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How Retailers Can Break Away From “Unprofitable Promotion Activities”
Tempur Sealy CEO Scott Thompson had some choice words about former retail partner Mattress Firm’s sales practices recently. During a third quarter earnings call with analysts, Thompson noted that the retailer, which filed for bankruptcy last month, “continues what we consider to be unprofitable promotion activities including heavy discounts and free product offerings.” While Thompson’s comments were pointedly made about Mattress Firm, it is definitely not the only retailer that fits that description. In fact, the entire mattress retail industry has long relied on a regular promotional cycle of both discounts and free product offerings. Is it time to reconsider this approach?
There’s no doubt that the mattress industry has changed drastically over the years. The marketplace is increasingly crowded with new direct-to-consumer brands and low-cost online mattresses. And with dwindling foot traffic and more entry-level choices, retailers of all sizes have struggled to maintain their margins—many are looking for new strategies to remain competitive.
During that same call, Thompson offered some specific suggestions for how to move away from this practice. “In an environment where retail traffic is at a premium, retailers need to maximize the average ticket and that means premium product offerings,” he explained. “We see this all around the world. Successful retailers have to move high-end product. Low price, high volume does not generally work well in high-cost brick-and-mortar bedding retail.”
But simply swapping your product inventory to premium options only is not a realistic solution for many brick-and-mortar retailers. Nor will it guarantee better sales, especially as consumers continue to be conditioned to seek out more affordable mattress offerings.
What if retailers, instead, reexamined their promotion-heavy strategies? Research has, for years, shown clear deficiencies in this approach. According to a study from Boston Consulting Group, “20 to 50 percent of promotions generate no noticeable lift in sales—or, worse, have a negative impact.” That research went on to indicate that “another 20 to 30 percent [of promotions] dilute margins in that they don't generate an increase in sales sufficient to offset promotion costs.”
One possible reason for “unprofitable promotion activities” is the way in which these strategies have skewered consumers’ understanding of mattress pricing. If a retail store is regularly discounting its product line-up, it can be hard for consumers to gauge the true value of any mattress. In addition to making the purchasing process more opaque, this can also have a direct impact on sales. Revionics, a global SaaS provider of retail insights, recently commissioned a study from Forrester Consulting that explored the efficacy of retail promotions—and found that 59% of respondents said they “would refuse to purchase an item if they perceived the price as arbitrary.” By obscuring pricing rational, regular mattress promotions may have the unintended consequence of driving customers away.
Querying shoppers in the US, UK, France, Germany and Brazil, this new study also found that “52% of the weekly or monthly retail promotions go to customers who would happily have paid full price.” And of those respondents, 37% said those offers had a neutral or negative impact — with more than half of them saying they would be less likely to shop at that store in the future if they were annoyed by the messaging.
These discrepancies in goals versus results underscores key mistakes retailers make when launching new promotions. According to this article from BCG, the primary mistake is failing to create a promotion strategy that focuses on clear goals. What is the intended outcome of this particular promotion? The most common objective for any promotion is to generate greater incremental sales, but there are plenty of other goals they can achieve - including improving margins, driving in-store traffic, bolstering customer loyalty and enhancing brand awareness. By exploring different objectives and zeroing in on just one at a time, retailers create a more efficient program that can be more easily analyzed.
The second mistake many retailers make is not having the proper systems in place to track and evaluate the program’s performance. As BCG explained, “to select effective promotions, companies need to put in place big-data capabilities that enable them to gather comprehensive information about promotions.” By investing in more in-depth performance reporting, retailers can then fine-tune new promotion strategies instead of simply re-using the same approach they’ve had year after year.
Of course, not all promotions are the same. In the mattress market, most retailers rely on price-cut deals. But according to Theresa McEndree, the vice president of marketing for Hawk Incentives, discount-based promotions are less effective than their reward-based counterparts.
Instead of offering a limited time price reduction at the point of purchase, rewards programs provide other incentives for consumers to make a purchase at full price. While they can take on many different forms, rewards programs, at their core, give customers exclusive discounts or perks in exchange for buying regularly. Research has found that rewards programs generate more annual revenue for the retailer: companies offering rewards see an average of eight percent higher year-over-year revenue growth than those offering discounts. They also increase the per-customer profitability; retailers offering rewards-based promotions see on average a six percent greater profit margin per customer than those offering discounts. Even more, rewards programs were also shown to boost customer retention and loyalty. Though discounts are often swiftly forgotten after the purchase has been made, reward promotions create a more positive impression of the brand among consumers that lasts over time.
While many retail stores have long been offering their customers tiered programs, merchant credit cards and special events, new research has shown that these are not the most effective type of rewards programs for today’s consumers. A new report titled “Dosh Consumer Loyalty Survey” explains how traditional rewards programs often lack “concrete value and immediacy.” In order to connect with younger customers, programs that offer cold, hard cash back are the way to go. “Eighty-three of respondents said cash makes them feel rewarded, and at least one in three respondents said that they would switch to a merchant that provides cash back over one that does not.”
Of course, the very concept of a rewards programs may seem tricky for sleep retailers, as mattresses are not a frequent repeat purchase. But, thankfully, consumer interests and buying habits are shifting. Many of today’s shoppers are on the look-out for the newest ways to improve their health and wellness, which opens up more opportunities for bedding retailers to engage with them more regularly through inventive non-mattress add-on products. By touting everything from new top-of-bed accessories to upgradable under-the-bed support, sleep retailers now have the chance to support their customers in creating a more tranquil and relaxing sleep environment. Taking the role of educator is another approach we’ve seen: a number of manufacturers have recently developed new ongoing sleep and wellness coaching services.
By not only offering products and services that bring customers in more regularly, but creating a rewards program promotion that supports regular purchasing, retailers have a real chance to boost their profitability. While there’s no doubt that it will be difficult for the mattress retail industry to break away from its reliance on promotions, doing so may be the key to new financial success in the future.
Amazon: The Newest Mattress Brand On The Block
Way back in 2009 Amazon launched its house brand, AmazonBasics, to provide low-cost, generic versions of staple household items to its loyal customers. According to Quartz, the brand went from selling 252 products on the AmazonBasics landing page in 2013 to 1,506 in 2017. Around the end of September 2018, the brand added a new category to its private label family of products: mattresses. Given the company’s history, this doesn’t seem like much of a surprise—but in the land of bedding and mattress retail, it was breaking news. So why is everyone talking about Amazon’s foray into the boxed bed category? And what is it that makes Amazon’s simple memory foam mattress models special?
First here’s an overview of the product: the ecommerce giant’s new mattress line comes in any size you could want— from twin to California King—and in three profiles—8, 10 and 12 inches. The product is sold on Amazon.com and presented in contemporary lifestyle photographs. The product listing breaks down the layers of the mattress into the plush memory foam layer, soft foam for comfort and airflow and finally, hard foam for support and airflow. Touting a Certi-Pur US Foam certification as well as Oeko Tex certification on the mattresses’ surface fabric, the models sell for $129.99 for an 8-inch twin and $329.99 for a 12 inch California king.
Although it might seem like Amazon has merely jumped on the continually growing bandwagon of trendy boxed bed brands, the powerhouse has done one key thing differently. Amazon’s mattresses cost significantly less and, of course, they can be delivered via free Prime 2-day shipping. If you look at the other mattresses sold online (whether direct-to-consumer or on Amazon), there are almost none selling queen size beds for less than $300. While Amazon may not throw in a pillow, offer a generous trial period or even provide a money back guarantee, its mattresses cost so much less that it likely doesn’t matter for majority of consumers.
While the line has been on the market for only a little over a month, it’s already getting decent reviews. On Amazon, its rating is a 3.5 with 35 reviews and was received positively on Amazon Vine, a program that allows consumers to preview products in exchange for a rating. Even Sleep Sherpa has nice things to say about the new bed.
All of that said, it makes sense for other brands to be nervous. While Casper likes to tout its ability to shake up a sleepy industry, Amazon is the original retail disruptor. At the same time, there are some major caveats to the popularity of Amazon. According to a recent Business Insider article, “Amazon's private brands have come under fire lately, as some critics have pointed to the problems inherent with the company's overall strategy to be both a retailer of goods and a marketplace platform for other sellers.” With the EU opening a preliminary investigation into whether or not the ecommerce company has violated anti-trust laws by using its information about third party sellers to launch its own private-label products and Jeff Bezos’ growing reputation for being hateable, who knows what the cards hold for the company.
Even though the boxed bed brands are rumored to be shaking in their boots as a result of this move, it might not be time for traditional retailers to panic just yet. The best response to any new and seemingly successful thing that a competitor does is observation. As retailers, it’s key to look at companies like Amazon— just as with the boxed-bed brands—and consider what they are doing right and wrong. Can your company offer something similar? Or, even better, offer something the competition can’t provide?
With so many major name brands and lesser known start-ups becoming “mattress companies,” what does it really take to be a mattress company these days? And in retail in general, what are today’s standards for success?
The lesson we can take from the example of AmazonBasics is that no-drama, decent quality and affordable options make consumers happy, especially when delivery is so convenient. In its limited marketing of the new mattresses, Amazon has taken a ‘less is more’ approach. It displays the mattresses in warm but sparing bedrooms and provides informative product detailing below (in the same fashion as any other product on the site). Since this bold move has caught the eyes of numerous news outlets, the product launch has received significant but inadvertent promotion despite Amazon’s quiet approach to the release.
Only time will tell how successful this particular AmazonBasics product line-up will be, but the initial reaction seems to be that the price is right and media interest, at least, has been piqued.
Helping Your Teenager Get More Sleep—Without Medication
Everyone knows how important sleep is these days. It’s a vital part of living a happy and healthy life. While this is true for everyone, it’s especially important for teenagers. Between the ages of 13 and 18, the body goes through an immense amount of growth, both physically and emotionally—and it’s imperative to get the appropriate amount of sleep to facilitate these changes. Health professionals agree that teenagers should be getting eight to nine hours of sleep every night, but a recent Pediatrics study has found that less than 3% of teens actually do. As the importance of sleep has become more evident in recent years, it’s no surprise that more and more teenagers are turning to medications, aids and supplements to help them get the sleep they need. But is that the best solution?
Much more than just a period of physical growth, the teenage years are also a time of significant brain development. That’s because the prefrontal cortex, the part of the brain that is responsible for complex thinking and decision making, is undergoing some serious maturation. Unfortunately, the prefrontal cortex is also particularly sensitive to sleep deprivation, no matter your age.
For teenagers, added sleep deprivation can further exacerbate the cognitive, emotional and behavioral issues that are stereotypically attributed to moody teens. This can include diminished focus and attention, poor judgement, greater tendency to engage in risky behaviors and irritability or impaired moods.
But as any parent can probably attest, it can seem nearly impossible get a teenager to go to bed and wake up at a reasonable hour. It turns out that biology could be to blame for these poor sleep habits. Science has shown that your circadian rhythm naturally shifts during puberty, making it physically more difficult for teens to fall asleep early. With break-of-dawn school start times, it’s no wonder that so many teenagers are not getting adequate rest.
Unfortunately, even if your teen is able to sleep in later in the morning, the quality of their sleep may still be compromised. Some research has found that the type of sleep experienced between 10pm and 3am—the non-REM kind—is deeper and more restorative than the REM sleep we get between 3am and 7am. So, if your teen is staying up until the wee hours of the morning, then they’re more likely to wake up feeling groggy and unrested even if they’ve slept a full eight hours.
Facing this uphill battle, more and more parents and teenagers are looking to sleep aids for help. Released in September, the C.S. Mott Children’s Hospital National Poll on Children’s Health surveyed more than 1,000 parents of teenagers to learn more about the different strategies being they use to help their teens deal with sleep issues. According to the study, 36% of teenagers have tried natural or herbal remedies like melatonin and 28% have tried some form of medication to help them sleep. Of the various types of medications available today, the study found that 16% of teens have tried over-the-counter medicines like NyQuil or Advil PM, while 14% have used an antihistamine like Benadryl and 5% have turned to prescription sleep medicine.
Only 25% of the parents surveyed said they had talked with their doctor about their teenagers’ sleep problems. This is especially troubling, because there is little consensus on the best practices for kids in this age bracket, even among medical professionals. Some physicians believe that prescription medication is the way to go because they are subject to a level of testing and regulation that natural supplements are not. Others recommend natural sleep aids because prescription medication has a higher risk of side-effects and addiction.
In limited quantities, sleep aids can be a helpful course correction for larger sleep issues—but any sort of long-term usage poses serious risks. This is especially true for teenagers, as their brains are still growing and developing. Even more alarming, there has been no official research done on how these medications can affect adolescent brains. Given that some studies have shown that long-term use of over-the-counter sleep aids can have detrimental side-effects like cognitive impairment for adults, parents should be wary of allowing their teenagers to adopt the habit.
To be truly effective, any type of medicinal intervention should be combined with other strategies like creating a more reliable sleep environment and building better habits.
Some parents may be hesitant to shell out top dollar on their teenager’s sleep set-up because of how quickly young bodies grow. Why invest in something they will likely outgrow in a few short years? Though these changes in shape and size may seem drastic, a good sleep system will be able to support and accommodate most growth spurts—and a mattress with the proper comfort and support levels may even help alleviate any aches and pains they experience along the way.
Of course, the mattress is not the only product to consider. Pillows make up nearly a quarter of the overall sleep surface and have a significant impact on sleep comfort. Getting regularly fit for the right size pillow can make a world of difference.
There is one big trend in the sleep industry that you should avoid for teenagers: tech-enhanced products. While bed bases with USB ports and other electronic features can be a fun selling point for adult consumers, they can create unnecessary temptation for teens who have not yet mastered impulse control quite yet. According to the Mott poll, 56% of parents said phones, social media and other electronics contributed to their child’s lack of sleep. Other studies have found that more than 90% of teenagers are using some type of digital technology before bedtime. As we all know, the blue light emitted from these screens can delay the production of melatonin and make it more difficult to fall asleep.
There are a number of different reasons why teenagers are struggling to get the sleep they need. Though medication and supplements can seem like an easy fix, so far it remains unclear if the risks outweigh the rewards. By investing in a quality sleep system that will provide the proper comfort and support, parents can be confident that they are helping their teenager get the sleep they need to really thrive.
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