Hi Lo vs EDLP Where to Promote

16th April 2018

 

When you are planning promotions, where should you aim to invest your promotional reductions?

In an earlier posting I described the good, better, best philosophy of range or assortment construction. The “good” section is your entry level price points and the aim is to use this section to get people into your stores. This section should ideally be every day low price. Whilst you may take up to 25% of your sales in this segment, it is all about demonstrating the regular value you can offer. Hence avoid promoting this segment or limit it, for example, to key sale periods only.

 

The “better” segment is where you will take the bulk of your money, typically 50% or more of your total sales. This segment can really benefit from promotions either from persuading shoppers to move up the price points or to get them to move from the “good” into the “better”. Equally, the same logic applies to the “best”. Done well, promotions in the “best” segment will encourage some people to trade up to the “best”.

 

If you have a CRM solution and you can identify who shops in your “good” segments regularly, you can then think about which promotional offers (in terms of products and prices) might tempt those customers to trade up while the promotion is on, and then stay with the better product thereafter. In this case, the definition of success will be those that maintain the new behaviour once the promotion is over.

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