A&P's Sales Plunge After Promotions Mix-Up

A&P blames a failed promotional program for its recent poor financial performance. The retailer spent its most recent third quarter focusing exclusively on promotions instead of investing in lower prices and spent more time confusing customers, according to one A&P executive.

"One of the major factors contributing to our less than expected performance was the previous belief that the best way to compact declining sales was with ever hotter promotions," says Christian Wilhelm Erich Haub, executive chairman of the board, interim president and interim CEO, A&P. "Our analysis found that we layered one promotional program on top of another in an attempt to capture more foot traffic but in fact, ended up confusing the customer. We basically spent too much money on too many different programs and in the end not having the right impact on the consumer's purchasing decision."

According to Haub, the retailer spent too much time chasing vendor dollars and taking every promotion offered regardless of consumer demand. "I believe we overreacted to the economic and competitive environment and our promotional spending and became less and less productive," says Haub.

Another issue the retailer uncovered revolved around price management, which Haub says was slow, complex and not supporting the retailer's intended price positioning in the market. The retailer also cites that its messaging and in-store ads became too cluttered, bringing more noise rather than a clear communication of value says Haub. "Consequently, consumers were confused and didn't understand what we stood for anymore," says Haub.

As part of a turnaround plan, the grocer is reducing its pricing complexity and defining a new, more effective pricing strategy that the company is currently implementing.

"We have discontinued several unproductive marketing and promotional programs and redirected the spend to some of the new programs we have started in our effort to focus our promotional investment and simplify our promotional approach based on what consumers really want in terms of product and prices," adds Haub.

Haub concludes, "We will be making further modifications during the fourth quarter as we want to shift some of our spending away from promotions entirely and into better everyday shelf prices. We also want to better focus our advertising on the really excellent values we offer to consumers on a regular basis."
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