of discounts and sales is untenable in the longer term, it discussed how it sees the situation developing. The RTT believes that retailers which use promotion and discounts more strategically, as opposed to tactically, will be more successful.
The group agreed that value will be the key pillar of retailers’ strategies going forward. To maintain and improve its prospects, a retailer’s focus must be on plans and actions which enhance stakeholder value. Price is only a part of the value equation; product, brand and the environment are equally important.
Across the market as a whole, there is a need for retailers to become more scientific in their approach to pricing.
Tim Denison observed that: “This is traditionally the least ’sexy’ part of the marketing mix and yet it is business critical.” Retailers are increasingly placing more emphasis on price strategy, development and planning; such as impact assessment, price sensitivity, optimisation research and price-increase management.
The RTT concluded that the retailers which are successful in the future are those giving more attention and dedicated resource to creating their value proposition for consumers, and developing and managing a price strategy with the emphasis on margin maintenance rather than sacrifice, where promotion management and compliance can add more distraction than inherent value.
The appropriate relationship between full price and sales and discounts is a fine balance to optimise price and demand over the long term. If that balance is achieved it will drive value enhancing customer behaviour, such as building loyalty.
As such, the RTT believes the successful retailers in the future will be those who:
Are committed to adding value to the consumer buying experience.
Have refocused much of their in-house effort which has previously been put into discounting and promotions into more value-adding activity.
Hold sales, promotions and discounting activity only at specific, tightly controlled ’sale’ times or with very clearly defined objectives which are not ‘derailed’ by the actions of competitors.
Look broadly across all channels open to them in considering their price strategy. For example, separating promotional or marked-down goods into outlet stores or using other channels e.g. jobbers, which the RTT observed some retailers do with success and with only very limited damage to their brands.
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