As shopping goes, I think I'm pretty good at it. And Christmas is a great time to get my retail fix. Sitting at home on the sofa, watching TV, with my iPad and phone on my lap, is probably as good as it gets for a comfortable omnichannel shopping experience. Yes, we'll still go to the high street but not for the serious business of shopping. Rather, it's to see the lights switched on by whichever 'celebrity' has the honour that year, enjoy some mulled wine and sing carols. In our family, the serious business of shopping happens on the sofa.
One thing I've noticed around this time of year is the sheer amount of discounts being offered with some retailers saturating my every interaction with them with heavy discounting. All this does is lead to margin erosion and I'm struck that in some cases I'm instantly presented with discounts when it's really not necessary. How can retailers find a balance between discounting when it matters in order to convert a sale, and giving away margin unnecessarily?
Here are my four festive tips:
1. Don't immediately default to discounting.
If your customers haven't displayed the right behaviours during their online interactions with you, don't discount. Assess your data and deduce the likely reasons why your customers have not bought from you. I'm a busy working mum and I often abandon a basket because my shop is interrupted by my children's bath and bedtime, or I simply run out of time to complete the purchase. My intention hasn't changed, just my shopping circumstances. Brands shouldn't use discounting as a mechanism to get me to return if they haven't tried softer measures first. A brand that does get this right is Sarah Raven, an online gardening company who have a great abandoned basket trigger. They reminded me that I'd left items in my basket, told me they were still available and invited me to call them if I had any queries about the items. Of course I went back and bought.
2. Understand the relationship between margin erosion and redemptions.
If a retailer is offering promotions on many SKUs it's important for the trading team to understand the dynamic balance between popularity and cost. UK electronic retailers need assistance in analysing its promotions, plotting them on a matrix cross-referencing redemptions with margin erosion to help them identify and cut out poor performing, high margin-eroding offers. We also helped it alleviate business risk by identifying the very popular promotions which were giving away a lot of margin. The retailer has now reduced margin erosion and implemented a more efficient suite of promotions.
3. Understand the incremental value of your discounting.
It's often impossible to attribute sales to any one promotion as the customer is exposed to so many messages across many different channels. Peak trading is not the time to be testing new strategies; it's a critical period during which promotional strategy should be running like clockwork. Instead, evaluate incrementally theories in test and learn models, away from peak trading periods, so that you can gain a clear understanding of the impact of a promotion type on a customer's long term behaviour. Understanding the drivers of profitable consumer behaviours and creating promotional strategies from them will deliver more effective discounting at peak periods.
4. Optimise engagement to upsell and cross-sell.
Sometimes, once they've made their initial sale, retailers can be guilty of thinking their job is done. However, if they fail to act they can miss out on making loyal customers out of us all. In the case of those of us who start preparing for Christmas early - buying extra chairs and the like to help fit the visiting family round the dinner table - after we take our delivery, it is a great opportunity to sell us other, related products. A well timed email or message from a retailer can be the difference that makes a consumer return to make another purchase. Retailers should take advantage of that positive feeling we feel when we receive our order and use that emotional connection to build a much stronger long term relationship.
By Susan Binda, Head of Loyalty Marketing and Insight at The Logic Group.
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