Consumer packaged goods companies spend up to 60% of their marketing budget on trade promotions. And these promotions are likely to be more effective when marketers keep consumer behavior with respect to channel in mind. The Nielsen Company recently published  tips on this topic which are designed to help marketers use their budgets more effectively.

To begin, Nielsen analysts remind clients that each channel demands the proper balance of pricing and promotion strategy  touching on five parts:

  • Price elasticity
  • Price gap elasticity
  • Promotion type
  • Frequency
  • Discount level

Nielsen analysts say that consumers respond to price promotions  on display in the store differently with respect to the channel they’re shopping. For example, the following percentages of consumers responded to an in-store display of reduced price products.

Food store:  38%  (Reason: Consumers respond well to promoted price changes in this channel.)

Drug store: 18% (Reason: Consumers tend to look for convenience more than price in this channel.)

Mass merchandise store: 27% (Reason: Consumers expect lower prices in general in this format.)

Nielsen research also revealed other key facts when it comes to trade promotions:

  • Price is not as important when consumers purchase a product infrequently and when few other options are available.
  • Consumers will respond best to display-based promotions of “must have and easy-to-eat products.”
  • Consumers will respond best to advertised or featured products in the paper goods and detergent categories.
  • While food store shoppers let their impulses take over, drug store shoppers have a purpose in mind.

As marketers continue to employ predictive analytics, they will fine-tune where and how their trade dollars are spent.

[Source:  Kellen, David. Kaiser, Kurt. Six Trade Tip Promotions. What Less Can Be More. Nielsen News. Nielsen.com. 16 Apr. 2010. Web. 3 May 2010.