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How to Plan Margin-Protecting Promotions

Sales, discounts, markdowns, promotions—no matter what form they take, eating into your profits to get your shoppers a little better deal is a necessary part of retail today.

Why is that the case? For starters, shoppers have more tools at their disposal than ever before. They can compare prices across retailers from their phones. They can shop online or in-store. There are more brands than ever, more retailers, more options. The right promotion at the right time can be exactly what you need to boost your sales.

Of course, promotions cut into margins. However, you can control how much. With the tips we have for you below, we’ll explain how to get that psychological pricing boost that promotions bring without letting the discounts erode profit margins.

One-Up Competitors on Retail Holidays

You have deep knowledge of how your promotions did last year, but how did your competitors’ promotions perform?

A Wiser customer had a big retail holiday coming up (Green Monday) and they used Wiser data to look at their top competitor’s Green Monday promotions from the previous year. Armed with this information, our customer put some marketing investment into beating that competitor by one day and running those promotions earlier. Green Monday ended up being their biggest sales day (besides Cyber Monday) of the entire year.

Promotions don’t have to hurt; instead, they have to be crafty. One way to do that is to get the timing right and beat the competitor to the punch. This can help you to see sales jump, while still protecting profit margins. Retailers need to change their strategy based on what the competition is doing in order to go to market with the best possible offers and promotions.

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Run Promotions at the Right Time

Timing is everything. A great sales campaign at the wrong time will get a retailer nowhere. Sure, with the growth of online retail, any time can be a retail holiday. However, figuring out when competitors were able to catch shoppers’ attention with promotional offers will clue you into what timing you should consider.

Another Wiser customer needed to know when competitors mentioned specific categories on their homepages and how those long promotions ran. This is key information to be able to plan your marketing at the right time and end any sales after the optimal number of days or weeks.

Picking the right day when shoppers will be browsing and open to a promotional offer will start you off on the right foot. Then, the next step is to add in a time constraint that encourages them to buy now instead of later, giving a sense of exclusivity to the sales.

Get Promotional Assortment Right

Timing is important for promotions, but it’s nothing unless you are promoting the best possible products to drive up profits. A product has to be something your shoppers want to buy, as even a 95 percent off deal won’t sell if it’s not a desirable SKU.

How can you know what to promote? Start by looking at what products competitors constantly feature on homepages week over week. On a related note, you can also monitor best-selling Amazon products for other sales trends. This data could indicate trending products that are hot in the market. Adding top-selling products to your assortment periodically will help you compete better, but first, you’ll have to gain insight into the best sellers in your category.

In addition to homepage, marketplace, and email promotional data, we’ve also worked with a few customers on discounting trends to see how many styles are on sale during a given promotional period. This insight helps retailers plan promotions on the right products, instead of losing margin on items that would have sold at full price.

The thread that connects all of these tips is that promotions aren’t just a one-off strategy. They have to fit into your larger sales, marketing, pricing, and merchandising efforts.

Treat Promotions Like More Than Pricing

Percentage and dollar-off promotions attract shopper attention, but so do other promotions, like free gifts and free shipping. One of the age-old questions in online retail is whether shoppers prefer free shipping over discounts and the answer to this conundrum depends on who your target is. However, the moral of the story is that there are several ways to run promotions and it’s best to try out several iterations to find what works best.

Another Wiser customer, a leading vitamin company, wanted to know if their competitors were running more free shipping promos versus percentage off or dollar amount off. Once they had the answer, they were able to adjust their promotions strategy appropriately with offers that appealed to shoppers and looked great within the competitive landscape.

Promotions Have to Be Part of a Larger Strategy

The thread that connects all of these tips is that promotions aren’t just a one-off strategy. They have to fit into your larger sales, marketing, pricing, and merchandising efforts. This will give you the best opportunity to increase revenue without eroding your profit margins.

Better yet, supplement any decisions you make with the right data. Look at historical trends, your competitor behavior, your sales data, and much more to understand what’s going on in your market and how consumers behave. With that information, you can optimize prices, choose the right days to promote the right products, and one-up the competition.

Contact us to learn more about how we can give you the data needed to create margin-protecting promotions.

Editor’s Note: Contributing writer is Matt Ellsworth. This post was originally published in January 2018 and has since been updated and refreshed for readability and accuracy.

Angelica Valentine

Angelica Valentine is a Marketing Consultant with several years of expertise in the retail sector. Her work has appeared on VentureBeat, Business Insider, SAP, and more. She holds a BA from Barnard College of Columbia University.

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