Five Key Considerations for Taking the Guesswork Out of Promotions

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Five Key Considerations for Taking the Guesswork Out of Promotions


Today’s cost-conscious consumer is increasingly on the lookout for a bargain. For many shoppers, price is emerging as a top consideration, edging out brand loyalty and other past preferences. This shift in behavior represents an opportunity for retailers to win new customers with promotions and special offers.

Successful promotions can result in improved customer loyalty and sales and enhanced inventory management. A critical component of promotions and special offers is the ability to accurately predict demand and order accordingly. For many retailers, forecasting is a process of trial and error based on antiquated spreadsheet models, past experience and educated guesses.

Retailers can remove the guesswork and grunt work from promotions, however, by taking a more holistic view of promotions and with accurate forecasting.

Retailers that know these five key considerations will stand to improve their promotional forecasting:

1. Take a holistic view of promotions: Make sure to study the impact of promotions on sales of both the products included in the promotion and those that aren’t. By doing so, retailers can identify the halo and cannibalism effect, avoiding unintentionally affecting the sales of nonpromotional items.

2. Integrate promotions with overall operations: Recognize that promotions affect all operations, including finance and the supply chain. By including all operations in promotions, retailers can help further streamline the supply chain and enhance inventory management, avoiding overstocks and out-of-stocks, freeing up capital, and increasing customer satisfaction.

3. Implement a scalable system: Retailers must factor in the unique characteristics of each location when undertaking promotions. However, they must be able to plan and execute promotions successfully at both the store and overall company level. It’s critical to have a system that’s agile enough to handle promotions for individual and multiple stores.

4. Build a solid foundation: Data is the backbone of every retailer’s operations, whether it’s inventory management or sales and promotions. Before undertaking promotions, make sure to have unified, accurate and up-to-date data. Retailers can tap into data on sales and consumers’ shopping behaviors to more accurately predict demand for promotions.

5. Invest in the proper resources: Promotions are becoming increasingly complex, often involving multiple products and even different categories. Invest in your staff and identify outside resources, ensuring that you have the skills on hand to undertake promotions.

While special offers and promotions are a common practice for retailers, they’re becoming increasingly complex. Promotions are also growing more critical as consumers change their shopping patterns in an evolving economy. While these factors combine to create challenges, they also create opportunities for retailers. By learning to effectively plan promotions in advance, retailers are able to gain a competitive advantage over those that are using outdated strategies.

This article was contributed by Brendan Lowe, SVP of global services at Atlanta-based Aldata Solution, Inc.