Tomato paste belongs in weekly ads, but sour cream sells itself. And when frozen pizza goes on sale, it doesn't appear to matter whether the ad appears on page 1 of the circular, or page 8.
These are among the truths Associated Food Stores has learned through an adherence to price and promotion software, according to Brian Duff, EVP of procurement, marketing and merchandising for Associated Food Stores of Salt Lake City. Speaking at the National Retail Federation show Tuesday in New York, Duff noted these lessons — some challenging long-held assumptions for the distributor — have helped to build more effective and profitable promotions for Associated and its retail customers, while also allowing for more effective negotiations with vendors and unifying merchants and marketers who often have different goals for promotions.
When Associated adopted software from KSS Retail (now dunnhumby Price and Promotion) nearly six years ago, Dunn described promotional strategy at the company as a matter of "just doing what we always did" — basing promotions of items and price points from previous ads without much precision.
"We had very limited visibility into these kinds of decisions," Duff said. "Quite frankly, our category managers would just go back and look at what we did previously to see how a particular item did. We had a lack of data to bring to our vendor negotiations. It was deja-vu in a lot of ways. We didn't have the data to back up what we did."
Submitting to what the data suggested, Duff said, helped the company to realize not only which items responded best when in ads — Associated runs fewer sour cream ads and more tomato paste ads today, for example — but also when sale items cannibalize categories. In some cases, the results were surprising: One item typically priced at 88 cents on sale sold better when the software suggested a 99-cent price point.
Dunn said the company today was looking into applying similar data to items with varying prices like produce, to direct-store pricing and to measure the effectiveness of short-term promotions.
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