How To Measure The Impact Of Holiday Promos

Bring on the jingles!  Every retail CMO kicked off 2015 by asking, “How do we trump the competition by offering the most unique and compelling holiday promotion this year?”  In fact, most retailers not only want to differentiate from competitors, but they also want to one-up their own holiday promotion from the previous year.

There is no lack of options in the 2015 season.  Trade in your turkey for shopping bags at Macy’s, which kicks off Black Friday at 6:00 p.m. on Thanksgiving Day.  Or beat the Black Friday mayhem during Sam’s Club’s Pre-Black Friday sale, starting the Saturday before.  Avoid the Black Friday bedlam all together and #optoutside with REI.  

Although this is a critical time of year for marketers in many industries, retailers face a unique set of challenges.  There are three important factors that differentiate retail marketers from their direct-response and brand marketing counterparts in other sectors.

1. Planning multiple promotions: The retail sector thrives on running promotions, one of the four Ps of marketing.  For most retailers, holiday promotions are the most important of the year.  A lot of planning goes into determining what kind of discounts to offer, how long to run the offers, as well as how much the promotions will cost.

2. Marketing thousands of SKUs: Retailers sell many different brands and products.  While other marketers focus on promoting their own brand and possibly a handful of their own products, retail marketers need to know all of the SKUs available online and in-store to promote them most effectively.

3. Measuring marketing effectiveness: Typically, marketers measure their long-term brand equity as well as the short-term incremental value of marketing when assessing overall marketing effectiveness.  However, retailers need to account for a third factor: promotions.  Since promotions have a distinct impact on sales and costs, they need to be accounted for separately from other marketing initiatives.

Normally, marketers use advanced measurement techniques that consider what happened in the past to predict what will happen in the future.  But because retail marketers strive to offer unique promotions, they don’t have historical data to guide predictions.  The uniqueness of the offer makes it more difficult to predict a promotion’s impact on sales.

The answer to the measurement challenge presented by #3 actually lies in #1 and #2.  First, any measurement model that predicts retail marketing effectiveness must factor in the cost of promotions such as discounts.  Second, the model must also account for the various products and product combinations associated with each unique offer.  This requires the ability to ingest very granular data into your model in order to uncover each unique offer’s impact on overall marketing effectiveness.  This will allow retail marketers to take a more data-driven approach to testing and optimizing their offer mix.

In two months when retailers ask, “How did we trump the competition?,” they  will be armed with all of the right answers if they have the right measurements in place.

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