I have recently completed terms negotiations with Countdown New Zealand. The option we had to consider this time was “net net” terms. This involved calculating the level of discount we had applied as a percentage of sales over the past 12 months. This percentage amount is then given to Countdown as an “Off Invoice Allowance” which they use to discount or adjust the retail price to achieve targeted price points. Countdown argue this will improve sales due to their sales algorithms being able to determine optimum discount price points, timing of promotions and optimum retail price points.
What has made ’net net’ terms interesting was since 2014 we have been looking for better ways of raising awareness of our products instore without relying solely on discount promotions every time. For our existing customers familiar with our brand and preferred honey variety the decision to purchase is a no brainer when the product is discounted. However in my opinion discount does nothing to increase brand or variety awareness for shoppers who don’t purchase Airborne Honey. Discount is an exercise in devaluing the gross profit for the brand as well as the value perception of shoppers.
What has made ’net net’ terms interesting was since 2014 we have been looking for better ways of raising awareness of our products instore without relying solely on discount promotions every time. For our existing customers familiar with our brand and preferred honey variety the decision to purchase is a no brainer when the product is discounted. However in my opinion discount does nothing to increase brand or variety awareness for shoppers who don’t purchase Airborne Honey. Discount is an exercise in devaluing the gross profit for the brand as well as the value perception of shoppers.
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Early 2014 we made the decision to introduce instore tasting but rather than increase the promotional budget the decision was made to reduce the discount budget by 34% and use this money to fund an on going instore tasting program. Instead of a campaign style demonstration program we conducted ongoing repeat store tastings on a monthly basis.
The results have been very interesting! Unit sales have increased significantly our promotional budget (tastings & discounts) as a percentage of sales has declined. I think we all agree that it is to simplistic to attribute these changes to the tasting activity. Factors such as brand perception, price, competitor prices, listing and distribution all contribute to sales. However what is clear is tasting’s are raising awareness making it easy for shoppers when they are considering new brands. Having already tasted and talked about the product gives the shopper confidence they are making a good decision.
Chart of Airborne tastes, cost per taste, interactions Jan-Jun 2017
The results have been very interesting! Unit sales have increased significantly our promotional budget (tastings & discounts) as a percentage of sales has declined. I think we all agree that it is to simplistic to attribute these changes to the tasting activity. Factors such as brand perception, price, competitor prices, listing and distribution all contribute to sales. However what is clear is tasting’s are raising awareness making it easy for shoppers when they are considering new brands. Having already tasted and talked about the product gives the shopper confidence they are making a good decision.
Chart of Airborne tastes, cost per taste, interactions Jan-Jun 2017
*Cost per taste includes samples & materials
So back to our ‘net net’ pricing negotiations with Countdown, it made it easier to consider agreeing to a supermarket allowance when discounting was not the only option we had to raise shopper awareness. Quite frankly computer algorithms should be able to come up with the right price points more cost effectively than myself or our sales and merchandising agent can by staring at spread sheets all day and sending multiple emails.
Lets talk in twelve months time and I will let you know how well the ‘net net’ is working out.
So back to our ‘net net’ pricing negotiations with Countdown, it made it easier to consider agreeing to a supermarket allowance when discounting was not the only option we had to raise shopper awareness. Quite frankly computer algorithms should be able to come up with the right price points more cost effectively than myself or our sales and merchandising agent can by staring at spread sheets all day and sending multiple emails.
Lets talk in twelve months time and I will let you know how well the ‘net net’ is working out.
Founded in 2014 for FMCG Brands. Storetaste.com: Is a "In Shop Sales Support & Reporting Application” with a team of shared reps and a cloud based reporting platform based in New Zealand & Singapore. Providing visible & affordable in store merchandising and in store sampling services."