By Sam Panzer, Director of Industry Strategy at Talon.One
As temperatures soared this Summer, so did sales. ONS data revealed that overall retail sales volumes rebounded in June – rising by 0.9 per cent.
We know that the weather has a powerful influence on consumer spending. And as we enter the summer season, brands across the world will be rolling out their seasonal promotions.
But to make the most of fickle weather forecasts, planning ahead isn’t enough. Marketers who can react quickly and offer highly personalised, targeted offers have an even greater opportunity to make hay while the sun shines – growing margin and customer loyalty.
Avoiding the discount death-spiral
The argument for personalised promotions sounds simple, but when it comes to reactive seasonal promotions many brands are still reliant on blanket discounting and the sugar rush effect of rocketing revenue.
Let’s take a hypothetical example, a famous German sandals manufacturer may decide to implement a 10% discount sitewide when a heatwave hits. It will be popular with customers, and could see a swift surge in sales. But at what cost to margin?
Blanket discounts, while beneficial in the short term, do not necessarily deliver the greatest long term reward. When applied unscrupulously across products at a mass scale, discounts have the potential to do real damage, decreasing engagement, impacting brand reputation, and eroding margins.
Not only do brands risk offering promotions to those already willing to pay full price, but if they get a reputation for regular discounting, they risk being seen as a glorified clearance shop, with customers delaying purchases as they wait for inevitable coupon codes.
For our German sandals maker, a smarter approach, one where their promotional response to the heatwave is targeted and informed by granular data, could lead to a very different outcome.
Targeted promotions: the missing link to loyalty
By adopting a flexible and personalised approach around surprise seasonal spikes, they could maximise sales and margin by engaging customers in the right place, at the right time, with the right offer. In fact, data from Boston Consulting Group estimates that by shifting just 25% of mass promotions to personalized offers, businesses can double the performance of those offers.
For example, if instead our German sandals maker could choose to respond to the heatwave with a multi-pronged response: a discount to new customers in the local areas where the heatwave is at its strongest (ideally encouraging them to sign up to their loyalty programme), and a multi-buy promotion for existing customers in those areas. This strategy would enable the brand to capitalise on peak interest from new customers, while also giving existing customers an offer which eats far less into margins.
By offering intelligent incentives like these, brands can demonstrate an understanding of what their customer genuinely wants or needs. Not only does this drive the likelihood of sales, it also fosters stronger relationships between brands and customers – and builds longer term loyalty.
Setting yourself up for success
Crucially, marketers need to be nimble, strategic and targeted when tailoring their promotions in response to an unplanned spike. But where to begin?
Brands should start by cleaning up their data. This will allow them to get a clearer understanding of their customers, thereby unlocking the ability to deliver smarter personalisation.
Next, they should consider personalised promotions as a more holistic tool for customer engagement – it’s not just about discounts, but also a strategic tool for driving business outcomes. This is when marketers can turn to a technical solution that will allow you to roll out the incentives strategy that works for your brand.
In today’s competitive, volatile and unpredictable economic environment, brands cannot afford to keep losing money with the wrong incentives strategy – and boardrooms are realising that smarter promotions have the potential to change the game. With this in mind, marketers should embrace the opportunity to make smart strategic changes to their promotions and incentives that will give them competitive advantage and help them to weather any storms in the short and long term.
