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The Four P’s of Merchandising: Product, Placement, Pricing, and Promotion Part 4

Read Part 1, Part 2, and Part 3

We have reached the end of the road for the 4 P’s of Merchandising. It started with selecting the right products and putting them in the right places for the customer. Next, we discussed pricing those products to convey value to the customer. The last leg of the 4-P journey is promotion. I left promotion for last because it is often considered the most fun element of the merchandising strategy, and it has the potential to generate the most bang for your buck. For this reason, I consider it the final course on the merchandising smorgasbord—the dessert, if you will.

Promotions for a produce retailer can come in many forms. They can help drive a positive image when used generically in the form of social media, television, or radio ads, or they can communicate low prices, specialized assortment, or new product availability when they come in the form of a printed flyer. Promotions can also show up entirely inside the store with no outside communication at all. These types of promotions strive to accomplish a whole different set of goals. For the balance of this article, I will focus on the two latter forms: the printed flyer and in-store features.

Generally speaking, produce promotions strive to accomplish one of three broad goals. Since the printed flyer is widely distributed via home delivery to potential customers, its most important goal is to convince customers to shop at that location for the coming week. It is a well-known fact that most customers (even a store’s best customers) shop at multiple stores and, normally, the better the flyer, the more customers will shop where that flyer is honored. For this reason, a time-tested strategy is to put the most sought-after products at very low prices on the flyer’s front page. This strategy of promoting ‘loss leaders’ is designed to convince customers to choose that location as their primary store for that week. It is often said that the printed flyer is the primary tool to advertise to your competitor’s customers in the hopes that they will switch grocery stores, even if for just one week. Being successful at convincing new customers over multiple weeks can greatly contribute to creating new shopping habits for those customers. In other words, writing effective flyers is one of the best opportunities for a retailer to grow their customer base in the short-term.

"This strategy of promoting ‘loss leaders’ is designed to convince customers to choose that location as their primary store for that week."

There are two other broad goals that can be met using promotions, and they are best accomplished using in-store features, commonly referred to as “Managers’ Specials.” Since these promotions are not distributed outside of the store, they cannot convince potential customers to switch grocery stores, but they can convince existing customers to increase their basket or prompt them to purchase one product over another. In addition to being produce professionals, we are all produce customers, too. And while some of us have a regimented grocery shopping routine, complete with our grocery list (my wife would prefer to go a week without her favorite product than stray from the list), others like to browse and buy whatever catches their eye.

This is where a strong group of in-store features plays an important role. A well-placed, popular product with a sharp price has a way of making it into many shopping carts, even when that product never made it onto anyone’s list. Let’s pause and think about that for a moment. Lychee fruit, for example, is a nice item. It’s very tasty and exotic, but it never makes it onto my grocery list. I can go shopping twenty times and never purchase lychee fruit, and I am sure I am not the only one. But, if one day I happen to see a good supply of lychee fruit on an off-shelf display for an appealing price, there is a very good chance I will put it in my shopping cart. Moreover, there is a good chance that many people will put lychee fruit in their shopping carts. This is how a good in-store feature can increase a customer’s basket.

"A well-placed, popular product with a sharp price has a way of making it into many shopping carts, even when that product never made it onto anyone’s list."

A well-executed in-store feature can also prompt a customer to select one product over another. If you remember back to the piece on placement, we talked about how not all sales are created equally. Again, a well-placed, well-signed product at an attractive price can convince a customer to purchase one product over a different product that is on their grocery list. Suppose a customer has bulk Gala apples on their list, which we heard last issue is commonly a competitively priced, lower profit Key Value Indicator (KVI). It is likely that a big display of higher profit Honeycrisp apples will prompt many customers to deviate from their list and buy the Honeycrisp over the Galas. By prompting the customer to switch, the store will be more profitable. Again, the store can thank their in-store feature for developing this higher profit sale.

Over this series, we have talked about the importance of selecting the right assortment and putting products in places where customers will notice. Plus, we talked about how to price a product and a category to remain competitive and drive profitability. Finally, we’ve completed the cycle with a discussion on promotion. Although in this series the 4 P’s of Merchandising end with promotion, from a customer’s perspective the cycle often begins with promotion. We as merchants will try very hard with aggressive loss-leader flyer promotions to drive a customer into the store, and then use all the tools in the merchandising tool chest to convince that same customer to finish their shopping with an entirely different product in their grocery basket. Well, not exactly—we’re still happy if they purchase the first product, plus a little more.

Mike Mauti is the Managing Partner and Senior Vice President of Execulytics, a consulting firm catering to produce suppliers and independent retailers. With over two decades navigating the Canadian retail scene as a buyer, merchant, and operator, he certainly qualifies as an expert. And with much of that time spent in produce, he has the goods to deliver on his promise to bridge the gap between growers and retailers. Check out www.execulytics.ca to learn more about the company’s signature products: The Retail 101 Seminar and Canadian Intelligence Services.