How to Effectively Run & Measure Best-in-Class Promotions
ATLANTA — Are you using the right data points for modern promotions? That was the question posed to convenience store retailers attending the "How to Measure Promotion Effectiveness and ROI" education session at the 2019 NACS Show.
Promotions are a critical component for c-store operators to gain funding and adjust retail prices to drive incremental merchandise sales. However, most retailers lack the resources to utilize basket-level data to measure take rates, identify the source of volume, and define incremental value.
Compared to their grocery store counterparts, few c-store operators have the capabilities, resources and visibility to collect actionable data on their shoppers. During a promotion period, operators may only be examining how many units per week are moving, but this strategy can hinder their ability to truly understand the uniqueness of shoppers.
Instead, the session's presenters — SwiftIQ CEO and co-founder Jason Lobel; Ruth Ann Lilly, vice president of marketing and merchandising at GPM Investments LLC; and RaceTrac Petroleum Director of General Merchandise, Snacks & Candy John Spicknall — suggested other key indicators for promotional success that c-store retailers should consider beyond units. This includes average price of products, total basket units and basket size, impact on the category, and take rate.
During the session, the retailers shared how they measure ROI, and discussed promotions that work — and some that don't. Among the case studies were:
Take-Home: Steal the Grocery Trip
In an effort to rival a Target promotion, one c-store retailer ran a "4 for $10" promotion on 12-packs of canned soda. In doing so, the operator drew value in total basket dollars, experienced an increase in trips (140,000 vs. 128,000), and saw subcategory growth increase by 70 percent.
RaceTrac, the Atlanta-based operator of 500 stores across Georgia, Florida, Louisiana and Texas, ran a promotion with one of its candy suppliers, Hershey, whereby the retailer offered a $1 Reese's product with the purchase of a fountain drink. In comparing trips, average product price, basket dollars and units, RaceTrac's fountain beverages saw trips increase by 5 percent and basket size increase by 4 percent, while Hershey as part of the operator's candy category experienced an 81 percent lift in trips and a 64 percent rise in basket size.
High Margin & Daypart Correlation
Foodservice and packaged beverages are two core categories for any convenience store retailer, yielding high gross margins. Depending on store location, one promotion that often works is combining breakfast sandwiches and energy drinks, seeing as both products are statistically the most purchased in the early morning daypart. However, as the session speakers noted, this promotion will vary depending on store location.
Lobel, Lilly and Spicknall left attendees with a few key takeaways when it comes to promotions:
Watch out for the impact on full basket margin. For example, offering the "99-cent any size fountain beverage" should bolster retailers' sales, but operators should look at the average price for its fountain drinks, compare price points and consider the length of the promotion to see if they'll make ROI.
A promotion shouldn't run for too long. Long-running promotions like "all summer long" initiatives could negatively impact sales. Instead, Lobel suggests operators test promotions in intervals of four to six weeks, as opposed to eight to 12 weeks, to experience more lift during the promotion period.
In-store signage is a must. Today's retailers may be more focused on reaching consumers digitally, but combining a digital message with in-store signage is imperative. Looking at "BOGO" offers, for example, c-store retailers who did not support digital messages with in-store signage only experienced 4 percent redemption vs. 30 percent redemption for retailers who did both.
The 2019 NACS Show is taking place Oct. 1-4 at the Georgia World Congress Center in Atlanta.