Just when retailers think the pace of market and consumer change can’t get any faster, they find themselves buffeted by yet more demands from the always-on shopper. With access to prices across any channel anytime, shoppers expect to be enticed to purchase. And indeed, with promotions becoming consistently targeted, even personalized, the moment is fast arriving where there is no such thing as a “regular” or “everyday” price – it’s a question of which promotional offer a customer receives and when.
So how can retailers avoid costly profit-eroding discounting practices? They must take a customer-centric approach that breaks through the race-to-the-bottom insanity by turning consumer and competitive data into actionable insights. With these insights, they can craft promotions that align with customer demands yet meet top- and bottom-line business imperatives. Retailers must break out of their traditional promotion mindset with radical innovations that at first seem daunting but are very achievable in increments.
Responsive merchandising, including a thoughtful, targeted promotion strategy, sets you apart by being able to listen, sense, anticipate and respond with greater speed and scale across all channels. Here’s a sneak peek from our new whitepaper with RIS News where we look at the five must-haves to drive profitable promotions:
1. Set goals that align metrics and financial incentives to promotional action.
A 2015 study by the Nielsen Company shows 59% of all global promotions don’t break even. U.S. retailers are worse with 71% of promotions failing to break even. Retail winners set up-front goals that define the endpoint for promotions in terms of financial impact, and they capture a clear view of their current promotion effectiveness baseline through applying promotion performance analysis. Only then can they define incremental milestones to drive continuous improvement and meet the end goal – over time.
2. Plan with the objective in mind to understand the value drivers and what triggers customer response.
Today, retailers are armed with more data and insights than ever – what customers like, what they purchased, how they purchased and which vehicle they used to make a specific purchase. With myriad retailers and etailers vying for the shopper’s attention and loyalty, retailers must identify which promotional vehicles can and will have the greatest influence on the consumer. Retailers must tap into the insights from their customer data to drive effective promotions that matter to that customer without getting into a discounting race to the bottom with their competitors.
3. Simulate by testing and comparing scenarios before executing in-market.
Today’s predictive analytics offer powerful capabilities that far exceed even the most sophisticated historical analysis. Users can easily adopt a test-and-learn methodology that ensures they stay relevant and current even among rapidly shifting market, customer and competitive dynamics. Retailers can rapidly simulate different options and compare them in a predictive test environment, then confidently roll out the most profitable proven promotions to their customers.
4. Forecast using models to understand demand signals, limit cannibalizations, increase affinities and align with financial expectations.
Retailers can let the system do the work by using powerful cloud-based analytics and predictive models to yield very granular forecasts for pricing, offers and product mix. Today when web offers compete with circulars, mobile messaging, Twitter, and other outlets, retailers need to know how each vehicle affects a promotion. Ever-evolving social platforms require dynamic and adaptable data collection and modeling to continuously learn and understand customer behaviors and their affinity to buy.
5. Respond quickly to customers, local market conditions and competitor actions.
The key to turning consumer and competitive data into actionable insights that drive effective, profitable promotions is identifying relevant shopper behavior, anomalies, and influential competitors that matter. Increasingly retailers accept the fact that one-size-fits-all promotions can’t sustain their business. They recognize the need to target locales consumer clusters with tailored offers.
As conditions change at ever-faster rates and customer expectations continue to rise meteorically, retailers must have a clear strategy and execute with surgical precision. Promotions need to keep pace with all the other enhancements required to stay competitive in today’s marketplace and attract and retain highly informed shoppers.
How can fast-turning, broadly assorted retailers achieve this promotion mastery? With meaningful goal-setting, planning, testing, forecasting and responding as well as innovation and adaptation to a changed retail environment. I invite you to learn more in our new eBook!