"One of the reasons promotions are so hard to get right is that most brands simply have no idea how they’re being executed at the store level."
Brands spend big on promotions, particularly in-store, with the aim of seeing a spike in sales. But do they know how much of that investment actually generated a return, and how much of it went to waste? Most companies don’t have a proper way to calculate the success rate of that spend. It seems simple enough to compare trade spend to any rises or falls in sales over the same period, but without proper execution and monitoring of promotions as they happen, most brands are missing out on what is or isn’t actually working on a daily basis.
One of the reasons promotions are so hard to get right is that most brands simply have no idea how they’re being executed at the store level. Manufacturers spend an average of 11% to 27% of their revenue on trade promotions, ranging from temporary price cuts and premium showings to competitive exclusivity and premium shelf locations. But without the proper tools and strategies to monitor execution, these showings are lost. This means that brands are spending big money on push marketing and getting nothing in return, without knowing it’s happening.
When you consider all the factors involved, there are so many things that can prevent a promotion from being successful. In fact, there are so many limitations that it becomes difficult to quantify whether a promotion was actually worth the investment.
Here’s a quick overview of some key factors that will affect a brand’s retail promotion success:
1. Product availability – The number one factor that affects the success of promotion is the availability of the product. If it isn’t available, or if the store doesn’t have it in stock, then the promotion won't work. Calls to action are pointless without product availability. You need to make sure your promotions can only go ahead if every item in the promotion is available.
2. Your product’s positioning – When you consider that more than 80% of shoppers research online before buying in-store, it becomes clear how important it is for brands to get their messaging right. The key is to make sure you're messaging directly links to your promotion.
3. Pricing – Discounting is hard enough when it comes to retail, but it’s even more difficult when you consider that a product needs to be at a price where the store will make a profit. If your promotion means a loss for the retailer, then they won’t take part. The same goes for any short-term offer versus something sustainable over time. It takes careful planning and consideration to make sure you’re not leaving money on the table.
4. Competitiveness – You can offer the best price in town, but if it’s still too high compared to your competitors then you’re not going to see success. This is why a lot of brands offer dramatic discounts on items that aren’t selling well anyway – the hope is that by offering a huge discount people will make room in their budgets and buy them. But this strategy has a high chance of failure and can actually hurt you in the long run if it means people will only buy when they see an offer, and not on your everyday prices.
5. Redemption – If customers don’t know how to redeem an offer, then you’re just throwing money away. It’s important to make sure the promotion is easy for your customer to understand, and even more important to make sure they can actually redeem it. If your offer includes using a retailer card, then make sure you have an event where you offer training on how to use it. If there are any stumbling blocks along the way, then the promotion won’t have a chance.
6. Timing – This can often be your biggest issue with promotions because of how many different factors come into play when you consider supply, demand, and other external forces that can influence whether or not you’ll see success. For example, if you run your promotion towards the end of your stocktake, then you’re going to impact your ability to get an accurate picture of how successful it was. The same goes for any promotion that requires product delivery too close to the end date. Timing will always play a big role in whether or not you see success with any promotion.
7. Proper display and signage - Retailers can fail to set up your displays or fill them with the right product. If your shelves are empty or the products don’t display the value of what you're offering then customers won’t take notice and you won’t see success.
These and other factors result in an immediate loss of potential sales and whenever you experience anything such as an unexpected out-of-stock, subpar setup of promotional materials, or inaccurate price labeling, you’re giving your competitors the chance to win sales that otherwise would have gone to you if your promotion was executed according to plan. As seemingly small mishaps accumulate throughout the duration of a promotion affecting your sales, you’ll be left at the end to explain why there is a massive gap between where your numbers are and where you projected them to be.
Using a third-party merchandising partner can ensure that these promotions are executed according to your brand standards. Merchandising audits and consulting services provided by a merchandising partner can strengthen your business and identify ways to run future promotions more effectively. A merchandising partner will also monitor price-matching policies to protect you from losing sales when competitors drop their prices in response to your promotion.
Having the right industry knowledge, logistics planning expertise, and supply chain management is essential when it comes to a merchandising partner. There isn't a one-size-fits-all when it comes to merchandising. Most brands have very specific processes for their promotions but by using the right partner to deliver on them, you can be sure that you’re beginning with a solid foundation.
Schedule a demo of our merchandising suite and learn more about achieving in-flight promotion optimization for your brand.