A pricing strategist’s guide to maximizing retail promotion effectiveness

Promotions are a critical tool for retailers' efforts to increase sales, enhance their competitive position and attract new customers. They tend to drive traffic, generate revenue and reinforce a brand's price image. But many companies tend to fall back on the same promotional strategies year after year, creating a cycle of repetition that does not always yield the desired outcomes.

This repetitive approach underscores a critical need for improved promotional strategies. To remain competitive and capture consumers' attention in an ever-evolving market, retailers must explore novel promotional tactics that resonate with their target audiences and set them apart from their competition.

Five strategies for increasing effectiveness

Based on our 20+ years of experience in the industry, Revionics has identified five strategies retailers can adopt to move beyond the repetitive promo cycles of years past and dramatically improve the results of their promotions.

1) Run more targeted, more creative retail promotions

Your consumers are tired of the same old promotions. They want targeted, personalized (aka complex) offers that reflect the specific nuances of each customer segment, location and category.

Running new offers, particularly complex ones, has always come with a level of uncertainty. But now modern pricing technology can provide ready-to-execute offer recommendations for precisely which items to promote when, where, at what price, for which customers, and for how long.

While you're building out your promotional mix, it's important to balance multiple objectives beyond just revenue. Generating revenue is certainly a primary goal, but an effective promotional strategy should also focus on measures like brand loyalty, customer lifetime value and product awareness. This well-rounded approach can help ensure long-term business growth and customer satisfaction.

2) Measure retail promotions before, during, and after the campaign

Waiting until promotions end to analyze their performance can certainly inform the design of future promotions but does nothing to move the needle right now.

Leading companies employ scenario planning to compare forecasts for different promotional options to help determine which offer will have the maximum impact before launching a promotion. They then continuously monitor performance during the promotion to identify and implement adjustments if targets are unmet.

Where many retailers can get tripped up after the promotion is in determining the holistic impact across the store. Factors like cannibalization and affinity can significantly influence the overall success of promotions beyond the impact of the individual items included in each offer. But having that comprehensive view is key to meeting business objectives storewide and even company-wide.

3) Craft retail promotions that directly challenge competitors

Competitive positioning is always top of mind for retailers. As consumers are more price-savvy than ever, monitoring and responding to your competitors' pricing and promotional moves is a vital part of any strong promotional strategy.

However, that is no small task. And figuring out whom to track, when to respond and when not to, and how, is time-consuming and often manual work. Having the right competitive data integrated into your promotions solution not only streamlines the process but also empowers pricing teams with the right analytics to make the best strategic moves.

With comprehensive competitive insights, you can better leverage promotions to control your market positioning and outsmart each competitive promotional move.

4) Improve supplier negotiations with the right data

Traditionally, big national vendors have held all the power at the negotiations table. But now is the time to shift from working "for" your suppliers to collaborating with them as equals.

Robust promotions analytics help retailers confidently determine which offers are effective, which ones need more vendor funding to be profitable, and which ones aren't in their brand's best interest.

This newfound data proficiency helps level the playing field with suppliers who — for years — have negotiated with reams of data from multiple retailers, giving them an advantage when negotiating. Retailers can now negotiate trade fund agreements on fairer terms because pricing teams enter negotiations better prepared to succeed.

5) Maximize the efficiency of complex promotion design

Promotions, although often only about 20% of all retail pricing activities, often require up to 80% of pricing teams' time and effort.

And as consumer demand for more complex promotions increases, your pricing organization needs efficient workflows that streamline repetitive tasks to move through more promotions faster.

One way to improve efficiency is with collaboration. Organizations can more quickly manage even the most complex omnichannel promotions by removing barriers and encouraging seamless interaction among teams, departments and partners. Collaboration makes execution easier and takes full advantage of the organization's collective expertise and insights, leading to more innovative and impactful promotional strategies.

Additionally, streamlining the day-to-day workflows will enhance an organization's ability to adapt to quickly changing business conditions, customer preferences and competitive challenges. In turn, more efficient execution can lead to promotions that match market trends more rapidly.

Want to improve your promotions proficiency?

Retailers that are setting a new standard for promotions strategies are doing so by embracing advancements in data science and AI technology. Their shift from traditional practices to a more data-driven approach marks the beginning of a significant transformation in retail, resulting in enhanced promotional effectiveness and operational efficiency, even for the most complex promotions.

To learn more about how you can improve your promotions, see how Revionics, the global leader in retail price optimization, leverages state-of-the-art AI to help retailers unlock personalized, inventory-aware, omnichannel promotions for today's sophisticated shopper.