PromotionsIn promotions it’s the sa

Promotions
In promotions it’s the same story. Take laundry detergents. This is a fairly stable market. Yet we’re spending 50 per cent more on promotions than two years ago, with consumers buying nearly 30 per cent more of their volume on promotions. This not only creates an inefficient supply chain, or in some cases poor in-store availability, but, more importantly, has reduced the value of the category and likely the retailers’ profit. We’re all aware of the inefficiencies promotions cause in the system, such as problems in production, inventory and in-store availability. They all create extra costs, which ultimately have to be recouped in price. But there’s a higher cost. As promotions are increasing, they are decreasing customer loyalty to both stores and brands by 16 per cent during the period of the promotion. We commissioned a report by Professor Barwise of the London Business School. He called it ‘Taming the Multi-buy Dragon’. The report shows us that over 70 per cent of Laundry promotional investment goes on multi-buys. The level of investment on multi-buys has increased by 60 per cent over the last three years. There’s been a 50 per cent increase behind brands and a doubling of investment behind own labels. Contrary to what we thought, most of this volume is not going to a broad base of households. It is going to a small minority. Seventy-one per cent of all multi-buy volume is bought by just 14 per cent of households. Just 2 per cent of multi-buy volume goes to 55 per cent of households. We really are focusing our spending on influencing and rewarding a very small minority of people indeed.