The 2008 financial crisis drastically altered consumer behaviour. Households are no longer just on the lookout for good deals but consider them as a given1. This results in a real price war between retailers who use and abuse promotions to attract customers. Each year, nearly 500 billion dollars are spent on promotions around the world2.
In Europe, pressure to offer promotions on mass consumption goods has never been so high: spending has doubled within a decade and nearly 30% of in-store purchases are made with a discount. Let’s take a closer look at the promotional practices of the three main European markets!
The UK – champion of promotions in Europe
The UK is the undisputed leader in promotions. According to an IRI Worldwide study from 2016, 51.5% of retail products were discounted, the highest sales volume in Europe3.
British consumers have therefore tended to favour products sold on offer, or have even turned to hard discount retailers. This can be seen by the fact that the hard discounters such as Lidl and Aldi have gained more than 2 market share points between 2012 and 20144.
France – staging a promotional battle
In the space of barely a decade, promotional activities have become a considerable part of French manufacturers’ and retailers’ marketing strategies. Budgets allocated to promotions today represent nearly 20% of their revenue.
The traditional French brands are mainly competing against each other in the field of prices, but in a sporadic manner through promotions. Between 2010 and 2015, 8 out of 10 brands increased their spending on promotions5.
Germany – doing its best to resist
Germany is an exceptional case in terms of promotions in Europe: only 13.2% of products are discounted. Slashed prices are the exception for German consumers.
Germany prefers the culture of ‘Everyday Low Price’ rather than mass promotion, which can be seen by the success of the hard discounters such as Aldi and Lidl. With over 15,000 shops nationwide6, Germany unsurprisingly has a lower share of its revenue devoted to promotions. Furthermore, the trend is more for customised promotions rather than generic offers.
Faced with the spiral of low prices driving Europe, many retailers are using promotions to attract consumers who are increasingly on the hunt for a good deal. Although promotions lead to an increase in sales, this is to the detriment of profit margins. Retailers therefore need to step up their efforts in order to optimise their promotional investments while continuing to respond to their customers’ needs. Big data, new technologies, customised promotions… There are many options available to them in order to offer the right promotion to the right person at the right time.
(1) Eales, T. (2014). IRI Executive Summary – Price and Promotion in Western Economies: New areas to explore for retail recovery, IRI Worldwide [online]. [Last accessed on May 16, 2017].
(2) La plupart des promotions en magasin ne sont pas rentables pour les industriels (2015), Nielsen [online]. [Last accessed on May 16, 2017].
(3) Eales, T. (2016). IRI Special Report – Price and Promotion in Western Economies: A pause in promotion escalation, IRI Worldwide [online]. [Last accessed on May 16, 2017].
(4) Dupré, J. (2015). Étude IRI – Guerre des prix en France : Bilan et enseignements pour les autres pays européens, IRI Worldwide [online]. [Last accessed on May 16, 2017].
(5) Forum LSA (2016), L’évolution des techniques promotionnelles à l’heure de la guerre des promotions, Nielsen [online]. [Last accessed on May 16, 2017].
(6) Bielinska, K., & Rehder, L. (2016). Germany Retail Foods, USDA [online]. [Last accessed on May 18, 2017].