How can retailers determine the best price-off deal to offer in the Holiday Season? How can retailers use competitor price monitoring to highlight their price advantages? How can retailers best use data-mining to target buyers? What's more important, price or value? This holiday season retailers will spend billions and billions of dollars on promotions. They won't track this spending the way they track payments to suppliers or salaries for workers, but the expenditures will be just as real.
As we discussed last time, you need to measure to see if your promotions are working if you hope to improve them. Once you have mechanisms in place to track promotions, think about the basic economics:
First, if you train customers to wait for promotions, they will learn to wait for them. Even value-buyers will start to look and behave like price-buyers. Second, if you offer broad promotions, you not only spend more, you get less leverage.
Consider the following promotion alternatives:
1. 25% off everything vs. buy one, get one 50% off. The 50% off encourages larger order sizes, and will end up providing a slightly lower average discount, while the customer will probably perceive the discount as higher.
2. 20% off accessories vs. an email campaign to buyers of the core item announcing hot accessories. The latter promotion targets people in the market for accessories.
3. Exclusive deals vs. exclusive access. A lot of companies offer discounts to folks on their mailing list. There's nothing inherently wrong with this, but why not turn it around and offer exclusive early access to new offerings?
4. Use data mining to target buyers with products they might also want. e.g. "People who bought winter boots also bought… gloves, hats, etc…"
5. Don't lead with price. Lead with value. Amazon is rarely the cheapest place to buy something online, but they sure make it easy, not just to buy something, but to mention other things I might want.
6. Use pricing intelligence to highlight places where you have a price advantage. If you already have lower prices, don’t lower them, simply promote that you have a good price. And you have to have the data from monitoring competitors' prices in order to know this.
7. 20% off-and-free-shipping, vs. 20% off-and-free-shipping-on-orders-over-$150. Give better buyers better discounts, and encourage people to load up. Your margins can more easily stomach free shipping on one large order than on a lot of smaller orders.
8. Free-express-shipping vs. free-express-shipping-on-orders-over-$100-placed before December 15. Encourage shoppers to plan ahead. Reward them with better prices.
Experiment to see what works. Hypothesize, test, measure, and repeat. Just remember that targeted discounts can be more effective not just in terms of overall cost, but also in terms of changing consumer behavior.