CASE:

Background Information

The customer is engaged in the business of supermarket and a chain of pharmaceutical products. The company has been increasingly losing market share to its competitors. The firm utilizes a high-low pricing strategy, in which regular prices are typically slightly higher than those of an everyday low-price retailer.

However, periodically high-low retailers drop prices significantly. During the time period in which a product's price is decreased, the product is also promoted through print and in-store advertising. The organization expects a significant lift in sales during the periods in which a product is promoted.

However, benchmarks against industry averages indicate that the company does not experience as large of a lift in sales as its competitors do during promotions.

Q u e s t i o n s :

• You were asked by the company to help them increase sales when promotion is done, so as a marketing student, what would be your approach to be able to increase the sales when the items are promoted?
• Identify and determine what is the source of the disappointing sales lift.
• Identify why the client's promotions generate less volume than competitors'
• Find out if there is any ineective promotion planning and execution the company is implementing that is causing missed sales opportunities
• Design a layout plan to improve any process that you find inefficient.

Reference: https://www.kearney.com/working-here/ace-the-interview/case-example-promotion-planning

Additional Info:

1. Everyday low pricing vs. high-low pricing

Shifting pricing strategy to an everyday low pricing model is not an option. The client has made the decision to focus on being the industry leading high-low grocer. They feel they can compete with everyday low-price retailers once this goal is achieved.

2. Competition

There are one or two major high-low competitors in each of the local regions in which the client operates. Our client's everyday prices, promotional cycle timing, and percent discounts are virtually identical to their competitors in each market.

3. Promotion planning at the stores

Timing. Store managers place orders with their distribution center for promoted products several weeks before the promotion takes place.

Predicting promotion volume. Typically, store managers base the size of their promotional orders on the quantities ordered in the past on a similar promotion and more subjective factors like length of time since the item was last promoted and the store manager's gut feel based on his years of experience. (Most store managers have at least 10 years' experience in the grocery industry).

Unexpected promotion volume. If an employee notices the shelves are running low or out of stock on a promoted item, the store manager will place an order for additional product. Orders must be placed by mid-afternoon and are delivered the next morning. On occasion, the store will not know that they are out of stock on a particular item until a customer complains.

4. Distribution center ordering process

Buyers at the distribution centers do not receive enough lead time to incorporate store orders into the orders placed with suppliers for promotions. However, buyers have access to the quantity of product sold during similar promotions in the past. Buyers typically use this data when determining how much product to purchase for a given promotion.

5. Customer experience

Customers routinely complain that promoted products are not on the client store shelves during promotions. Customers are typically loyal to a particular grocery store, provided that it stocks the products they consume at a reasonable price.