Close
 

The future of promotions

  • Opinion
  • December 17, 2015
  • Antony Ede
The future of promotions

According to Nielsen, the majority (60 percent) of supermarket sales in New Zealand are on promotion. But do you know whether your buy one, get one free promotions are more effective than your half-offs? What promotional structure drives trial of a new product and whether or not that will grow the category?

As the old adage goes, you can’t manage what you can’t measure. Therefore, to improve promotional performance we must first measure it. Point-of-sale data, or better yet, loyalty card data, can be analysed to measure performance of a promotion on two key dimensions: whether it delivered financially for the retailer and whether it was valued by the customer. It sounds straightforward, but the first of these is often mismeasured and the second is ignored entirely more often than not by retailers around the world.

To understand the first issue, you need to understand a bit about how promotions can be measured. As pharmaceutical testing has done for years, the only way to accurately measure the impact of a promotion, or any piece of marketing activity for that matter, is A/B testing. This is where one randomly selected group is exposed to the promotion and another randomly selected group (the control) is not. The mistake often made in measuring the financial impact is that people can underestimate the impact of a control on the measurement. The trouble with this method is that it’s not always possible to randomly expose only one group to it. The trick of the method is using analytical sleight of hand to best estimate the behaviour of this control group when a perfect control is not possible. The quality of this estimation is then what determines the quality of the measurement. Poor estimation will lead to measures of financial performance that are totally unrelated to the true performance of the promotion.

A more troubling aspect is that whether or not the customer values the promotion is usually not even considered. It’s easy to think that if the promotion is delivering a financial return then it doesn’t matter whether customers value it or not, but this is a short-sighted view. From our work here at TRA, we know how important promotions are to customers’ purchasing decisions. According to a Stuff.co.nz poll, only 24 percent of people claim to buy the products they want, regardless of the promotions. It’s clear that promotions have a huge impact on customers’ experience of a retailer. In today’s competitive environment where customers vote with their wallets, a poor experience will lead customers to switch to a competitor, while a great experience can lead to a loyal customer or even an advocate.

Measuring all promotions quickly leads to a bank of knowledge about what works and what doesn’t. This bank of knowledge is where the value in the method really lies. Leveraging it doesn’t only answer the questions at the beginning of this article, but it can also be used to predict the performance of a proposed promotion. Like many machine learning processes, the more data we feed, these models the better they get. The more types of promotions that we try, the greater the accuracy when predicting the promotion’s performance. Forward-thinking retailers are already deploying this approach with great success. For such an important part of the customer experience, why wouldn’t you? 

This copy originally appeared in NZ Retail magazine issue 740 October / November 2015.

​ ​

This is a community discussion forum. Comment is free but please respect our rules:

  1. Don’t be abusive or use sweary type words
  2. Don’t break the law: libel, slander and defamatory comments are forbidden
  3. Don’t resort to name-calling, mean-spiritedness, or slagging off
  4. Don’t pretend to be someone else.

If we find you doing these things, your comments will be edited without recourse and you may be asked to go away and reconsider your actions.
We respect the right to free speech and anonymous comments. Don’t abuse the privilege.

 

The beauty of it: From start to success with cosmetic mogul Rowena Roberts

  • News
  • June 14, 2019
  • Courtney Devereux
The beauty of it: From start to success with cosmetic mogul Rowena Roberts

Rowena Roberts had zero experience in retail when she propositioned Estée Lauder to allow her to open a MAC Cosmetics store in New Zealand. Now, over 18 years later through her business Red Honey Cosmetics, she has sold luxury brands Jo Malone London, Bobbi Brown and MAC in New Zealand successfully. The cosmetics mogul talks to us on the most important aspects of running her businesses, and why no one should ever be afraid to do the literal dirty work.

Read more
 
 
Design

Spread the word: Pic’s Peanut Butter World opens

If all the world’s a stage, Pic’s Peanut Butter World is no peanut gallery.

 
 
Sponsored Content

Past the typical: Well Hung Butchery

Well Hung butchery, located in Milford, is a new shining example of how retail fit outs are becoming less about what you sell and more ...

 

Social scoreboard

Zavy and The Register have worked together to create a scoreboard that compares how the top 25 traditional media advertising spenders in New Zealand have performed on social media over the past 30 days, updated in real time.

 
topics
Regional rollercoaster
What does retail look like in 2019 for ...
Concept to closet
Business coverage of New Zealand Fashion Week.
Town centres
A positive retail environment over the past 12 ...
Amazon Arrival
Keeping up with all things Amazon as it ...
The Retail Yearbook 2017
As we battle our way through the busiest ...
Hospitality enhancing retail
Some think food and integrated hospitality offerings will ...
The future is bright
We spoke with four retailers in their twenties ...
Spotlight on signage
At first glance, the humble in-store sign might ...
Red Awards 2016
The Red Awards for retail interior design celebrate ...
Auckland Unitary Plan
Auckland is changing. The Unitary Plan will decide ...
How to open a store
Sarah Dunn considers what it would take to ...
All things to all people
Kiwi retailers share their omnichannel strategies.
Rising stars
Retail's top young achievers.
Delivering on your promises
The sale isn't over until your item is ...
Retail in heartland New Zealand
Retailers keep the regions pumping, but how strong ...
Sisterhood
Women in retail help one another. We spoke ...
The changing face of retail
Shifting demographics are creating big changes in New ...
The retail yearbook
With the help of experts in the retail ...
Retail rogues
We put the spotlight on staff training. Jai ...
Here come the giants
Topshop has arrived in Auckland’s CBD, David Jones ...
From retail to e-tail
Ecommerce has become part of the way mainstream ...
Window shopping: A spotlight on social media
Sarah Dunn and Elly Strang look at how ...
Loyalty in the digital age
How are retailers maintaining loyalty? Sarah Dunn, Elly ...
The Innovators | In partnership with Spark Business
Technology is rapidly changing the retail industry as ...
 

Fisher & Paykel makes record result on strong sales

  • News
  • June 13, 2019
  • Radio New Zealand
Fisher & Paykel makes record result on strong sales

Fisher & Paykel Healthcare has made a record full year profit with more than $1 billion in sales

Read more
 
 

Farro co-founder launches Waste-Not Kitchen charity

  • News
  • June 13, 2019
  • The Register team
Farro co-founder launches Waste-Not Kitchen charity

A new charity, Waste-Not Kitchen, has launched with the aim of feeding Kiwis in need with meals created from surplus retail meat that would otherwise go to landfill in a one-for-one model. Farro co-founder Janene Draper and her sister Leysa Ross are behind the initiative.

Read more
 

Wellington book sector gets shared working space

  • News
  • June 13, 2019
Wellington book sector gets shared working space

Booksellers NZ has made its latest venture to supporting writers in the industry, teaming up with the New Zealand Book Council to form Whare Pukapuka, a shared working space in Wellington.

Read more
 
Next page
Results for
Topics
Jobs
About us.

The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!

©2009–2015 Tangible Media. All rights reserved.
Use of this site constitutes acceptance of our Privacy policy.

Advertise
The Register

editor@theregister.co.nz

Content marketing/advertising? Email anita.hayhoe@icg.co.nz or call 022 639 3004

View Media Kit

}