As micro markets continue to thrive and evolve, Malcolm McAlpine, business manager, Branded Snacks at Mondelēz International, has been on a mission to help operators capitalize on the opportunity. His recent themes in webinars and articles have focused on having a retail mindset and proper category management. At his 2022 NAMA Show presentation, McAlpine spoke about the importance of promotion. Here are some key takeaways from his session.
McAlpine defined category management as putting the right product in the right place at the right time, for the right demographic. “Promotion is the missing piece,” said McAlpine.
“In today’s business climate, manufacturers would much rather fund consumer-focused, retail-style promotions in micro markets than simply give operators a dollar off per case,” he said. “For operators, the benefits are significant because promotions increase sales and the data proves that there is a measurable ROI when promotions are applied, so there is plenty in it for both the operators and manufacturers.”
McAlpine pointed out that product promotions come in many forms, including product bundling, an immediate cents-off discount, loyalty programs and a new concept in promotions, cross-channel, that ties the purchase made at a micro market with a discount at a business across town, such as a movie theater. “The beauty of it is that promotions are communicated right on the kiosk screen and the overhead monitor, right at the point of sale,” he added.
Bundling involves an immediate discount with the purchase of a second product. “As an example, we have run bundling promotions successfully with belVita and the purchase of a branded bottled water,” McAlpine said. “Not only are you giving the consumer an immediate discount, but you are giving them a reason to purchase a second product, when they might have only purchased one.”
Dollars off or cents off programs also have a strong appeal with consumers, providing instant gratification. “Bundling and immediate discounts work very well with Gen Z and younger millennials, because instant gratification appeals to them,” he said.
Loyalty programs, which reward a consumer for consistent purchasing of the same product, are attractive to older millennials, Gen X and baby boomers. “They are willing to wait to be rewarded by a program that offers ‘buy four, get one free,’” McAlpine said.
Cross channel promotions, such as the movie theater discount, are proving to have wide appeal. McAlpine said that a cross-channel program in San Antonio from late 2021, which tied a micro market purchase to movie theater discounts, resulted in a 155% sales increase on the promoted products.
McAlpine noted that there is evidence that people continue to buy at a higher level even after a promotional period. “That's another advantage. The upswing in sales tends to last long after the promotion ends,” he said.
McAlpine offered plenty of data to support the success of promotions, including a third-party study that some may find surprising. “There is a demonstratively different result when you promote first-tier brands as opposed to second-tier brands,” he said. “The study showed that the lift in sales when you promote Tier 1 brands such as RITZ, OREO, CHIPS AHOY!, belVita and SOUR PATCH KIDS, for example, was 75%. Second-tier products saw only a 25% lift in sales.”
While there is a natural inclination to believe that new products would benefit greatly from promotion, McAlpine noted that the study showed only a 5% upswing with promotion. Although the lift in sales for new products is significantly smaller than the leading brands, they are still important for the operator as they create excitement and keep the Micro Market Fresh. From a manufacturer perspective, they are important as awareness and trial are a vital part of any new product marketing launch plan.
As of April 1, Mondelēz International has their own direct sales force for vending. McAlpine urges operators to reach out directly to their sales rep, use the data that is available, get as much help as they need to select products based on demographics, and implement promotions that will deliver measurable results.
To elevate micro market success, McAlpine offered some clear advice to operators. “Micro markets are growing. Get your house in order, make sure that you’ve got the right products in the right place at the right time, and that you have correct planograms. Then, engage the consumer with promotions. Remember, consumers expect promotions. Also, there’s a secondary benefit for operators who run promotions. If the consumers are happy, the decision-maker at the client is going to be happy. That is important for an operator who wants to keep great locations and see them grow.”
Knowing how and when to use promotions in micro markets is becoming increasingly important to operators. Check out Mondelēz International’s insights channel to find more articles about product promotions and loyalty programs in workplace foodservice environments.
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