To address a challenge that continues to become more prominent in the retail industry, (and coincidentally just in time for NRF), last week The Parker Avery Group published a new point of view titled, “Promotional Forecasting: Reasserting Control Over Retail Promotional Destinies,” authored by Parker Avery’s Merchandising Practice Leader Josh Pollack and President & Managing Partner Clay Parnell. The paper begins with the assertion that a key reason for the degradation in the effectiveness of many retailers’ promotions is the lack of ability to predict the outcome of their many stacks of promotional campaigns. This week’s blog post highlights some of the key viewpoints from this compelling and highly relevant publication.
Almost all retailers utilize some form of promotions—print advertising, mailers, emails, social media campaigns, and more. In today’s ultra-competitive retailing market, the goal of standing out, being noticed, and influencing behavior is indeed a challenge, but also a necessity and an opportunity. There are some assumptions that must hold true for even the most basic promotion to be relevant to the target consumer:
• The products being promoted must make sense to the consumer. If this is not true, it likely does not matter what the discount or value proposition is. For example, most male customers really do not care when beauty products and handbags are on sale at the local department store (granted, a man may care indirectly; if it makes his wife happy, this likely contributes to his own well-being).
• The timing of the promotion must be aligned with the personal needs of the customer. Depending on the geography, promoting winter coats in December is likely to be more relevant than in June.
• The offered price of the product must be compelling. The customer’s evaluation of the price impact may be based on knowledge of the competitive marketplace or on a comparison of prior prices from the same outlet (i.e., “was / now” pricing).
• Appropriate inventory to support the promotion must be available. Retailers have a tacit (and legal) responsibility to make sure that promoted products are in stock in all SKU variations. If a customer cannot find a promoted item, that customer is only more frustrated than she or he would have been without the promotion.
Josh and Clay continue the point of view by defining and outlining key retail industry challenges for what they outline as the 10 Tenets of Effective Promotions:
1. Clear Brand Positioning
2. Marketing Innovation
3. Marketing Mix Budgeting
4. Strategic Planning
5. Promotional Space Brokering
6. Calendar Management
7. Event / Offer Management
8. Analysis & Reporting
9. Merchandise Planning of Promotions
10. Event Forecasting
The paper goes on to discuss current Promotion Optimization Solutions and ends with Parker Avery’s recommendations for what retailers can do to not only confront the challenges around promotional forecasting but also effectively manage promotions and related demand signals. The authors assert “even slight improvements in the effectiveness of promotions can drive substantial business results.”
If you’re planning on going to NRF Retail’s Big Show and would like to discuss your own challenges with promotional forecasting—or any other retail opportunity, please contact The Parker Avery Group to set up an individual meeting.