On Sale: What exactly are brands discounting

FMCG NIELSEN DIGITAL

Singapore - Price discounting is tempting as it may seem to yield higher average ROI revenue than any other marketing activity, but it does not build brand loyalty on a long term, a recent Nielsen study said.

Nielsen's Marketing Effectiveness Practice study heeded advertisers to be aware that that price discounting can quickly move to a "negative margin return proposition".

This is particularly significant when it comes to brands with high shelf price, low internal margins, and low responsiveness to short term promotions.

Evaluating 6 FMCG categories, namely shampoo, conditioner, carbonated soft drink, infant milk formula, household cleaners and biscuit, the study found that 19 out of the 20 items across these categories that used price discounting strategy to hold their market positions after their loyal buyer base had declined, were out of the market within 16 to 20 weeks.

Only one item managed to save its position, with a re-launch. Six items exited the market within four to eight weeks. Nielsen declined to reveal the names of these items only adding that "it is advisable for advertisers to properly evaluate price discounting and look for opportunities to drive efficiencies within the portfolio."

Nielsen suggested that advertisers must look into the relationship between actual volume share and the volume share of their base business or loyal buyers, while evaluating a price discounting strategy.

If there is an over-dependence on price discounting and predominance of transient buyers, brands will struggle to maximise the potential from their brand investment strategies.  

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