Product experience, not price, dictating sales growth

Posted by Daniel Palmer on 13th October 2008

As consumers continue to restrict their spending, consumer packaged goods (CPG) manufacturers and retailers have re-invigorated merchandising activity in the search for higher sales. Yet, too often, merchandising strategies rely heavily – and sometimes entirely-on price reductions, according to the latest IRI study – “Times & Trends: Merchandising Trends 2008”. The new research recommends industry leaders consider new, innovative approaches involving updated positioning and product mixes and solution-based merchandising that generate enhanced shopper loyalty while concurrently reducing the reliance on lowering prices.

New merchandising approaches are especially important as consumers reduce the number of store trips, which in turn is decreasing the opportunities manufacturers and retailers have to reach them. Innovators realise that the store is more than a step in the distribution chain from manufacturer to shopper, it is a stage upon which manufacturers and retailers can define products, tell stories and create unique experiences.

“Simply lowering prices doesn’t fit with a product’s complete value proposition,” IRI Innovation and Consulting President, Thom Blischok, commented. “In fact, just one per cent of product categories that utilised price reductions as the sole merchandising tactic earned a sales lift of 100 per cent or more. Contrast this with 86 per cent of product categories that enjoyed a sales lift of 100 per cent or more with a feature and display combined strategy – a merchandising tactic that allows the manufacturer and retailer to define that product, tell a story and create an experience.”

The IRI study suggests the following merchandising tactics for retailers and manufacturers:

* Explore opportunities to reduce reliance on price reductions by focusing on an affordable product mix and positioning and solution merchandising
* Adopt broader, more innovative merchandising programs; aggressively test pre-launch and track consumer response to enable mid-program modifications or builds
* Develop region and store-specific, highly targeted merchandising strategies to maximize relevance and response for high-priority categories and segments
* Drive private label trial/adoption with merchandising strategies that feature products and solutions which are highly relevant to the stores’ key consumer segments

“As merchandising is re-born, the key to success is balance: too little merchandising is opportunity lost, while too much leads to clutter and a high probability that shoppers will completely tune out the noise,” Mr Blischok noted. “Total merchandising levels may be less than in days gone by, but moving forward, it is the quality of merchandising and targeting, not quantity, that will define the most effective players.”