[Pricing Nugget #026] Place a Safe Bet with (Retailer-Themed) Super Saver Events?

Imagine you are a pricing manager or a marketing manager responsible for promotions, but you are tired of your business-as-usual promotions.

You think – this time you go big; you create your own super saver event:

The "BIG BIGGER BIGGEST BANG FOR THE BUCK BOOM SHAKALAKA" event.

You pitch the idea to your boss, and she responds, "Cool, can you tell me more about your super saver event's incremental impact? And why should we do it?"

What is your answer? We will find out today.

What are "Retailer-Themed Super Saver" events (ReTSS)?

These are promotional events specific to and designed by retailers. These are not seasonal events shared by many retailers simultaneously, like Black Friday. And these retailers mass advertise unusually deep, immediate deals across a broad range of categories with a common savings theme and deal format.

Examples are the Super Sale event offered by Woolworth, the Cart Buster savings event offered by Krogers, or the Hamster Week event offered by Albert Heijn in the Netherlands.

Are ReTSS events effective? Four questions might help.

The researchers investigated four questions to shed light on the effectiveness of Retailer-Themed Super Saver Events:

1. Do ReTSS attract extra visitors to the store during the event?
2. Do they increase visitors' purchases at the store?
3. Are these effects incremental - that is, do the increases during the event period outweigh negative pre- and post-event dips?
4. What makes a ReTSS event more successful?

To answer these questions, the researchers analyzed a panel of households. They observed what a specific set of households did across a certain period.

They checked what did these households buy at the top seven Dutch Grocery chains over 200 weeks. And these 200 weeks covered 44 retailer-themed super saver events.

Four variables might help answering the four questions.

The researchers looked at four variables...

1. the (change in) visits: Number of customer visits
2. the (change in) conditional volume: If purchased something, what was the volume (think of number of units or amount of "product")
3. the  (change) total volume: Amount of product that was purchased.
4. the (change in) total spending: Total revenue

...and checked them for four different time periods:

1. The week before the event,
2. the duration of the event, 
3. eight weeks after the event, and
4. across all periods.

Let us turn to the four questions.

Q1: Do ReTSS attract extra visitors to the store during the event?

Yes, ReTSS attract +7.75% more visits.

Q2: Do ReTSS increase visitors' purchases at the store?

Yes, these customers bought on average +.34% more and in total +8.47% more units equaling to +3.63% more revenue.

Q3: Are these effects incremental - that is, do the increases during the event period outweigh negative pre- and post-event dips?

Yes & No. We have a anticipation effect before and a stock-pile effect after the event: the conditional volume, the total volume, and the total spending DROP before and after the event.

Only the number of visits decreases before the events, but increases after the event.

In sum, the number of visits increases by +2.68%, the conditional volume drops by -.66%, the total volume increases by +1.08%, but the change in total spending / revenue is null (!).

Q4: What makes a ReTSS event more successful?

The researchers analyzed the impact of six different factors on the performance of ReTTS events: the number of visits and the conditional purchase volume.

• Deal format: BOGO ("Buy One, Get One for Free") and "Percentage off" promotions are more effective in driving visits. However, they do not affect the purchase volume.
• Scope: A larger assortment that participates in the promotion drives more visits, but does not increase the purchase volume.
• Discount depth & advertising budget: Does not affect visits and purchase volume (possible explanation: not enough variance in discount levels and advertising spend - meaning the discounts and advertising budgets more or less the same).
• Theme resonance: More media coverage drives visits and purchase volume.
• Number of previous occurrences: Wear-out effect - with each additional occurence, the number of visits and the purchase volume drop.

In a nutshell: What did we learn about "Retailer-Themed Super Saver Events" (ReTTS)?

• ReTTS increase the number of visits and total volume.
• ReTTS leave revenue untouched ("null sum game").
• The right deal format, a broader eligible assortment, and media coverage support, additional repetitions of the same ReTTS hurt the performance.
• Impact on profit is hard to estimate because too many variables are unclear (margin inside/outside of events, share of promotional revenue, funding of promotions via manufacturers, etc.).