Black Friday and Cyber Monday, two of the hallmarks on the Australian retail calendar, will be here before we know it.
Retailers have just a few short months to get their house in order to make the most of what could be a highly profitable time.
In the four days over the 2018 Black Friday and Cyber Monday sales, it was reported by The Commonwealth Bank that the value of online sales of electronic equipment was up 205 per cent above the average November daily spend, with clothing up 127 per cent and furniture up 77 per cent.
This demonstrates the return on investment for retailers in this period that can exist if they put the right strategies in place. But heavy discounting across the board doesn’t represent effective promotional strategy.
Nielsen research shows some 59 per cent of promotions globally don’t meet financial goals, showing there’s a propensity to failure with ad-hoc or data-poor promotional tactics.
Robust pricing and promotional strategies should exist year-round, and be adjusted appropriately to accommodate major market events. But without the right data insights and accurate promotional forecasting tools, these pricing and promotional strategies could easily fall flat.
Use data to inform the end-to-end customer journey
The role of software solutions in getting pricing and promotions right in the lead up to these sales cannot be underestimated. In the past eight years, the percentage of products sold on promotion has increased from 30 per cent to 40 per cent, according to Nielsen, making Australia one of the most highly promoted countries in the world, with an estimated $11.3 billion wasted on ineffective promotions every year.
In the lead up to the November sales, retailers should be designing personalised campaigns based on the customer data at their disposal. Doing the leg work now will ensure the customer journey is seamless from sofa to store, offline and online, when customers engage with your brand during these crucial weeks. Taking a data-driven approach will take the guess-work out of strategy and assist in building long-term plans around what customers really want.
Even before the customer is in-store or online, it’s essential the right deals and the right offers are communicated. Much of this involves using data in a way that answers essential questions, such as: how have promotions impacted my category over a specific time period? Which promotions have helped drive positive margin? What were the contributing factors for positive or negative promotional performance?
Promotional strategy is a journey, not a destination
A promotional analytics tool looks at not only what has succeeded in the past but continues to learn from new data on a weekly basis to help plan annual pricing and promotional strategies more effectively. It’s a way to have clear direction on which specific products to promote, advertisement and in-store display locations, and what offers to use to bring the biggest return for your business in these peak times.
It’s important to assess your ongoing pricing strategy in relation to major events. In Europe for example, dunnhumby conducted research around the impact of Black Friday, and found a lot of retailers have been reconsidering their involvement in the sale at all. It found that while prices drop and more products are sold in the immediate short term, there is frequently not a gain in the number of loyal shoppers.
Heavy discounting across the board, ‘for the sake of it,’ is not a good strategy. The best pricing and promotional strategies are those that are thoughtful and informed, and provide personalised, rather than scattergun offers. Retailers may also want to consider looking at which categories they are strongest. For example, a grocery retailer trying to compete with a major electrical retailer may not bring the best return. Understanding what your customers look to you for during these sales improves your chance of maximising profits.
Planning for these major events is important, but applying this mentality and having a solid pricing and promotional annual strategy holds the key to this success. Using data, you can dig deep into what your customers really want, and design plans which will appeal to customers not just as a once-off, but in the longer-term too. Working to improve the overall customer journey will earn their loyalty for your business and improve your bottom line.
By Kylie Gleeson-Long, Managing Director, dunnhumby ANZ