Promoting with Purpose

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Sean KervinSean Kervin May 9, 2017

To develop truly successful sales promotions, retailers and manufacturers need to shoot for clear, data-first business outcomes.

At Clear Peak, we do a lot of work helping retailers use data analytics to measure the real effectiveness of their promotions.The first question I usually ask is, “What’s the strategy or purpose behind this individual promotion?”

And the most common answer I hear is “to drive revenue.” In fact, that’s often the only answer I hear. That’s like when you ask your teenage nephew, “What do you want to be when you grow up?” and he insists, “Successful!” In this situation, it’s easy to see that if he can’t articulate what he wants to accomplish, he can’t know how to define success.

“If you don’t know where you’re going, you’ll end up someplace else.” – Yogi Berra

Too often, companies can’t articulate what they want to accomplish with a promotion. One of the most common justifications goes something like this: “We always run this campaign during the last week of May, and if we don’t run it this year, our comps will be down.”

But is it truly profitable? Are you missing an opportunity to promote something better? Groundhog Day is a great movie, but please don’t run your promotions that way.

When you promote, you must promote with purpose, and that purpose can’t simply be to “drive revenue.”

Failing to design or analyze promotion by what it’s designed to accomplish—driving traffic, conversion, basket size and basket profit among specific segments of customers—is perhaps the biggest and most common dysfunctions of promotion analysis. (For three other major ones, check out my last blog.)

Building on a data-first foundation

Data is the heart of successful retail trade promotions, and data analytics are the central nervous system. They power customer segmentation and insights, forecasting, promotional measurement and optimization, pricing and assortment strategies, loyalty programs and all the factors that make up successful campaigns.

If you’re a retailer, the goals of your promotion should be to bring specific customer traffic into the store, get them to go down a new aisle, or get them to add a new product to their basket. If you’re a manufacturer, your goals should be to encourage trial or increase consumption of your product among a specific set of customers.

Here are three examples:

What really caused that jam in Aisle 3?

If the goal of a promotion is to drive traffic or build awareness, your promotional tactics should focus on circular or digital and your success metric must focus on the number of unexpected trips where the promoted item is the destination. You need to understand the type of customers it brought in, and what else they bought.

Among retailers, Target is excellent at featuring traffic drivers in their weekly ads, then putting basket builders and impulse items on their end-cap displays.

Going from first time to long time

If the goal of the promotion is to get trial among a new segment of customers, the focus should be on secondary locations for the product within the store. The promotion should focus less on price.

Success would be measured around the number of customers who try the product for the first time. Then follow them into the future, to see if they come back and make a repeat purchase.

Getting more “biscuits” into the basket

If you’re trying to increase consumption, you must have a detailed understanding of the average purchase quantity and the repurchase frequency.

The classic example is yogurt. If your target customer buys five containers per week and you want to get them to buy seven a week, your promotion should be precision-designed to accomplish this. Then, your success metrics should focus on how well you accomplished it.

Four for $4 works against you since you encourage them to buy four containers instead of their typical five. If you offer a 20% discount, they’ll still buy their normal five units and pocket the savings. However, if you offer “buy six, get one free,” you shift customers up from their typical five-per-week to seven.

Plus, you begin the process of retraining customers to eat yogurt on the weekends. By training customers to increase consumption, you invest in your future.

Here’s what not to do: offer 40% off everything in the store! That floods your store with cherry pickers and trains your full-price customers to wait for your promotions. I used to buy my jeans at the Banana Republic at full price until they trained me to wait until they inevitably took 40% off.

Analysis, not paralysis

Are the goals of your promotions no more specific than to “be successful” and “drive revenue?” Does your promotional strategy get stuck in a “same time, every year” Groundhog Day mentality?

Promoting with Purpose demands both creative (right-brain) and analytical (left-brain) thinking. Marketers tend to be more right-brained – but successful promotional strategies take a lot of left-brained number crunching. Companies like Clear Peak are your left-brain partners. You can let your creative genius shine and we’ll do the tough math.

Give me a call. Clear Peak can help you get back on the path to customer loyalty and healthy traffic.

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