I’m a food marketer’s worst nightmare.
At least, that is, when it comes to in-store price promotions, which are designed to pull throngs of customers through the doors and encourage impulse purchases.
But when marketers run these promotions, they’re wading into treacherous waters.
Their first gamble is whether or not lower promotional prices will attract enough new-to-brand buyers to outweigh the revenue from those people who were going to buy the product anyway, even at the higher price.
The second risk is that the short-term spike in sales won’t lead to a long-term increase in volume because people will buy more than they need during the price promotion and therefore won’t have to buy again for a long time.
And the third peril, which is perhaps the most dangerous of all, is that the sale price will undermine the regular price by forever lowering expectations about how much customers are willing to pay.
And when it comes to all three of these frightening perils, I’m a nightmarish villain.
First, I’m rarely induced to try a new brand just because it’s on sale. So, marketers don’t acquire a new, potential long-term customer. And second, I’m quick to pick up on the rhythm of their promotions’ calendar so I can stockpile their product until the next sale. So third, I’m unlikely to ever pay full price again.
I’ve been brewing Peet’s coffee at home for more than 30 years. No other coffee brand has a chance of finding its way into my pantry. Peet’s started on the West Coast, and when I moved back East, I even paid premium prices to have Peet’s mail-ordered to Miami. But then Publix started to carry Peet’s and I happily, and consistently, started to pay less. Every other month, my preferred blend goes on sale for 20 percent off, and I buy 6 pounds. That’s enough to carry me over until the next price promotion.
Or, take Pompeian extra virgin olive oil. I like it because it’s non-GMO-verified, and the flavor is perfect for marinades, sautéed vegetables and salad dressings. Normally, it’s one of the most expensive bottles of olive oil on the shelves. But every few months, it goes on sale at the irresistible promotional price of two-for-one. I grab five or six bottles depending on how many I still have in the pantry from the last two-for-one promotion.
But my favorite example of a price promotion gone wrong involved sparkling mineral water. At my house, we go through one-liter bottles of lime flavored Perrier as if they were… well …water.
Recently, our favorite beverage was marked down from $1.95 to one dollar, nearly a two-for-one extravaganza. I went into a wicked frenzy. I even stood on a lower shelf so I could reach all the way to the back of the top shelf in order to snatch every bottle for myself. I villainously laid in more than a month’s supply while denying any first-time brand buyers a chance to get in on the deal.
For me, the Perrier promotion was great while it lasted. But it has had a devastating effect on my long-term revenue potential for the makers of Perrier. I’m unlikely to ever again pay $1.95 for a bottle of Perrier. When my stockpile of $1.00 bottles runs out, I’ll make my own carbonated water with my Soda Stream machine.
That is, of course, until the next Perrier price promotion. Which I’m betting will come around any time now. Hopefully, they won’t get smart and limit the next offer to a measly four bottles per customer. If they start doing that, I’m afraid I just may have to go back to paying full price.
Adam Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a consulting firm that specializes in helping companies attract more, high-paying customers. He can be reached at firstname.lastname@example.org, or via the company’s website at PeakRevenuePerformance.com.