Discount dynamics: Mastering the art of promotional pricing

May 7, 2024 • 15 min

Picture this:

A grocery chain launches a “50% off” promotion on organic produce, aiming to outshine competitors and attract health-conscious shoppers. The campaign kicks off, drawing crowds, but the store’s inventory depletes rapidly. All the empty shelves leave customers disappointed. Competitors respond with similar discounts, diluting the promotion’s impact and straining the chain’s relationships with loyal customers.

Promotions can be highly effective, but they require a solid understanding of the opportunities and obstacles of expert pricing. In this example, the retailer wasn’t prepared with accurate data and a pricing strategy to maximize profitability during the promotion.

Promotional pricing done well drives sales, builds loyalty, and grows market share. But when done poorly, anchored in guesswork, fragmented data, and disconnected spreadsheets, it quietly erodes the margins it was meant to protect. The difference comes down to having accurate data, cross-functional coordination, and the analytical depth to manage the full promotion lifecycle with confidence. That’s precisely what RELEX Promotion Planning & Optimization is built to deliver.

What is promotional pricing?

Promotional pricing is a short-term discount on product or service prices. These campaigns can serve various purposes, like clearing inventory, boosting customer engagement, responding to competition, or highlighting a special event.

The limited timeframe to receive a reduced price can stimulate demand and increase sales by creating a sense of urgency in customers. But mastering promotional pricing requires complex coordination across channels and sophisticated pricing analysis. These capabilities are essential to maximize profitability and avoid cannibalizing sales of regular-priced items while maintaining brand integrity and customer trust.

Mastering promotional pricing requires complex coordination across channels and sophisticated pricing analysis.

Without the right insight into important factors such as customer demand or profitability at various discount depths, effective promotional pricing can be nearly impossible to achieve. Yet when done right, promotional pricing is a fast way to boost sales.

Time-tested promotional pricing examples

Whether leveraging the appeal of volume discounts or strategically timing campaigns to coincide with seasonal sales trends, retailers have many promotional pricing options to drive sales and attract new customers. These tactics have the potential not only to sway consumer decisions but also to unlock untapped profits and propel businesses to new heights of success.

An illustrated diagram showing five promotional pricing strategies. — ***Fig 1:*** *Five common promotional pricing strategies, each serving a distinct role in driving sales and customer behavior.*

Some dynamic examples of promotional pricing strategies include:

Single-item discounts: Reducing prices can help retailers effectively target high-ticket items (where the savings are significant) and lower-priced goods (to encourage bulk purchases).
Volume discounts: Offering a discount on larger purchases encourages customers to buy in bulk, thereby increasing the average transaction size. Volume discounting is an effective strategy for products with long shelf lives or high repeat usage.
Loyalty program discounts: Extending exclusive discounts to members of a loyalty program can enhance customer retention and increase the lifetime value of customers. This strategy also provides valuable data on customer preferences and buying habits.
Campaigns: Aligning promotions with holidays or seasons (for example, Halloween or back-to-school season) taps into heightened purchasing trends.
Price matching: Matching competitors’ prices can attract price-sensitive shoppers and position a certain brand as the best value option. This strategy requires careful management to keep profit margins healthy.

6 key benefits of impactful promotional pricing

With the right promotional pricing in place, retailers can expect to see a range of benefits, from boosted profits to fierce customer loyalty. Here are the top six benefits a well-priced promotion can deliver.

Unlocking the potential of promotional pricing can be a gamechanger for businesses, offering advantages across a range of sectors. The benefits are multifaceted and impactful, from boosting sales and profitability to gaining market share and fostering customer loyalty.

An illustrated diagram showing six benefits of promotional pricing. — ***Fig 2:*** *Well-executed promotional pricing can deliver many benefits, spanning sales growth, customer acquisition, and competitive positioning.*

1. Increase in sales and profitability

Retailers can improve incremental sales and make promotions more profitable by optimizing promotional pricing. Promotions often lead to a temporary increase in sales volume as promotions incentivize customers to purchase based on the perceived value of getting a good deal. This perception can be particularly effective during product launches, seasonal peaks, or inventory clearance periods.

Promotional pricing can also increase sales volume, improving cash flow in the short term.

2. Gains in market share

Companies that strategically offer discounts, incentives, or bundled deals can attract consumers who may have previously favored other brands. Attracting new customers this way is especially effective in industries where brand loyalty is moderate and consumers prioritize pricing.

Increasing market share boosts revenue and strengthens a company’s position in the industry. As market share expands, businesses can benefit from economies of scale, improved bargaining power with suppliers, and enhanced visibility in the market.

3. Customer acquisition

Attractive promotions can attract new customers who might not have considered a retailer’s products or services. Once these customers are acquired, there’s potential to convert them into regular customers, thereby expanding the customer base.

4. Greater customer loyalty

Well-crafted promotions can reinforce brand loyalty for existing customers by offering them value and appreciation. Exclusive deals for returning customers can make them feel valued and more likely to stick with the brand.

5. Improved inventory management

Promotional pricing can be an effective tool for managing inventory levels, helping to clear out old or excess stock to make room for new products. Promotional pricing can be particularly useful in industries with rapid product life cycles or seasonal variations.

6. Competitive advantage

Offering promotions can provide a competitive edge, especially if a business can offer more attractive deals than its competitors. That competitive edge can be crucial in attracting price-sensitive customers and positioning a brand as offering exceptional value, especially when inflation is driving up consumer costs and tightening budgets.

The toughest challenges in promotional pricing

Despite the myriad of benefits that promotional pricing offers, navigating its landscape presents several formidable challenges retailers need to look out for when planning promotions.

When done right, promotional pricing significantly boosts sales volume and customer loyalty through high-level strategy, offer optimization, fund negotiation, and outcome evaluation. But too many brands rely on manual spreadsheets for promotion planning, a time-consuming and error-prone process. This often results in missed opportunities and inadequate stock levels, diminishing the effectiveness of sales initiatives.

Navigating the realm of promotional pricing also presents challenges – from data management and technological limitations to the delicate balance between enticing customers with discounts and preserving brand image. Failure to properly navigate these challenges can result in decreased sales and dissatisfied customers.

An illustrated diagram showing four promotional pricing challenges. — ***Fig 3:*** *Successful retail supply chains must navigate certain challenges that undermine promotional pricing effectiveness, from fragmented planning to gaps in customer and competitor intelligence.*

Difficulty reviewing past promotion pricing results

Assessing the true impact of promotional pricing on sales, profitability, and customer acquisition or retention can be complex. It requires robust analytics and the ability to attribute outcomes directly to the promotion.

Manual planning leads to guesswork and inefficiencies. Underestimating demand can lead to stockouts, while overestimating can result in excess inventory. Both scenarios can negatively impact customer satisfaction and profitability.

Fragmented promotion price planning

It’s common for pricing and promotions to be handled by separate teams working in separate systems — and a lack of alignment between systems almost always drives a wedge into cross-functional collaboration processes.

Unnecessary friction when coordinating across departments increases the potential of pricing mismatches during promotion.

Implementing promotional pricing strategies requires coordination across multiple departments, including marketing, sales, supply chain, and finance. Misalignment among these departments can lead to execution challenges and diminished returns on promotional efforts.

Unnecessary friction when coordinating across departments increases the potential for uneven pricing during promotions, undermining performance.

Technological and data difficulties

Technological and data challenges arise from scattered and incomplete promotion data. Examples might include not having proper data on what promotions were running, which items were included in a leaflet, or what proportion of sold items were picked up from a promotional endcap versus the regular aisle facing.

Furthermore, processes and responsibilities are spread out across departments throughout the promotion planning cycle. The resulting confusion often means important promotion data is incomplete or scattered across individually maintained spreadsheets. This fragmentation makes it harder to examine promotion performance and identify which levers will improve future performance.

Limited scenario testing and optimal discount level determination leave pricing during promotions to little more than guesswork. Leveraging data analytics and AI for promotional pricing requires sophisticated technology infrastructure and data management capabilities, which can be a significant operational challenge for some retailers.

Predicting customer and competitor response

Promotions often obscure a product’s actual value to customers, who end up shopping solely based on deals, turning promotions into a habit that retailers find hard to break.

Without a clear rationale or insight into product performance, promotions soon become the norm — and can unintentionally manipulate demand. Frequent promotions can lead customers to expect discounts and delay purchases until the next promotion, potentially affecting regular sales cycles and profitability.

Promotions can also lead to decreased sales of non-discounted items, as customers opt for cheaper, promoted products instead. This cannibalization effect can dilute the overall profitability of the promotion.

Retailers can also get in the way of their own success by getting caught up in price wars with competitors. In highly competitive markets, promotional pricing can trigger price wars in which retailers continuously undercut each other’s prices, eroding margins across the industry and creating a race to the bottom where no one wins.

Frequent or overly aggressive discounting of any kind can harm a brand’s image, leading customers to perceive it as low quality or cheap. Maintaining brand value while using promotional pricing is a delicate balance.

And finally, don’t forget about supplier interaction. Suppliers (particularly for branded products) often sponsor promotions, sometimes challenging the balance of power with the retailer. Suppliers hold leverage because retailers depend on their products and financial support for promotions. This is reinforced by strong brand names and strategic partnerships. Negotiating power is often tied to the retailer’s size and market share.

How RELEX promotion planning & optimization works

Navigating the challenges of promotional pricing requires more than good instincts and historical precedent. Eroding profit margins, damaged brand perception, and strained supplier relationships are the direct result of planning processes that lack the data, analytical depth, and cross-functional coordination to consistently drive performance. Getting promotions right means replacing guesswork with a system that surfaces accurate insights and enables action across the full promotion lifecycle.

RELEX Promotion Planning & Optimization is purpose-built for this. Retailers can combine AI-assisted analytics with end-to-end planning infrastructure to improve promotion forecast accuracy, strengthen supplier collaboration, and run promotions that consistently deliver measurable results.

The solution brings together four integrated modules within a single platform:

Evaluate
Plan
Optimize
Deal Management

This gives promotion teams a continuous workflow from post-event analysis through to campaign execution and discount selection. Where other vendors treat these as separate tools with separate interfaces, RELEX unifies them so that insight from one stage directly informs the next.

A diagram showing the four modules of RELEX Promotion Planning & Optimization: Evaluate, Plan, Optimize, and Deal Management. — ***Fig 4:*** *The four integrated modules of RELEX Promotion Planning & Optimization form a continuous workflow from post-event analysis through to campaign execution and discount selection.*

Evaluate: Understanding what promotions are actually worth

Most post-event analysis either understates or overstates the real impact of a promotion because it doesn’t account for all the effects at play. For instance, a sales uplift figure that ignores cannibalization from similar products or stockpiling by customers who simply pulled forward their next purchase presents a distorted picture of whether a promotion actually generated value.

RELEX addresses this through TrueLift, our proprietary methodology for measuring the complete impact of promotional activity. TrueLift calculates both the sales and profit effect of a promotion by accounting for four key cross-effects:

Switching and cannibalization (sales taken from similar products)
Stockpiling and pantry loading (demand borrowed from future weeks)
Halo effects (uplift on non-promoted items linked to the campaign)
Vendor funding contributions

The result is a waterfall view of promotion performance that shows what a campaign genuinely delivered, not just what the gross sales numbers suggest.

A waterfall chart showing the TrueLift breakdown of promotion performance across sales, basket effects, and costs and funding. — **Fig 5:** *The TrueLift waterfall view breaks down the true sales and profit impact of a promotion, accounting for all relevant cross-effects.*

Critically, the Evaluate phase applies the same analytical framework to planned future promotions as it does to past ones. Within the same interface, retailers can forecast the expected TrueLift of an upcoming campaign before it runs, identify promotions likely to underperform, and cancel or adjust them in advance.

Plan: Coordinating promotions across teams and timelines

Even well-analyzed promotions fail when planning processes break down. Large retailers may run hundreds of simultaneous campaigns across multiple categories, channels, and regions. Coordinating this at scale across separate teams and systems is where fragmentation tends to cause the most damage.

RELEX Plan supports end-to-end campaign management from high-level strategic planning months in advance down to tactical execution in the days before a campaign goes live. Planning guidelines, approval workflows, and business rules are built into the process, ensuring that every promotion is reviewed against margin thresholds, timing constraints, and category objectives before execution.

This helps retailers avoid common and costly failings such as:

Promoting similar products simultaneously.
Running campaigns that erode rather than build category value.
Allowing individual planners to bypass guardrails that protect profitability.

The platform strengthens the retailer’s position at the table by centralizing vendor funding management, making it straightforward to track supplier contributions. It also models the impact of different funding levels on promotion viability and presents a clear ROI to suppliers in negotiations.

Optimize: Finding the right products and the right price

Once teans know which promotions have performed well historically and have the planning infrastructure to execute them efficiently, they still face one of the hardest questions: what should the promotion actually look like? Which products should be included in a given week, and at what discount depth?

RELEX Optimize uses AI-driven scenario testing to answer both. Retailers can model different discount depths against their specific objectives, whether it’s maximizing sales, profit, store traffic, or halo uplift. After the system runs the relevant simulations, planners receive recommendations on which products to promote and at what price.

For retailers negotiating with suppliers on trade fund contributions, Optimize can also model what level of vendor funding is required to make a promotion financially viable, giving planners a data-backed position before entering negotiations.

The three modules are fully integrated within a single, uninterrupted workflow. A retailer can evaluate a past promotion in Evaluate, copy it into a new campaign in Plan, then use Optimize to find the optimal discount structure.

Deal Management: Closing the gap between vendor funding and promotion performance

Around 70% of retail promotions are funded by vendors, making supplier collaboration a central part of the planning process. Yet for most retailers, that collaboration happens across disconnected emails, spreadsheets, and meetings — a fragmented workflow that’s manual, error-prone, and difficult to audit.

RELEX Deal Management replaces this with a single collaborative portal where retailers and suppliers jointly negotiate deals, plan campaigns, and evaluate outcomes. Both parties access the same analytical context, including historical performance data, forecasting, and promotional intelligence. This shifts negotiations from opinion-based discussions to fact-driven decisions.

The result is a more transparent, efficient process for everyone involved. Approval workflows, activity tracking, and settlement management are built into the platform, eliminating version control issues and reducing administrative burden. Retailers attract stronger supplier funding by presenting clear ROI data in negotiations, while suppliers gain early visibility into planning timelines and promotional performance.

A real-world promotional pricing success story: JJ Food Service

JJ Food Service Ltd. is a prominent omnichannel bulk food retailer operating across the UK with 12 branches and over 100,000 B2B customers. With a diverse inventory of 3,000 product lines, promotions play a significant role in their business, accounting for 15-20% of total turnover.

As the company shifted toward a direct-to-public model with expanded online click-and-collect services, existing manual processes couldn’t efficiently support the frequent promotions and competitive pricing that direct consumers expect. Managing promotions while balancing customer value and profitability had grown cumbersome and error-prone. The JJ Foods team needed a solution to streamline promotion management processes and enhance decision-making accuracy.

Working with RELEX, JJ Food Service went live with pricing and promotions capabilities in December 2023. The platform enabled the team to test different promotional strategies before implementation, analyzing the impact of various price changes on sales and profit. RELEX facilitated data validation, optimized product and discount selection, and provided AI-driven pricing recommendations. This has freed category managers from relying on habit, guesswork, and bias, and saved the team 4–5 hours per day.

Results include:

60% increase in promotion sales
39% increase in promotion profit
40% growth in total promotional turnover
8.1% uplift in overall gross margin
30% increase in supplier funding attracted for promotional campaigns

Amplify returns with powerful promotions

Promotion planners are under constant pressure to deliver. They’re expected to coordinate across departments, negotiate vendor funding, forecast demand accurately, and evaluate hundreds of promotions. This is often done with fragmented data and tools that weren’t built to work together. In that environment, good intentions aren’t enough. Promotional pricing decisions that look reasonable on a spreadsheet can quietly erode margins, trigger cannibalization, or miss the optimal discount depth entirely.

The difference between promotions that drive genuine incremental profit and those that move volume lies in the quality of the decisions behind them. Retailers who can accurately model switching effects, stockpiling behavior, and halo effects before a promotion runs consistently outperform those who rely on post-hoc analysis and intuition. That’s not a strategy question; it’s a capability question.

RELEX Promotion Planning & Optimization is built to answer it. As a purpose-built promotional pricing solution, it gives retailers the tools to stop guessing at the right discount and start making decisions they can defend with data — across every stage of the promotion lifecycle.

Make a compelling case for software investment

Promotional pricing FAQ

How can promotional pricing benefit my business?

Promotional pricing can increase sales and profitability, help gain market share, attract new customers, strengthen customer loyalty, improve inventory management, and provide a competitive advantage.

How does AI improve promotional pricing decisions?

AI processes and analyzes enormous amounts of data to automatically identify patterns and insights, enabling more effective and profitable promotions that human planners don’t have time to calculate manually.

Why is a unified system important for promotional pricing?

A unified, end-to-end system integrates pricing and promotion planning across departments, enabling seamless adjustments based on up-to-date data and improving consistency in strategy execution.

What are cannibalization and halo effects in promotional pricing?

Cannibalization occurs when a promoted product takes sales away from similar non-promoted items, reducing the net benefit of a campaign. Halo effects are the opposite. When a promotion drives uplift on related products not included in the campaign. Accounting for both is essential to understanding the true profit impact of any promotion.

What is TrueLift?

TrueLift is RELEX’s methodology for measuring the complete impact of a promotion on sales and profit. Rather than relying solely on gross sales figures, it accounts for cross-effects such as switching and cannibalization, stockpiling, halo effects on non-promoted items, and vendor funding contributions — giving retailers an accurate picture of what a promotion genuinely delivered.

How does vendor funding affect promotional pricing?

Vendor funding, where suppliers contribute to the cost of a promotion, can significantly change whether a promotion is financially viable. Retailers who can accurately forecast the sales and profit impact of different funding levels are better positioned to maximize supplier contributions and negotiate from a data-backed position.

Can frequent promotions harm a retail brand?

Yes, frequent or overly aggressive discounting can lead customers to perceive a certain brand as low quality or cheap, and may train them to only purchase during promotions, affecting regular sales cycles and profitability.

Written by

Martin Tilbury

Director of Product, Price and Promotions

Martin Tilbury is Strategy Director, Category Management at RELEX Solutions, based in the United Kingdom. He has four years of experience at RELEX and specializes in pricing, promotions, and wider category management areas.

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Andreas Willgert

General Manager, RELEX Promotions

Andreas Willgert is General Manager of RELEX Promotions at RELEX Solutions. He is an expert in pricing and promotion analytics and planning, with a strong background in retail technology and e-commerce.