Ep. 12. Natural Promotions

It is time to take on another one of those topics that is both a curse and a blessing. Let’s talk about promotions.

Needless to say we usually talk about promotions in general, as if all types of promotions were all the same thing.

The retailer asks for a promotion, we run a promotion, the supermarket flyer goes out, the pallets are shipped at a lower price, and we move on to the next week. But behind that single word are two very different beasts. One can be the salvation of a season; the other can be a slow painful loss of profitability that no one bothers to measure.

So today I want to draw a line between the two. I want to give them names, give you a way of thinking about each of them, and share a couple of simple calculations (included in my book) that I think every fresh produce manager should run, at least once a year, just to keep their feet on the ground.

Are you running Natural Promotions or Marketing Promotions?

You better now it before hand, because Promotions are a value-distorting element of the first order. Few attributes break the price-value relationship as profoundly as a promotion does.

Promotions are an absolute necessity, both for producers and for retailers. There is no fresh produce business operating at scale that does not run them. But they also accelerate the evolution of the value cycle; and, normally, in the wrong direction. The more promotions we need to run, the faster the price-value reference of our product gets destroyed.

The conclusion I’d like you to take away from this episode is this: not every promotion is a promotion in the same sense. And if you can clearly state it during the negotiation, you’ll find that many of the conversations with retailers, sales managers and finance controllers become much easier.

Welcome to a new episode of Freshconomics Podcast!