According to a January 14 report from the National Retail Federation, 2008 holiday sales for the combined November-December months fell 2.8%. This was the first-ever decline in the period since the trade group first started to track holiday sales in 19995. Weakening consumer confidence is exacting its toll on retailers and suppliers who must respond to this decrease in sales volume. In most cases, suppliers have had to reduce their prices and accept a lower profit margin. To meet volume and profit objectives for the year, suppliers must take a good look at the shifting consumer purchasing patterns. Utilizing demand data, suppliers can then present fact-based selling cases and ROI-oriented decisions to their retailers.

It's all about measuring price sensitivity. What products are consumers most price sensitive about? Are they choosing opening price products or does brand loyalty remain strong? How are sales shifting within the category? Is consumer responsiveness to promotions changing? And how does this affect your business?

Yes, in a recession consumers care more about price, but in which categories are they actually switching to the less expensive opening price products? For which product category? By what percentage? And at what point in the consumer decision process does pricing come into play? For example, when buying shampoo, is price the first concern? Or does it fall somewhere between the brand of the shampoo and the scent of shampoo?

By examining the step-by-step decision process of a consumer, you can see how decisions are changing at any point within that decision tree. The key to tracking and measuring the impact of price as a factor is a customizable data set that allows you to set up item attributes (or "buckets") that reflect the pricing decision made by consumers -with products segregated into premium, midrange and opening price point categories. These price "buckets" can be used to illustrate sales share trends and growth by brand and price point.

Demand data also assists category managers in ascertaining whether shelf space reflects current consumer price sensitivity. If shelf space is still allotted to products based on pre-recession purchasing percentages, then consumers are being disadvantaged and retailers and suppliers are not maximizing their sales and profit margin.

Demand data from pre-recession and current timeframes can also be used to analyze changes in the effectiveness of promotional lifts. With event lift reports, suppliers can determine how current promotional lift performance compares to the pre-recession timeframe, whether consumers take more advantage of temporarily reduced pricing, and if coupon redemption has changed.

Consumers are trained to look for sales and circulars. But are they more attuned to these methods during a recession? Demand data can illustrate, over time, whether lifts are increasing, for what products, and by what percentage. It can also help determine the optimal price point for a product. By alternating pricing in circulars over time - say $3.00 in one circular and $3.50 in the next - demand data trends can illustrate the benefit of the lift at each price point. If the promotional lifts for both price points is the same, then the supplier can continue to promote the product at a higher price point, effectively improving profit margins while remaining sensitive to consumer pricing.

Start making better decisions that maximize buying opportunities for consumers and profit margins for suppliers and retailers in a down economy with demand data that can make a strong business case.

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