Retail businesses have always faced challenges in developing and implementing promotional plans that effectively reach and engage their target audience. With the rise of e-commerce and the increasing competition among retailers, promotion planning has become even more crucial.
Retailers need to be sure of their promotion planning strategies, but every new initiative carries some level of risk. They may worry about the cost of running a promotion or whether it will generate enough interest. In some cases, retailers may continue offering discounts even if they result in losses due to unrealistic expectations about the campaign’s success.
Challenges Faced by Retailers
Pricing for Different Consumers
It may prove beneficial for your business to adopt differential pricing strategies for different consumer segments. For example, one-time sales often incur higher expenses compared to repeat customers. Thus, it would be wise to devise a promotion planning strategy that caters to frequent purchasers by offering value-added items or complementary products. You could also consider rewarding their loyalty by providing them with exclusive access to offers or memberships that encourage them to make further purchases from your business.
Competing Against Other Retailers
Competitive pricing is often used as a tactical measure rather than a strategic one. To gain insights into a competitor’s pricing strategy across their brand and specific SKUs, businesses can employ a competitive pricing strategy for eCommerce. With technological advancements, more accurate and real-time data can be obtained. Retailers can use predictive analytics, market trends, and knowledge of their competitors’ behavior to ensure that their value proposition remains relevant to their target audience. It is important to note that engaging in a price war with competitors can harm all parties involved, except for the customers.
Defining the Promotional Objectives
After identifying the target audience, the next challenge is defining the promotion planning objectives. Retailers need to set clear and measurable objectives that align with their overall business goals. These objectives could include increasing sales, promoting brand awareness, driving traffic to the store, or launching a new product. However, retailers must ensure that their promotional objectives are achievable and realistic within their budget and resources.
Brand Positioning
The selection of a suitable promotional planning strategy is closely linked with the intended market positioning of the product. A high price point may imply superior quality or premium value, while conversely, a lower price can signal an inferior product compared to other brands.
Allocating Budget and Resources
Once the promotion planning objectives are defined, the next challenge for retailers is allocating the budget and resources. Retailers must balance their promotional spending with other operational expenses to maximize their return on investment. They need to determine the optimal marketing mix and allocate resources to different promotional channels such as social media, email marketing, in-store displays, or paid advertising. Retailers must ensure they have the right mix of promotional channels to reach their target audience effectively.
Pricing for Different Channels
As smartphones have made price and product information more accessible to customers, companies hesitate to implement different pricing strategies for online and in-store purchases, even if the latter are more expensive. However, some companies may offer different prices for different channels, such as airlines with varying rates for phone and online reservations. To thrive in the current retail industry, executives need to view online and in-store sales channels as distinct operations that cater to customers with diverse preferences and price sensitivity.
Pricing strategy for eCommerce plays a vital role in a retailer’s product offering as it is integral to generating revenue. A retailer’s success hinges on its ability to
How to Solve Pricing Challenges?
- Promotional Impact of One Item on Another
Businesses often create products that can serve as replacements or complements to each other, where promotions for one product can affect the demand for another. For example, advertising for shampoos can impact the sales of conditioners to some extent. Predicting such changes manually can be challenging, but leveraging AI-powered promotion planning strategies can offer a smart solution.
- Recording Data on Promotions and Special Events
Event data is usually scattered across several spreadsheets, emails, and documents, making demand planning a challenging task. As a result, considering the impact of promotions when making inventory planning decisions can be inappropriate and inefficient.
To overcome this challenge, demand planners can leverage pricing optimization software to input one or more event plans simultaneously. This software records crucial information, such as the SKU segment affected, event type, event treatment, and date range.
- Understanding Promotional Impact
Demand planners typically rely on their experience and intuition to forecast promotional demand based on previous order quantities for similar promotions. However, this approach can be subjective and may not produce accurate results.
To overcome this challenge, pricing optimization software integrates various algorithms with historical event data and upcoming event calendars. By finding comparable events and predicting the increase in demand during the event duration, this software can provide more precise demand estimates. Moreover, it performs calculations in real-time to ensure accuracy.
Once the plans are frozen, the collaborative plan is used to build inventory plans, allowing demand planners to modify and enhance them.
- Relation Between Promotions and Demand
While artificial intelligence (AI) and human experience are both valuable for decision-making, their combined influence can have a greater impact. Even with AI platforms that can predict demand based on available data, there are numerous unknown factors that can affect actual demand, presenting significant challenges for demand planners.
To address this issue, pricing optimization software imports primary event data and future promotions schedules to provide demand planners with a promotional planning uplift visual. This visual display the baseline and expected demand for a specific SKU during an upcoming event. Additionally, demand planners can leverage their judgment and business skills to refine the solutions offered by the system.
About Fountain9
Fountain9‘s Kronoscope is a promotional planning and price optimization software designed to assist businesses in meeting the high demand that comes with promotional marketing campaigns. By providing accurate insights into consumer demand, Kronoscope enables companies to make better-informed pricing strategies and plan promotions that drive profitability and revenue growth. With its advanced features, Kronoscope helps resolve complexities in businesses and ensures that the right promotions are run at the right time and place, resulting in increased success and achievement of revenue targets.
