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How to Create Effective Sales Promotions

Promotions are a popular technique for brands and retailers to motivate customers and drive sales. You’ll see promotions in all shapes and sizes, from buy one get one free to a percent off to free shipping.  

Here’s how leading brands and retailers today create effective sales promotions: 

1. Track Competitor Behavior

The first step toward a high-quality promotional strategy is to track competitor behavior. This is a critical part of the process for one national retailer, which told Wiser that its pricing team uses historical syndicated data to forecast competitors’ promotional schedules. 

Why do this? Tracking and predicting competitor behavior will help you plan your promotions—you’ll know whether the competitor will eat into your sales or if you can run a counter promotion to offset potential losses. Plus, you’ll be able to use historical data to determine which units to keep in-stock ahead of any promotions based on past consumer demand. 

“We have to understand not only what we are doing but what our competition is doing,” the national retailer explained to Wiser. “Our best guess is that this week last year our competitor did this, so typically we would expect that they would do something similar this year. Assuming they do that, we expect we will get a certain percent of the market share and based on that we should promote it at this level.” 

Overall, use historical competitor data to forecast promotions and determine an effective promotional cadence. For many brands and retailers, promotion and markdown calendars are created six-plus months in advance based on this type of data. 

“If all I did was shift a purchase from one item to another item and it didn’t drive any additional sales for the retailer, then I might think it’s good—but the retailer may not think it’s good.”

2. Test and Measure Promotions

Once it’s time to implement a promotion, you’ll need to properly test and measure the results to ensure it has performed well.  

This is done with two key metrics, according to the brands and retailers Wiser spoke to:  

  1. Incremental sales lift vs. revenue cannibalization – Would your shoppers have bought your discounted products without the promotion? If so, this is revenue cannibalization, where the incremental sales lift created by the promotion is actually at the expense of existing revenue. That’s not a recipe for effective promotions. 
  2. Volume shifting – Did your shoppers make additional purchases because of your promotion or did they simply buy the one discounted item instead of another? Make sure your promotions increase the number of units sold and not just shift sales from a full-priced unit to a marked-down one.  

“If all I did was shift a purchase from one item to another item and it didn’t drive any additional sales for the retailer, then I might think it’s good—but the retailer may not think it’s good,” a packaged food brand emphasized. “You’ve got to create a win-win scenario to continue getting features and being able to do promotions.” 

Charts and data on desk

3. Monitor Promotional Compliance in Stores

Finally, you must track in-store promotional compliance. Naturally, the effectiveness of a promotion depends on whether a brick-and-mortar promotion was executed properly.  

You want to track on-shelf availability, store associate knowledge and recommendations, whether any displays are broken, and, of course, if the promotional displays were set up properly. Any hiccup here could harm sales and skew the perceived quality of an in-store promotion.  

“We were looking at the effectiveness of our promotions on the shelf at retail,” added a toy manufacturer. “If it was something that was very critical, like understanding our competitors’ pricing and promotion strategies, we would place a higher priority on gathering data to help us understand that. We needed to make sure our own pricing and promotions were competitive in the marketplace.” 

Furthermore, according to the packaged food brand, promotional activity is something that is highly questioned within the supplier community. This places an even greater emphasis on in-store promotional execution to build quality working relationships with all partners.   

What are your strategies to create effective promotions? If you’re like these brands and retailers, you’re tracking your competitors, testing your promotions, and monitoring promotional compliance.

Matt Ellsworth

Matt is the Sr. Manager, Marketing & Demand at Wiser, the leading provider of actionable data for better decisions.

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