Promotions should make economic sense
The CSNA examines whether the Irish Independent's “Championship Monday” promotion is hitting retailers in the pocket
Print21 June 2011
Every retailer is well-disposed towards promotions, as long as they make economic and marketing sense. The CSNA has been asked by a number of its members to run its finger over, from a retailer’s perspective, the ongoing “Championship Monday” Irish Independent promotion.
The Irish Independent is Ireland’s largest selling daily newspaper. The wholesale price of the product (through Newspread, the wholly-owned subsidiary of INML) is calculated through a standard discount of 25.4% off the ex VAT RRP. Therefore the price of the Monday Independent is as follows:
RRP Cost Profit (ex VAT)
€1.00 €6573 22.38c
€1.90 €1.2488 42.52c
Every 10 copies sold at €1.90 per copy returns €4.25 profit. Selling the product at €1, a retailer needs to sell 19 copies to earn the same amount.
As an increase of 90% of the original €1.90 price point is highly unlikely, retailers will be earning less when selling at the €1 promotional price. With substantial radio and TV advertising, in addition to a very large €1 strapline on the actual paper, it is not practical to “opt out” of the promotion; INML does not provide two separate priced products (or one “flashed”), therefore you will earn less from your Monday sales than those from the Tuesday-Friday editions. The indication for increase of sales for the Monday €1.00 promotion are that, on average, retailers have sold between 9% and 12% extra Independents.
As the Championship has not reached each participating county as of yet, there are substantial geographic variations in sales. Cross purchasing, whilst of obvious interest to INML, has no substantial financial benefit to retailers. Retailers only benefit when the paper is sold as an additional purchase.
The CSNA is aware that price-based promotions are devised around product sampling. The organisation hopes that this promotion will assist in reversing the decline in purchases of newspapers. The price point of €1 for a national quality newspaper is incredible value for a “home-grown” publication. The association would be very interested in whether the subsidy that retailers are paying (20 cent per copy) will lead to extra sales for the rest of the week. It reiterates the belief that the very substantial number of “free” or heavily discounted Independents that are made available to hotels, pubs and cafes is a barrier to retailers’ sales potential. If INML wish retailers to take a reduced cash margin for selling the Monday Independent, perhaps they should reciprocate by increasing the customer base. This can be done by ceasing “free” circulated papers in a controlled fashion, and identifying local stores willing to provide papers (at a cost) to the hotel/restaurant sector.
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