NielsenIQ recently hosted a regional client webinar Navigating Through Turbulent Times that provided a deep analysis of a new era of price and promotions amidst the ongoing aftershocks of the COVID-19 pandemic. Driven by the NielsenIQ Analytics Intelligence division, the online event outlined the new realities around pricing strategies to help FMCG manufacturers make sense of the altered COVID-19 retail reality. A core strength of the insights shared during the webinar was the granular data made possible through the analytics division’s use of weekly store level modelling, at an item level, to predict the impact of pricing changes or price elasticity.
Speaking after the event NielsenIQ South Africa MD Ged Nooy commented; “South Africa remains one of the most price-sensitive countries in the world (Source: NielsenIQ Pricing Models 2020, 2021. See diagram below). However, what we have seen is that consumers’ price sensitivity has not changed significantly from what it was pre-Covid. Rather it is their reaction to price changes that have shifted, and they are making far more strategic lifestyle changes and tactically re-assessing how they spend their money.
Price shifts
A key question asked during the webinar was whether NielsenIQ expected consumers to become more price sensitive? Nooy comments; “We don’t expect that to happen. Consumers are looking for value, but it is not the only attribute of concern. The number one action towards household spending is to weigh up the attributes of the product that matter the most to their current life situation.
“This has seen price tiers evolving with both a growing economy price tier and a growing premium price tier. This stems from the fact that there are now Insulated Consumers who have jobs and have re-engineered their lifestyles around a new COVID-19 reality. They are purchasing premium FMCG products to allow them to emulate a premium type experience at home. On the other side of the coin, there are Constrained Consumers who are struggling financially and have been forced to make tactical changes in their purchase behaviour such as buying economy brands and private label products.
A new kind of promotion?
The webinar also specifically addressed the role of promotions amidst the new COVID reality. NielsenIQ found that during the lockdowns, retailers did not change everyday prices and rolled back on promotional intensity to preserve the supply chain. They did not want to put even more pressure on the supply chain by adding additional purchase drivers like promotions to an already fraught mix.
The big question now is whether promotions will remain at the “new normal” levels created by COVID circumstances or if manufacturers and retailers will rethink promotions entirely within this new context? Nooy comments; “We would suggest that this is the perfect time to leverage multiple innovation points for promotion strategies going forward to gain not just short but long term growth. This new way of approaching promotions is especially important when given that in 2019, 66% of promotions were not efficient i.e. did not pass 50% efficiency point, while in 2020 that increased to 69%.”
A human connection
To counter these types of inefficiencies, some key insights shared during the webinar included the fact that retailers need to look beyond merely communicating price and start communicating at an emotional level. For example, Back to School Promotions should tap into consumers mindsets around this real-life event and be designed around this need state to create promotions that connect and resonate with consumers.
Another catalyst for the rise of a new era in promotions is a significant increase in the usage of eCommerce during lockdown by certain key target markets. When these types of consumers go online it’s a convenient, user-friendly pleasant experience and they are now seeking promotions that streamline their decision making process and add to the level of ease of their shopping experience. An additional suggestion was a proactive approach towards launching new brands in new formats, with new attributes and line extensions that meet new demand states and usage occasions. This will allow manufacturers to command a price premium for these items.
Overall Nooy says; “What we have observed is that with each new wave and lockdown; immediate pre- and post-lockdown behaviour changes are merging into a pattern and people are not reverting to behaviours that were favoured before Covid. As a result, there has never
been more of a need for manufacturers and retailers to understand the changes impacting the categories they are present in, and fully restructure their price architecture to remain competitive.
“As one of the largest investment manufacturers and retailers make, trade promotion strategies are one of the biggest influences on revenue and profitability. We have therefore made our ‘always on’ store panel data more accessible to our clients because we realise what a difference a month, a week or even 24 hours can make right now and we’re investing heavily in technologies to aid this real-time data accessibility even further.
