The role of consumer retail price promotions in the marketing strategies of manufacturers and retailers
Van Selm, Andre (2000-12)
ENGLISH ABSTRACT: Retail sales promotions are one of the most fundamental and high profile
concepts of retail marketing. Everyday consumers are bombarded with
various forms of information regarding sales promotions. Manufacturers and
retailers go to great expense, up to 75% of the United States' marketing
expenditures are spent on promotions (Lewison, 1994), but very little is done
to measure the effectiveness of these promotional activities (Walters, 1991).
Price promotions form an integral part of the marketing strategies of both
manufacturers and retailers, yet they are often neglected in terms of
assessing their impact on the marketing strategies of individual products.
Lewison (1994) supports this statement by saying, "the precise positioning of
sales promotion in terms of marketing strategy is often vague".
"The increase in sales promotion spending in consumer goods field is greater
than that of advertising promotion. However, it is important to know that a
substantial part of this money is being misspent, some of it through poor
planning" (Shapiro 1977). This statement is dated and probably aimed at the
American retail market in particular, but it evokes some relevant questions
about the South African domestic market. Are our manufacturers and
retailers misspending valuable promotional budget on poorly planned and
illogical sales promotions?
An article in Sales and Marketing Management (1979) made a good, and
relevant, point that "sales promotion is an orphan child of marketing. Both sales promotion budgets and sales promotion objectives are virtually ignored
by senior management". More than twenty years later one would expect that
the effectiveness of promotions would be monitored more closely and the
promotional budgets of both manufacturers and retailers would be subject to
close scrutiny by marketing directors. This appears, however, not to be the
case, and little study has been done, particularly in South Africa, on the
profitability and marketing effectiveness of price promotions within the retail
The use of trade promotions has risen considerably during the late 20th
century. Within companies intense competition and increasing sophistication
in sales promotion techniques together with a greater pressure to increase
sales has resulted in an increased frequency of promotions. .Market factors
have also fostered an increase in promotions. These factors include a rise in
the number of brands (especially generic brands) and a decrease in the
efficiency of traditional advertising due to increasingly fragmented consumer
markets and advertising 'clutter'.
A review of the marketing literature on grocery retail price promotions appears
to be indicating a move toward a new approach to retailing which sees more
focus being given to cutting costs out of the system, usually through
improvements to the supply chain. Retail giant Wal-Mart introduced a policy
of Every Day Low Pricing (EDLP) and moved heavily toward certain supply
chain methodologies like Quick Response and Efficient Consumer Response
which focus on reducing inventories and increasing supply chain efficiencies. These policies shun the retail sales promotion in favour of more constant
sales trends and supply of goods. It appears that this policy is working, and
not just in America, but in Canada and Germany as well (Kalish, 2000).
This paper will focus on the inefficiencies of the traditional South African retail
price promotion, particularly prevalent in the grocery chains, versus the
current American and European retail promotion techniques that focus less on
temporary price reductions and more on eliminating costs out of the value
chain. A current South African price promotion model is given and a price
promotion model for the future is proposed.
Without a more complete study it would be immature to think that this paper
could be a definitive study of the reasons, cause, and effects of retail price
promotions, rather it is intended as a stimulus for further research in this area.
This mini-thesis looks at pricing policies in the South African grocery retail
market relative to international trends. Particular detail is paid to the grocery
value chain and the effects of retail price reduction promotions on the supply
chains within the value chain. Inefficiencies in the current South African
pricing system are highlighted from both a marketing and a supply chain
management perspective. A future value chain is proposed and the migration
to this new value chain discussed. International trends like EDLP are
discussed with relevance to the South African grocery retail market.
AFRIKAANSE OPSOMMING: Kleinhandel reklame promosies is een van die mees fundamentele and hoë
profiel begrippe van kleinhandel bemarking. Daaglikse verbruikers word
gebombardeer met verskeie vorms van inligting betreffende reklame
promosies. Vervaardigers en kleinhandelaars gaan groot kostes aan, tot 75%
van die Verenigde State se bemarkingsuitgawes is gemik op promosies
(Lewison, 1994), maar daar word baie min gedoen om die doeltreffendheid
van hierdie promosionele aktiwiteite te meet (Walters, 1991). Prys promosies
vorm 'n integrale deel van die bemarkingstrategie van beide vervaardigers en
kleinhandelaars, nogtans word hulle dikwels afgeskeep in terme van die
beraming van hulle impak op die bemarkingstrategieë van individuele
produkte. Lewison (1994) steun hierdie bewering deur op te merk dat, "the
precise positioning of sales promotion in terms of marketing strategy is often
planning" (Shapiro, 1977). Hierdie opmerking is verouderd en waarskynlik
spesifiek gerig op die Amerikaanse kleinhandel mark, maar lok sekere
relevante vrae uit in verband met die Suid Afrikaanse plaaslike mark. Is ons
vervaardigers en kleinhandelaars besig om waardevolle promosie begrotings
op ondeurdagte en onlogiese reklame promosies te verkwis? 'n Artikel in "Sales en Marketing Management" (1979) maak die goeie en
relevante punt dat "sales promotion is an orphan child of marketing. Both
sales promotion budgets and sales promotion objectives are virtually ignored
by senior management". Meer as twintig jaar later sou mens verwag dat die
effektiwiteit van promosies in detail gemonitor word en die promosie
begrotings van beide vervaardigers en kleinhandelaars noukeurig bestudeer
word deur bemarkingsdirekteure. Dit blyk nie die geval te wees nie en, veral
in Suid Afrika, is daar min navorsing gedoen oor die winsgewendheid en
bemarkings effektiwiteit van reklame promosies binne die kleinhandel
Die gebruik van handelspromosies het merkbaar gestyg in the laat twintigste
eeu. Binne ondernemings het intensiewe kompetisie en toenemend
gesofistikeerde handelspromosietegnieke tesame met groter druk om reklame
syfers te laat styg gelei tot 'n toename in die frekwensie van promosies.
Hierdie faktore sluit in 'n styging in die aantal handelsmerke (veral generiese
handelsmerke) en 'n afname in die doeltreffendheid van tradisionele
advertering weens toenemend gefragmenteerde verbruikersmarkte en
'n Hersiening van die bemarkingsliteratuur op kruideniershandel
reklamepromosies blyk daarop te dui dat 'n verskuiwing plaasvind na 'n nuwe
benadering waarin meer fokus daarop geplaas word om kostes in die sisteem
te sny, gewoonlik deur middel van verbeteringe aan die verskaffingsketting.
Kleinhandel reus Wal-Mart het 'n beleid van "Every Day Low Pricing (EDLP)" ingestel en sterk beweeg na sekere verskaffingsketting metodologie soos
"Quick Response" en "Efficient Consumer Response" wat fokus op die
verminderde inventarisse en verhoogde doeltreffendheid in die
Hierdie beleide vermy die kleinhandel reklame promosie ten gunste van meer
konstante reklame tendense en verskaffing van goedere. Dit blyk dat hierdie
beleid besig is om te werk, nie net in die Verenigde State nie, maar ook in
Kanada en Duitsland (Kalish, 2000).
Hierdie werkstuk sal fokus op die ondoeltreffendheid van die tradisionele Suid
Afrikaanse reklame prys promosie, veral heersend in die
kruidenierskettingwinkels, teenoor die huidige Amerikaanse en Europese
reklame promosie tegnieke wat minder toegespits is op tydelike prys
verlagings en meer op die eliminasie van koste in die waardeketting. 'n Huidige
Suid Afrikaanse prys promosie model word daargestel en 'n prys promosie
model vir die toekoms voorgestel.
Sonder 'n meer deeglike studie sal dit naief wees om te dink dat hierdie
werkstuk 'n beslissende studie kan wees vir die redes vir, oorsaak en gevolge
van kleinhandel prys promosies. Die bedoeling is eerder dat dit dien as 'n
stimulus vir verdere narvorsing op die gebied.
Hierdie mini-thesis ondersoek die prys beleid in die Suid Afrikaanse
kruidenierskleinhandelmark relatief tot internasionale tendense. Veral word daar aandag gegee aan die kruidenierswaardeketting en die invloed van
kleinhandel prysvermindering promosies op die verskaffingskettings binne die
waardeketting. Tekortkominge in die huidige Suid Afrikaanse sisteem van
prysbepaling word uitgelig uit beide 'n bemarkings en verskaffingskettings
bestuur oogpunt. 'n Toekomstige waardeketting word voorgestel en die
migrasie na hierdie nuwe waardeketting bespreek. Internasionale tendense
soos EDLP work bespreek met betrekking tot die Suid Afrikaanse
Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/52017
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