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CHAPTER 6 PROMOTIONS
Key Point Summary
- Knowledge of promotional activity is common place and it is accepted by all study participants that promotions are a regular part of grocery shopping in general in Scotland.
- Promotional strategies to increase purchasing are a common and expected phenomenon within our consumer culture; the sale of alcohol is no different with various strategies being employed to encourage additional and/or unplanned purchasing.
- The collated evidence supports a theory that whilst people may be brand switchers they do not tend to switch between types of alcohol. This, in part, may be because promotions are now so common place there is not the necessity for people to switch from the type of alcohol favoured because consumers will, in general, always manage to access a deal on their favoured type of product.
- General opinions suggest that consumers are more affected by price- discounting rather than multi-buy offers.
- Measuring the relationship between purchase and consumption patterns with regards to off-sales is extremely difficult because it is difficult to monitor whether alcohol is consumed immediately or stockpiled.
- The primary technique used for the promotion of alcohol in off-sales is price discounting, in particular, ramped discounting, and is often event driven.
What is meant by Promotion
6.1 Whilst the range of literature examining the effect of advertising on alcohol consumption is substantial, there is limited literature describing the type of promotions utilised within the off-sales industry and their effects.
6.2 All participants agreed on general terms for promotional activity, focusing either on the discounting of individual sales or multi-buy purchases. Perhaps the most important point to make with regards to definitions of promotion is that low-cost or 'budget' alcohol is often discussed interchangeably with promotions 29.
6.3 For the purpose of Chapter 6, sales promotion is defined as:
"… non-personal promotional efforts that are designed to have an immediate impact on sales. Sales promotion is media and non-media marketing communications employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability…Sales promotions can be directed at either the customer, sales staff, or distribution channel members (such as retailers)." (Wikipedia, 2006)
6.4 The British Code of Advertising, Sales Promotion and Direct Marketing 30 states that, for alcoholic drinks "Particular care should be taken to ensure that marketing communications for sales promotions requiring multiple purchases do not encourage excessive consumption.
6.5 A recommendation of the Nicholson Committee (Scottish Executive, [Nicholson] 2004) was that there should be a standard condition attached to all premises licences to the effect that "nothing must be done in connection with the business of the premises, whether by way of promotional advertising, by way of offering discounted prices, or in any other way, which encourages excessive consumption of alcohol and which thereby prejudices, or is likely to prejudice, the licensing principles".
Types of Promotional Activity
6.6 Industry and Staff interview data suggests that in general, stores tend to offer promotions as price-only rather than on a 'free product' basis. Promotional decisions (including time and prices judgments) appear to be made at a central level with very little local control; and usually on a regimented calendar with a 2 - 4 week rotation. Most large-scale promotions are event or season driven, with changes in consumption and brand allegiance across all age groups. Smaller independent stores have more control over what promotions they offer which are sometimes driven by cash and carry offers.
6.7 All stores within the study tend to follow the same format for promotions with larger volume discounting for lager/beers and wines 31 and money-off discounting for spirits. The supermarkets were commonly mentioned as offering the largest discounts, often with minimal profit or even below cost (this was sometimes raised as a problem by dedicated off-sales and convenience stores). Promotions were seen as a common and required activity within off-sales.
6.8 Lager/beers were mentioned most often by Staff when discussing promotions, followed by wines and spirits. Ramped discounts on wines and beer (generally lager) were quoted as being successful promotions in stores, for example, wine with 3 for 2 offers or 3 for £10 and beer in bulk promotions e.g. 8 for £6, buy one pack get one free, or 20 cans for £x. Spirits tended to be promoted with money off discounts, however budget brand spirits (permanently available) were also frequently mentioned alongside promotional offers (e.g. vodka 70cl for £7.99).
6.9 There was recognition that low-price and a concentration on price promotion was now beginning to undermine marketing concepts with regards to promoting quality brands and especially in the lager markets which is mainly price driven. Short- term pricing promotions are also thought to be affecting the routes of promotions which are now more limited because consumers are not only 'promotionally sensitive', but can choose lowest- price promotions rather than 'good quality deals'.
6.10 With no flexibility in promotion, a producer or marketing team may be trying to reduce the attrition on a brand or maintain quality, however the perception is that multiple grocers are only interested in market share and they use alcohol to gain that.
6.11 The Retail/Industry Stakeholders believe that creative ways of trying to address price for large retailers can be handled by minimising volume, for example reducing multi-buy packs from 24 cans to 20; with a definitive move away from offering, for example, 50% extra free.
6.12 The Retail/Industry Stakeholders had a clear recognition that controlling promotions within the off-sales arena within a legal framework would be difficult due to anti-competition laws.
The Extent to which Promotions Influence Individual Purchases
6.13 There is limited literature surrounding the effects of promotions on purchasing and consumption habits. In general, the evidence supports the theory that alcohol sales are bolstered by promotional activity within stores, particularly for young people ( IAS, 2005; MacAskill et al, 2001; Brain and Parker, 1997;), however the evidence is not complete in that it does not reveal consumption patterns, i.e., are purchases consumed more quickly or stockpiled at home? (Gardner, 2002) Kuo et al (2003) did find that large volume and cheaper priced alcohol was associated with higher binge drinking rates 32. Nevertheless, the Portman Group believe such sales to not be problematic, because alcohol purchased in this way can be consumed ' at the purchaser's leisure over many weeks or months' (Portman Group, 2003).
6.14 A number of studies exist focusing on specific communities within the US and the types of promotions which are targeted at their community members (Pollack et al, 2005; Harwood et al, 2003; Alaniz, 1998; Alaniz and Wilkes, 1995; Altman et al, 1991); these are discussed in more detail within the literature review.
6.15 Evidence suggests the most popular of price-reduced/multi- buy/save products is wine ( WARC Publications, 2005), and that whilst there is fierce competition amongst retailers (for share of retail sales) and manufacturers (for shelf space and share of category) the effectiveness of promotions is questionable as evidence shows they can undermine consumer loyalty (Fearne, 1999).
6.16 Some of the available industry data suggests that consumers are brand 'switchers' and that promoted lines sell at the expense of others therefore supporting the view of the fieldwork that promotional activity greatly affects purchasing patterns. That said, interviews across Staff clearly states that whilst consumers can be persuaded to switch brands they do not necessarily tend to be influenced to change the type of alcohol they are buying.
6.17 A large proportion of Staff felt promotions do increase purchasing, however it was less clear if they thought they actually affected consumption rates as generally Staff have no way of knowing whether people stockpile a product or drink it at a faster rate.
6.18 Focus group participants who frequently reported buying alcohol from an off-sales establishment elicited a sense of pride in seeking out the best deals whether saving money or obtaining extra alcohol. The general belief was that bargain shopping is part of everyday life. Interestingly, people who reported drinking infrequently stated they were unlikely to be affected by promotions and would still stick to established or preferred brands.
6.19 Again there was a belief that promotions were largely linked to the UK shoppers' desire for a bargain. There was also the perception that promotions can affect consumption rates - especially at times of major sporting events. But also the suggestion that young people's awareness of brand had spread into alcohol sales and that sponsorship was also continuing to raise brand awareness.
6.20 Both Health and Community Safety Representatives thought there was a clear pattern of young people having a set amount of money to spend on alcohol and therefore focussing on promotions that give the most alcohol for their pound.
6.21 An interesting point made by one interviewee within the retail supplier sector was that in terms of promotions at different seasonal times or events, heavy discounting may not make logical sense, other than to prevent loss of market share. Seasonal events and our culture dictate that people look to consume higher amounts of alcohol at particular times of the year, therefore it follows that discounting should not be required at such times, nevertheless retailers actually discount even more.
Marketing
6.22 There has been a growing trend in the design of alcoholic beverages which are specifically intended to appeal to 18 - 25 year olds, and are promoted using well informed and precisely targeted marketing strategies. This has led to mounting anxiety about the implications for public health, and a resultant demand for tighter control to regulate alcohol marketing practices.
6.23 Many suggest that when given the option to get "a good deal" consumers will take the deal and therefore purchase a greater quantity of alcohol. Opinions were mixed as to who is more likely to buy promotions i.e. younger or older groups, men versus women; this may depend on local or store demographics, however the strongest consensus was that younger people were more susceptible to offers than older people.
The Influence of Off-Sales Promotions on Individual Consumption Patterns
6.24 Over the years alcohol has become a cheaper commodity ( WARC, 2006), this has in part been due to the introduction of low-priced' brands and stores creating their own label brands, making alcohol cheaper, and at times, stronger. In response premium brands have lowered prices, but not to the same extent. The 'design' of promotions has meant that premium brands can retain their price but offer 'deals' of 2 for 1 etc. therefore increasing the volume of alcohol sold in line with the cheaper brands.
6.25 Promotions are an accepted part of consumer behaviour, and although some focus group participants cited buying promoted alcohol, the general consensus was that their consumption rates did not increase in contrast to the statements of some Area Key Stakeholders who felt promoted alcohol would increase the amount of alcohol consumed per session. Interestingly for those who reported being unswayed by promotional activity (see 6.18) the belief was that promotional activity did increase consumption rates.
6.26 Rather than being solely influenced by individual off-sales promotions, culturally the evidence suggests that there are other factors which shape the way we view and use alcohol, for example, one young persons' focus group were very much affected by the place they had grown up in, in terms of how they spend social time, how they interact with people from the nearest city and neighbouring towns, and how they access and subsequently consume alcohol. It is these factors which play a part in determining whether an alcohol promotion will increase their consumption rate and therefore is a factor which cannot be applied universally across the board.
Different Techniques of Off-Sales in Alcohol Selling
6.27 It would appear that the means of promoting alcohol are relatively standard across different types of stores, the only differentiating factor being scale i.e. larger stores tend to offer larger discounts and sell larger quantities. A large proportion of the convenience stores were also national companies therefore also operated centrally and had similar promotions nationwide.
6.28 Smaller grocers are more concerned with their businesses being affected by large supermarket chains pricing them out of the market. Indeed supermarkets have the ability to allocate a substantial amount of space to the sale of alcoholic beverages thus increasing variety, offering bulk buys, and reducing overall cost for the consumer. Industry data suggests that the amount of space allocated for alcoholic beverages in the five leading supermarket chains ranges from 4.5- 7.1% of total space allocation [average 6.1%] 33; with only produce (7.3%) and frozen foods (9%) taking up more space than alcohol (Grocery Retailers, 2006).
6.29 There was also the belief within the retail sector that space was being actually 'squeezed' within the larger multi-grocers with bulk goods like lager compared to spirits. Related to amount sold, volume was a huge issue. Large retailers appear to want regular purchases (lager) rather than just 'one-offs' (spirits). It was also suggested that this relates to increase in importance of wine in the market.
Associations between Discounted Products and Bulk Buying
6.30 The Daniels Report (Scottish Executive, [Daniels Report] 2004) concluded that "price plays a part in encouraging excessive drinking and in particular irresponsible promotions, usually accompanied by deep price discounting".
6.31 The Portman Group were less concerned about this practice in connection with off-sales with a code of practice stating that: "Packaging and Promotion of Alcoholic Drinks requires that a drink's promotional material should not encourage immoderate consumption and drunkenness […] Promotions in the off-trade are less likely to be problematic in this way because even if the promotion encourages the purchase of a large volume of alcohol, that alcohol may be consumed at the purchaser's leisure over many weeks or months" (Portman Group, 2003).
6.32 Data from one large multi-grocer shows that the likelihood of repurchase after a promotion is higher in the South of England (8.3%) than Scotland (6.8%).
6.33 It is commonly reported by Staff that promotions increase purchasing and talked freely about the popularity of certain brands/drink types. However, it is worth noting that some also indicated that they don't know what happens to the alcohol once it leaves the store, thus it could be stockpiled or given away as presents, hence could not comment about consumption rates.
6.34 There was some discussion of the type of person more likely to buy promotions, and whilst no strong consensus, the strongest view was that younger people tended to be attracted to promotions and older people tended to stick with what they always drank.
6.35 It was also seen as a difference between larger supermarkets and dedicated off-sales that within the larger stores there may be more impulse buying of alcohol that is connected to other shopping whereas if you go to a dedicated off-sales you are going for a particular purchase and are less likely to change from your original path.
6.36 Within the Strategic Key Stakeholder interviews great emphasis was made of the effects of price, both deep discounting and general low price alcohol, as there seemed to be little difference in their effects.
6.37 Examples of the effects of discounting came from participants of an older persons' focus group who stated they were likely to bulk buy alcohol from their nearest supermarket rather than convenience store which is in closer proximity. One young focus group also described how they received large discounts for regular bulk purchases from a small convenience store; it is postulated this is to maintain business and keep the group from purchasing cheaply in a supermarket. It must be noted that this deal was not visibly promoted within store.
6.38 From the point of view of the Retail and Industry Stakeholders there was recognition that there had been a gradual trend to aggressive promotional discounting which was directly linked to the supermarket sector. It was seen as one of the major drivers in getting people into the larger stores. This was linked to an issue also mentioned which was aggressive discounting based around sports events.
6.39 The belief was that the level of cheapness and discounting had reached a point where it could no longer go any lower. Producers had therefore become more creative in dealing with price, for example offering lower volume per pack, or reduced number of units within a pack.
6.40 Though all Stakeholders were concerned about discounted pricing it must be noted that the Retail sector believed that anti-competition laws could deflect any focus on trying to address price, however, anti-competitive laws apply to price fixing, not government intervention, hence this could be an issue for the Retail sector.
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