Retailers know that promotions are an essential part of their success by driving sales and customer engagement. Yet why do they continue to constantly struggle with such a frequent and vital aspect of their success?
The bottom line is that the promotion process is extremely difficult to do well. In preparation for a webinar on retail promotions, we spoke to nearly 30 retailers in the grocery, convenience, and health and beauty sectors about their most critical pain points concerning promotions.
Of the retailers we spoke to, 88% identified completed promotion analysis as a top issue. Further, 81% want a better understanding of how well their promotions work, and 75% are not satisfied with the data they collect from their promotions.
When asked about goals, 81% said they want to automate manual processes for planning, adjustment, and follow-up for promotions. Streamlining promotions (73%) and improving coordination between internal teams (66%) were also top-ranking improvement areas.
Furthermore, 79% of retailers stated a need to improve their promotion types and parameters. Even so, the cycle of accepting previous promotions as “safer options” and running them repeatedly with minimal updates results in retailers copying around 95% of promotions year after year.
Beyond planning new promotions, retailers must promote the right products at optimal discounts to maximise profits. Of the retailers we spoke to, 82% stated a need for promotional price optimisation, and 73% cited the need for better forecast accuracy.
Outlined below are three ways that retailers can become savvy when it comes to maximising promotions.
1. Automate analysis of promotion performance
Retailers need a system that can provide automated analysis of past promotions across every product and every store and compare those promotions throughout the year. Such analytics drive the insights planners need to maximise promotional results in the future. Armed with actionable data-based analysis, planners understand which promotions drive sales and margin, which past promotions to eliminate due to poor performance, and the optimal product assortments and discount depths for each one.
Cutting off low-performing promotions also saves time that teams can put toward developing new campaigns and strategies. An automated system also eliminates the need for time-consuming spreadsheets prone to data corruption, saving a considerable amount of planners’ time and boosting efficiency and accuracy across the supply chain.
- +3-6% increase in profit margins for promoted products by eliminating low-performing promotions.
- 20-25% reduction in time spent on manual planning that teams can spend on the strategic development of new promotions and supplier collaboration.
2. Centralise promotion planning
Retailers need the capability to plan all promotions in one tool that makes sharing responsibilities easier, automates recurring processes, and maintains a single source of truth. From a larger business perspective, connecting promotion, forecasting, replenishment, and space planning creates a seamless process where all teams work based on the same data, plans, and expected outcomes. Further, when forecasting and replenishment teams have complete visibility into promotion plans and data, they improve forecast accuracy, helping mitigate over or understock situations and driving efficiency for store operations teams.
A better understanding of their promotions and an improved planning process also help retailers build stronger supplier relationships. Both parties contribute equally to promotion development as they strive for higher market share and negotiate supplier investments and trade funds. Improved insights equip retailers to better evaluate suppliers’ recommendations for promotions and determine the best course of action for all, including the impacts on customer experience.
- Eliminate disconnected silos and create seamless end-to-end planning.
- Increase forecast accuracy to mitigate over or understocks and drive in-store efficiency.
- Reduce waste for specialty, seasonal, and fresh items.
3. Test promotion scenarios
A sandboxed scenario testing environment enables retailers to test promotions using real-life data and estimate their performance proactively. Through an advanced simulation engine, retailers can assess various campaign scenarios to determine which combination of price, mechanic, and display will drive the best result. Further, a flexible, user-friendly system that provides customisable business rules streamlines and increases promotion efficiency for central planning and store operations teams.
Effective promotion analysis and testing also give retailers improved insights into customer behaviour in certain situations, such as seasonal events and economic changes. These insights provide an advantage when sudden market shifts occur, enabling them to react more quickly and better forecast products and sources to meet customers’ needs.
- +4-8% profit for the promoted product range without impacting sales uplift.
- +15% increase in incremental sales for the promoted product range.
- Support better tactical supplier negotiations with mutual win-win outcomes.
Today’s retailers have a dizzying number of options available regarding technology solutions. However, they must carefully select solutions that best fit the business’s specific needs. To accomplish this, retailers must assess their unique improvement needs, build measurable goals, and invest in solutions that meet those criteria.
Kristie Davison is sales director for APAC at RELEX.