Planning Effective Promotions

Price is still (and likely will always be) the number one factor in shopper decisions.

Planning & Executing Effective Promotions

Price is still (and likely will always be) the number one factor in shopper decisions. Nielsen reports that 85% of shoppers cite price as a factor impacting their grocery purchase decisions.

However, many manufacturers neglect to consider the impact of promotions on the prices that shoppers ultimately face. In the US, manufacturers provide MAP and MSRP pricing to retailers, but ultimately have no direct control over the prices that retailers ultimately post. In Europe, manufacturers are legally obliged to distance themselves from retailer pricing. Promotions are the one area, in both markets, where manufacturers can have an impact on the prices that shoppers ultimately face.

This explains why more than half of all retail goods sold in the U.K. are on promotion. And across markets we know they work, as 96% of shoppers in the US take advantage of trade promotions.

For brands this means one thing: monitoring promotions and fully understanding price points in each category is key to online success.

It’s worthwhile to ask your eCommerce insight provider how they arrive at promotions price. If they depend on simply comparing a “before” and “after” price, you may be missing a huge swath promotions – for your own products, and for competitors.

As promotions like “Buy One, Get One Free”, or “3 for 2” don’t always present an “after” price – you may miss all of these promotions. Shoppers can do the math in their head – but most promotions monitoring software cannot.

To understand the ultimate price that shoppers face for these types of promotions, your eCommerce insight provider must translate these promotions (via semantic analysis), and then automatically choose a formula for calculating the final price.

Once that’s in place, you can begin the work of understanding how to plan and execute effective promotions.

Two Questions for Brand Manufacturers

The first question most manufacturers want to resolve is “How can I confirm that my promotions are in place”?

Account Managers spend an enormous amount of time, energy, and money on trade promotions – according to Nielsen, 60% of marketing budgets is dedicated to trade promotions. So it’s natural that Account Managers will want to ensure that promotions are in place, with the correct offers, for the negotiated time slots.

To understand your promotions discounts versus your competitors, you’ll want to ensure that your eCommerce insights provider is able accurately interpret promotions via semantic analysis – to ensure that you’re monitoring all promotions, not just the ones with explicit pricing laid out on the product page. It's important to not only have knowledge of your own promotions, but those of your competitors as well in order to analyze if other promotions are impacting your sales.

The second key question most manufacturers want to resolve is “What promotions are most effective in my category?”.  A “2 for 1” promotion may be more effective for toothbrushes than for 50lb sacks of dog food. In order to begin to answer this question, you’ll want to know the most common promotion types (mechanics) in your category, and understand the discount rates that are offered.

Many factors go into planning promotions – but one of the most powerful tools is understanding competitive promotions history. Given that many manufacturers like to travel well-worn paths when planning promotions (in order to reduce the burden, and the risks), your competitors often repeat promotions cyclically, with slight variation. Knowing your competitors’ promotions history – which products they promoted, the discount rates and promo mechanics involved – can help you you’re your own promotions that can effectively counter those that you’re likely to be up against.

Danny Silverman
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Danny Silverman
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