A Playbook for the Holiday Season: AI Price and Promotion Strategies to Keep Your Sales on Track
Now that summer is coming to a close, retailers’ thoughts are turning to planning and strategies for the all-important holiday season. The season spans Black Friday to Cyber Monday and through the varied landscape of early shoppers who plan ahead to last-minute shoppers who crowd stores and websites in the last days before Christmas. Retailers are more aware than ever that they need to get their pricing and promotions right, or risk falling behind in ways from which they’ll never recover.
To cut to the chase, this means using the best of contemporary technology to deliver carefully crafted pricing and promotions that truly resonate with shoppers on the items that are most important to them, while simultaneously recovering margin elsewhere to sustain a long-term healthy business. Here are some actionable strategies that leverage proven artificial intelligence-based technology to accomplish just that:
1. Relevant prices are more important than ever, so get them right.
A recent Revionics-commissioned global study from Forrester Consulting on holiday shopping behaviors found that consumers are highly inclined to research prices in advance, with 74 percent of shoppers doing advance price research online for special purchases they planned to make, whether they ultimately bought in-store or online. In an age where shoppers expect — and get — complete price transparency 24/7, you can’t afford to guess wrong. Fortunately, AI-based pricing takes into account competitive elasticity, shopper price sensitivity, and halo and cannibalization effects, down to the item-store level. Therefore, retailers know exactly where to price aggressively and which items are less price sensitive so they're well-positioned for margin recovery.
2. Make the right offers — and make them where it matters.
Consumers may start their shopping journey with online research, but when it comes to responding to offers, they're finely tuned to their particular channel preferences. The same study found that 32 percent to 37 percent of shoppers say that if they received an offer in their nonpreferred channel, they found a different retailer that would honor a similar promotion in the channel of their choice across brand-specific/retailer’s website vs. brand-specific/retailer’s physical store v. major online-only marketplaces. And the benefits of making the right offer extends well beyond the holiday season. As the study notes, “If retailers can align their promotions, pricing and channel strategy to their shoppers’ needs and preferences during the holiday season, they can reap big benefits from these insights year-round.” Analytics-based promotion performance analysis can help retailers immediately identify promotions that resonated with shoppers in the past, including past holiday seasons, to help them focus on those that are most effective.
3. Avoid misguided offers that alienate shoppers and leak precious margins.
Delivering promotional offers when they’re not needed or wanted is an astonishingly common source of margin leakage. Another global shopper study found that 69 percent of shoppers receive promotional email offers that they would have been content paying full price for. As shoppers redeem these unneeded promotional offers, precious dollars that could have gone to the bottom line slip away. Worse, these unfocused offers can actually alienate shoppers. The same study found that 37 percent of shoppers feel annoyed, shop less often or are indifferent when receiving promotions on items for which they would have been happy to pay full price.
4. Avoid knee-jerk price matching.
An earlier Revionics-commissioned study conducted by Forrester Consulting found that 76 percent of retailers market their price-matching guarantee, yet only 17 percent of shoppers demand price matching on products they want to purchase. Instead, focus on actual offers that shoppers value, which research has found to be percent-off and dollars-off.
In a fast-changing, brutally competitive retail environment, the competitive edge that AI-based pricing and promotion capabilities provide is invaluable, and retailers know it. In fact, 76 percent of retailers believe AI-driven pricing would have a positive impact on shoppers’ perceptions of their brand. Fortunately, there's proven, affordable SaaS-based price and promotion optimization working hard (and successfully!) for innovative retailers worldwide, delivering measurable business results day after day, year after year.
Jeff Smith is founder and senior vice president of strategy and corporate development at Revionics, a SaaS-based pricing, promotion, markdown and space solutions provider.