Negotiating the “New Normal” – Paycheck Cycle Spending
According to a recent article in the Wall Street Journal, the recession has led some consumers to shop based upon their paycheck cycle — stocking up on necessities right after payday and then cutting back on spending until the next paycheck rolls in. As an example, Unilever NV notes that they see a jump in sales of their lower-priced brands typically during the first week of the month.
Industry experts believe the paycheck cycle spending habits will continue after the recession. So the question is, are your brands experiencing the ups and downs of the paycheck cycle? Do you experience a paycheck effect during the first week? Every two weeks? And does that paycheck cycle affect bargain- or premium-priced brands? Do you find that consumers are buying what they normally wouldn’t — or trading up to a higher priced brand?
Once you’ve identified weekly spikes in activity associated with the paycheck cycle, you want to take a look at the finer details — are there specific days that rank higher within the paycheck-affected week? And which specific SKUs are most affected by the cycle? Premium, mid- or lower-priced brands? By looking at the daily sales you can zero in on specific effects that may be drowned out by weekly data.
When you start by asking these questions, you can then align your promotional calendar to be certain you’re catching the specific days — with the specific SKUs — that experience the biggest spike in sales related to the paycheck cycle. By targeting those spikes, you’ll catch the attention of consumers when they’re in stores and feel confident purchasing items. You may find that layering your promotions is very effective — television ads aired just prior to the paycheck cycle spike coupled with instore price discounts on the key day you’ve identified thanks to the POS data. Or optimize price and supply with promotions that encourage multiple purposes. Experiment.
Then see how those promotions have done. The key to seeing if it worked is to take a detailed look at the promotional POS data for the identified paycheck cycle. Be sure to look at promotional effectiveness for the SKU, the event, the non-promoted SKUs and the category so you have a complete picture.
Consumers are tightening their purse-strings, which may be dramatically affecting demand patterns at your retailer. Are you taking the necessary actions to keep in step, or are you missing out on key opportunities to meet their changing needs?
