Stopping up the Promotional Money Pit

“Indiscriminate promotions subsidize 52% of shoppers who would have paid full price.” So screams today’s headline promoting a new survey as if “man bit dog.”

For the last twenty years, we’ve been able to quantify the degree to which different price promotions subsidize loyal buyers, bring in new shoppers or even accelerate the purchase cycle…all with just some decent frequent shopper card data and sharp analysts. And then differentiate the tactics that are more effective and efficient both short and long term.

But what if you don’t have access to such data or the resources to analyze it? Are you doomed to Wanamaker’s conundrum of “I know half my budget is wasted I just don’t know which half?”

Even with just a little syndicated data and some perspective on the Strategic Role of Promotion for your brand and its shoppers, you can squeeze much of the inefficiency out of your system; the key is to incorporate insight into the Value of Promotion for your business and the Shopper Behavior it can change.

Defining the Value of Promotion for your brands or sublines can help make sure you spend on the right items. Analyzing your items’ Dependence, Performance and Impact of promotion across metrics like loyalty and differentiation, customer role and channel support as well as promotional lift and ROI can guide improved allocation of funding across promotional groups.

The other half of understanding the Strategic Role of Promotion is defining the Shopper Behavior you are trying to change with price promotion; this will help make sure you spend in the right way. If your goal is:

· Penetration/Trial…you’ll be more open to deeper promotions with stronger ad placement

· Trade Up…you’ll skew toward large sizes and Multiple Unit Pricing

· Cross Purchasing…you’ll use more bundling and display activity

· Reward Loyal Buyers…you’ll consider EDLP and higher frequency/lower depth events.

So, if you have the data to quantify true promotional productivity and the wherewithal to design focused personalized promotions, have at it! But if your scale and staffing don’t support such advanced steps, you can still focus on the strategic discipline that will capture greater productivity from what is likely the biggest line item in your budget.

We’ve been helping companies large and small with these issues for the last 20+ years and would love to help you. Feel free to reach out to Bob at BobH@KnowledgeAmp.com to discuss how we can help you too.