Discounting changes consumer preferences and opens the door to trading up.
Price is one of the famous 4 P’s of Marketing (along with product, place, and promotion) and in the adult beverage category it’s one of the hottest. At retail, it’s all about the everyday price and the promoted or sale price. If your product is priced at a premium you probably command prestige. The average consumer stares at your product on the shelf and thinks a bit, then grabs their old standby. As competition in the category toughens you need more consumers trying your product. If you can get them to try your higher-priced product, they might really enjoy it and you might have a new customer. That’s if they can hurdle their self-imposed resistance to the price. This is the beauty of pricing. That famous 4 P.
Putting your product on sale is one of the best ways of encouraging a consumer to try your brand instead of their old standby. A premium product that discounts just the right amount can get its price within the sweet spot of that price-resistant consumer. Let’s take a look at a three Bourbon competitive set and a hypothetical consumer (okay, it’s really me). The consumer is a long-time Jack Daniel’s fan. The average national price of a 750ml bottle of Jack in June was $24.10. Two more-premium brands, Bulleit and Maker’s Mark, generally also occupy the same eye-level shelf position but are priced at a premium to Jack. In June average price of a 750ml of Bulleit was $28.03 and Maker’s Mark, $28.57.
However, as our chart shows, when Bulleit and Maker’s Mark were promoted in store, the discounted price quickly approached the everyday price of Jack Daniels.
With an average discount of about 14% Bulleit’s sale price was $24.17 –not a far cry from Jack’s non-promote price of $24.10. And Maker’s Mark, while still a bit higher, clearly approached that sweet-spot with a sale price of $25.21. If Jack Daniel’s was positioned at its everyday price our hypothetical consumer may well have taken the bait and traded up. [Postscript – I did!]
This is just one simple example of the effects of discounting on a tightly competitive brand set. Other categories, such as Rum, exhibit much deeper discounting among the old stalwarts as new brands enter the marketplace and shift volume away from once-mighty brands.
To learn more about every day and promoted brand pricing, depth of discounts, brand pricing between channels, chains and independents, Bev-Al suppliers look to Pricetrac. Pricetrac is a syndicated study conducted quarterly by the Beverage Information Group. Pricetrac is conducted in 24 metro markets with coverage including grocery, drug and liquor.
The Beverage Information and Insights Group uses Tableau Software, a business intelligence and analytics product, to quickly process and query data. Tableau allows us to create data extracts, visuals and dashboards to make brand performance analysis easier and faster.
For more information on our syndicated in-store merchandising studies, you may contact Andrew Esham, VP & Managing Director, at 206-709-4112 or firstname.lastname@example.org.