The BOGO is the most pervasive discounting gimmick in the retail world over the past two decades—and especially in Grocery today. It is the default for “getting your product to really move” when your product isn’t moving. It’s such a common concept that major shoe retailers (I think most of them) have built entire “original” ad campaigns around it.
People might say, “You idiot, how can you hate getting free stuff?” “What’s wrong with getting two of the thing you already like.” But, in the end nothing is really free. So here comes the tirade:
1) Food retailers and CPGs are constantly complaining about deflation driving down revenue—even to their shareholders. And yet, they can’t seem to understand that they are directly responsible for taking everything of value and knocking the price down. Kings and servants of the BOGO.
2) They will claim that the consumer demands it. But, consumer wasn’t asking for this (until they were trained they needed it) and it wasn’t a treat, it was their right. We became the window blind economy, everything 50% off, all the time, forever. Yes it’s true, for someone, somewhere—the BOGO was a key differentiator. The year was probably 1994 and Friends was a fresh, new comedy experiment. But now, it’s everywhere. In some categories it’s a monthly requirement—ice cream, all summer long.
2a) And yet, think about products that have taken off and are driven by true consumer demand, innovations over the past decade. Almost all of them are premium priced, higher value, superior in some way—until some rocket scientist decides they need a good BOGO to really drive sales.
3) BOGOs are a default. We are in the business of creativity and disruption. I hate defaults. Defaults are non-ideas, the domain of people stuck in the past, the domain of “I can’t think of anything else to do, so do what we’ve always done.” They are your parents saying “Why don’t you watch TV?” when they can’t think of anything for you to do. All summer.
4) BOGOs seldom drive baseline volume. Yes, they become the revenue crack that drives temporary sales spikes (that then need to be repeated the following year), but they seldom, particularly the first year after launch, drive new usage. They are just a gift to people who would buy your product anyway or worse yet to the disloyal who shop for deals. This is NOT to suggest that price discounting is either bad, nor part of a well developed plan. Just ease up on the BOGOs.
5) BOGOs consume an irrationally high level of time, thinking and most of all profit from the marrow of brands that are attempting to be successful. They favor the Fortune 50, who can afford years of break even with highly established brands and punish the newer, fresher brands of tomorrow. They take the next generation brands—and actually delay their ability to break out and become better, broader, faster. They are an anti-growth engine.
I remember sitting in a meeting a decade ago when a retailer (now out of business), suggested to one of my clients, “Why don’t we run a Buy One, Get 3 Free?” I thought, wow, this must be the apocalypse. Then I thought, wow you (me) really get worked up about pricing strategy. You really should write about that.
The brand did it and we managed to sell 9x as much product and lose money on every single case. As I said previously the retailer filed for bankruptcy and is now out of business. Nobody won.
