/ grocery retail

How consumers respond to regular price promotions

When scanning through leaflets, do you really scrutinize all the offers or do you just search for the two or three products you usually buy to see if maybe they’re on sale this particular week? Take, for example, Nutella. Your kids love it and, let’s be honest, so do you. As a regular grocery shopper who also regularly scans the coupon pages, you know that a monetary discount on Nutella comes around every so often. You also know that when it does, it’s offered at such a low price that it’s well worth your while to buy a few jars more, which will then last you and your family until the next time a discount is offered. This is something you’ve learned over the years. Promotions on your favorite products come around regularly, that’s a given.

Switch your perspective...
Now let’s look at this situation from a retailer’s point of view. This is not how you thought promotions were supposed to work, is it? Your traditional leaflets are meant to provide drive-to-store leverage, and to encourage your customers to buy additional products they would not have bought anyway. But when customers explicitly wait for offers to save money on products they would have eventually bought without a monetary discount, you lose out on margins (compared to them buying the product at full shelf price).

Another problem is that consumers have different needs at different times. This means that regular leaflet offers with the same products for all consumers at exactly the same time end up being irrelevant for most consumers in that moment and are thus ignored.

Failing-mass-promotions

So instead of offering a product a consumer would buy anyway or isn’t interested in at all, what if you had the opportunity to somehow break through this customer pattern of waiting for regular discounts on preferred products and shift your promotional focus to truly personalized offers with perfect timing? Thus, you could keep your customer base interested and coming back to the store for relevant offers without cannibalizing sales - but driving incremental sales.

There is a better way to do promotional offers
So how can retailers bypass this learned consumer behavior and keep customers happy at the same time? By investing in next-generation marketing technology and possibly even cutting leaflet budgets while doing so. It means jumping into cold water, but it’s definitely worth it. For example, our AI targeting engine recently achieved a 182% uplift compared to a standard engine under the same circumstances (see the most recent results of SO1’s targeting engine here).

Uplift-redemption-rate-SO1-AI-vs.-current-targeting-engine

One easy entry path to personalization of promotional discounts would be to rank your leaflet offers according to individual customer’s purchase patterns, which are in the data you already have in your hands. Personalizing offers is a win-win for you and your customers.

SO1-AI-solutions-for-grocery-retail

Next-generation targeting engines bypass the learned behavior of consumers by giving them diverse impulses on non-regular occasions. They catch consumers’ attention with variation and perfect timing. There is no waiting for offers anymore, as offers are made when they have a high redemption probability and when the products would not have been bought without the impulse. This also allows for personalized promotions that are actually tailored to a customer’s needs and not randomly distributed to all customers. Retailers should realize that one-size-fits-all offers are just not as effective as they once were. Personalization is the key to avoiding “Pavlovian” conditioned behavior that undermines the goal of promotional offers - crafting the future of retail.

SO1-NRF-Innovation-Lab-2019


PS: SO1 is one of the driving forces of retailer digitalization. We have created very powerful Artificial Intelligence for retail which is capable of personalizing promotions for users in real-time and across devices. The SO1 Engine sources the entire portfolio of the retailer and automatically selects the right products for each individual consumer and adjusts discounts such that, depending on the retailer’s goals, revenue, profit, or consumer satisfaction are maximized. To learn more, reach out to:
US Sales: Patricia A. Cucinelli, cucinelli@so1.ai, +1 917 757 6221
EU Sales: Stephan Visarius, visarius@so1.ai, +49 160 93 59 69 95

Lelia Hanslik

Lelia Hanslik

After finishing her B.Sc. in Mathematics and Psychology, Lelia takes care of Business Analytics and Business Development at SO1.

Read More