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5 ways retail promotion planning software boosts profitability

Aug 24, 2022 4 min

Retail is facing unprecedented challenges 

If images of empty shelves best encapsulate pandemic-time supply chain disruption, then it is the rising prices of everyday products that occupy the minds of today’s consumers. Increasing financial insecurity brought on by soaring energy prices, inflation, and patchy product availability has made consumers more cautious than ever about how and where they spend their money.  

Within this context, retailers must continue to drive revenue and preserve their margins. Offering competitive pricing and minimizing their operative costs is essential, and having an effective promotion strategy is a boon for boosting profits in this complex time. 

While some retailers have already invested in promotional planning technology, others remain hesitant. With so much potential for improving their bottom line at stake, retailers need to quickly ramp up their knowledge of the modern technology landscape so they can make smart, informed investments. So how can today’s advanced solutions support and improve retail promotions planning to improve the bottom line?  

1. Save time and reduce errors by automating manual planning processes 

Promotion planning solutions offer retailers a collaborative tool to plan promotions, set targets, track performance, and react to price changes and inventory levels, adjusting promotions and resources to serve changing needs.  

Access to centralized demand forecasting data helps organizations stay aligned and make better decisions without the added complications of numerous spreadsheets. This unified data frees up the mental headspace of the planning team and automates the heavy lifting, leaving the team to do what they do best: plan optimal promotions campaigns. 

2. Minimize under- and over-pricing scenarios to preserve margins and maximize sales opportunities in a volatile economy 

Unpredictable inflation forces retailers to review their pricing more regularly. Since campaigns are sometimes planned as far as 18 months in advance, the window for making changes is often very small. To manage risk, promotion planners must make informed decisions as late as possible to account for these unexpected changes. 

With thousands of campaigns live or in preparation, the cost of underpricing promotions (and taking losses) or overpricing them (and missing sales opportunities) is significant. A solution that offers centralized forecasting data gives retailers a larger window to decide on which promotions to cut to remain profitable in constantly changing environments.  

3. Maximize revenue, profit, and traffic with a flexible, creative planning process 

Measuring the effect variables like price and mechanics have on campaign success for thousands of promotions is complex and time-consuming. Uncovering insights and acting upon them is even more so. That’s why at least 15% of campaigns typically fail to deliver either revenue, profit, or traffic, costing retailers millions of dollars annually.  

Too often, promotion planners are forced to make critical revenue decisions with only incomplete results from past campaigns and gut feeling as a guide. Automating analysis frees time for more thorough campaign planning, scenario testing, and experimentation. Giving purchasing managers access to reliable performance and forecasting data helps them make evidence-based decisions about which promotions to run and which prices to choose. 

4. Capture the true impact promotions have on the top and bottom line. 

KPIs like basket value or online conversion rates present only a partial picture of promotion performance. However, a sophisticated promotion solution estimates baseline sales, calculates vendor funding, and accounts for key effects like switching, stockpiling, and the halo effect to provide retailers with a reliable profit or loss outcome. 

Figure 1. When evaluating campaigns solely through profit, retailers may mark a campaign “successful” without looking at the negative effects the promotion has on other areas of the business. 

The true value of the promotion is only visible when looking at all of the effects of the promotion. In Figure 2, below, the promotion actually incentivized shoppers to switch away from Brand B, a more expensive product. This has a dramatic effect on the bottom line. Consumers also choose to stock up on Brand A while it’s cheap, further eating into profits. All in all, even once vending funding is accounted for, this promotion actually ends up costing money.

Figure 2. The true value of a promotional campaign can only be seen in evaluating all effects of a campaign such as product switching and the halo effect. These factors prove that the true value of a campaign can be quite different than predicted and campaigns that seem “successful” on the surface may be hurting the business.

Imagine this reflected across thousands of promotions each year. For retailers who can’t account for all the factors that influence promotional success, it’s impossible to know how much campaigns are contributing towards or taking away from their business.

5. Maximize external funding by presenting compelling data-led cases in vendor discussions

Vendor funding can prove the difference between running profitable and unprofitable promotions. However, retailers lack the data and insights they need to maximize external funding opportunities and run optimal campaigns. Since vendor and retailer incentives aren’t always aligned, retailers quite often find themselves at a considerable disadvantage. With a promotion solution, retail planners can utilize past campaign data to gain more leverage in future campaign planning. Scenario testing can be used to put forward proposals for novel campaigns or to counter vendor proposals that don’t serve the retailers’ best interests. Retailers come away more confident in their promotion decisions and more empowered in their discussions with vendors.

Written by

Thom Iddon-Escalante

Senior Product Marketing Manager

Andreas Willgert

General Manager, RELEX Promotions

Arvid Stenback

Co-Founder at Formulate by RELEX