A compelling sales promotions strategy can mean cost-effective buys for DIY enthusiasts while helping brands retailers avoid margin-killing discounts says Martin Bailey, business development director at the expert sales promotions firm Opia.
Spurred on by DIY and property programmes such as Homes under the Hammer, millions of people across the UK are inspired to give their homes and gardens a new look each year. In some cases, they are so confident in their design talents and practical skills that they will turn a passion for improving homes into a new business venture, all of which is boosting sales. In fact, latest figures showing that in 2014, spending on home improvement reached a massive pre-recession £5.5 billion.
Meanwhile, the number of homeowners re-mortgaging has also soared, driven by a long-term trend in people wanting to upgrade their existing homes rather than move. This has prompted Verdict Retail to predict that the DIY market will remain buoyant over the next five years.
Yet, while it is often said that a bad workman blames his tools, the cost of good sanders, drills, paint and other materials can be extremely costly. This makes many consumers extremely price sensitive, especially when it comes to hand and power tools.
However, although discounting and multi-buy offers are increasingly seen as essential to drive sales of premium goods in a competitive market, for brands and retailers it often creates a vicious cycle whereby consumers only buy products when they are on offer, making sales at the full RRP next to impossible and contributing to boom-and-bust retail cycle.
While value-added promotional mechanics are very rarely used by manufacturers and retailers of DIY products, in consumer electronics and other markets, shoppers are frequently tempted to take advantage of cashback and other smart promotional offers, driving footfall in store and encouraging impulse buys. With the right promotional mechanics in place, brands can advertise the same types of headline discount as a price drop and get a better return.
The ‘secret’ to these types of deals is that, because the number of people claiming the offer will be far lower than the 100% of customers that automatically benefit from a discount at the till, the cashback reward costs significantly less. For the brand, this means an uplift in sales, additional margin due to the lower cost to offer cashback and reduced downward price pressure. Meanwhile, the many shoppers that do claim can expect an often sizable amount of the purchase price being returned to them after a set period.
To avoid being left out of pocket by an over-subscribed campaign, an experienced industry partner will recommend risk-managed sales promotions that are underpinned by the predictive analytics and specialist underwriting. Other highly-effective sales promotions that use this strategy include cashback trade-in campaigns and ‘gift with purchases’ which could include a branded gift card redeemed against companion products, an extended warranty, or other related items.
According to a recent OnePoll survey, faith and appetite in cashback deals has seen them become consumers’ top alternative to price cuts. Yet in order to ensure DIY enthusiasts, retailers and brands keep getting a good deal, the specialist partner needs to invest time and money in high-quality systems and robust security processes that guarantee a good outcome for everyone.