With Thanksgiving, Black Friday and Cyber Monday falling on the early side this year, there's a little longer shopping season — but an overwhelming array of choices. More time means more opportunities to compare assortment, prices and offers, which means loyalty may go out the window. How can retailers craft engaging, relevant pricing and promotions to attract last-minute shoppers? Here are six tips to help you engage successfully:
- You can deliver high-impact promotions without eroding your margins by knowing which items to promote. You need to craft promotions that matter — don’t just repeat promotions from last year and the year before that because they're likely to fail. In recent Revionics-commissioned global shopper studies conducted by Forrester Consulting, consumers reported that 62 percent of the promotions they receive at least monthly were on items for which they would happily have paid full price. Furthermore, 17 percent of shoppers say they don’t want to receive promotions at all. It’s an astounding margin leakage.
- Get the right offers to the right shoppers. Once again, analytics are your friend. Promotion performance analytics and promotion optimization can identify the promotions you need to stop doing as well as recommend which products you should promote. They also give insight into the ideal offer type, such as percent off or buy one get one, as well as the optimal promotional vehicles to reach your customers across the omnichannel journey. Shopper responses showed the kinds of offers that they like best aren’t the ones that retailers most often default to. For example, surveying both retailers and shoppers revealed that 66 percent of retailers felt that shoppers want BOGOs, yet the earlier research revealed that among shoppers, BOGOs are far less popular than percent-off discounts or dollars-off across all retail categories.
- Recognize that price is all-important. The research found that for the majority of shoppers price is THE single most important factor in determining where they shop. Traditional loyalty patterns tend to fall away during the holiday season, so you must be very focused on two cardinal rules: provide prices that engage shoppers on the items they care most about, and never forget that shoppers demand pricing that they think is fair. The research, which surveyed shoppers in the U.S., U.K., Germany, France and Brazil, found that 58 percent of consumers would refuse to purchase an item if they perceived the price as arbitrary.
- Leverage analytics to understand price sensitivity, halo and cannibalization impacts. We already know that loyalty flies out the window during the holiday season, so it’s imperative to get the shopper in your door or on your e-commerce site by promoting the right products in the right categories at the right discounts — and maximizing the halo effect to enrich the overall basket. In today’s data-rich ecosystem, drill in and get crystal clear on shoppers’ price sensitivities, down to the item level. Layer in competitive elasticity to know where you must get aggressive in pricing, and you can recover margins where shoppers are less sensitive. Once you have the consumer engaged, you have a good chance of winning more of their basket since they're shopping under time pressure.
- Resist the temptation of going for short-term results that undermine long-term success. If retailers increase prices because an item is in short supply, they risk losing shopper loyalty forever. When asked how they would react if an item they wanted was available at a higher-than-expected price, almost 60 percent of respondents said they would wait, not purchase the item at all, or purchase it from a different retailer. A retailer seeking short-term gain violates the shopper’s keen sense of price fairness — and may pay the ultimate cost in terms of lost customers.
- Powerful artificial intelligence-based optimization technology has moved beyond theory into a world of reality where it has been proven to deliver solid results for some of the largest retailers in the industry. It’s time to start using AI. If you're one of the few who believe you can continue to meet shoppers on their terms in today’s retail, while also remaining competitive and protecting margins by simply using Excel spreadsheets or basic planning and forecasting tools, think again. You'll lose out to competitors and risk being left behind by tech-savvy shoppers. Shoppers themselves believe the key to optimal pricing is science. An overwhelming 78 percent of shoppers think it's fair to use data science to increase and decrease prices as long as they are presented with prices aligned to their expectations. They’re even fully prepared for dynamic pricing across various retail sectors, with only 6 percent saying they don’t think it's fair at all for prices to change dynamically.
The holiday season provides a unique opportunity to engage with both existing customers and new shoppers to attract traffic, grow basket size and win long-term loyalty. Through the use of today’s modern science, and thoughtful, analytical approaches to pricing and promotion, you can set the stage to prosper now and in the years to come with a win/win approach: presenting shoppers with pricing they trust as fair and promotions they find relevant, all while protecting your bottom line for long-term business success.
Cheryl Sullivan is the chief marketing and strategy officer for Revionics, a global SaaS provider of science-based pricing, promotion, space and competitive insight for innovative retailers.