Promotional scenarios and pricing: instructions for use
Product promotions allow companies to increase awareness of a product and optimize its purchase. At first glance, promotions appear to be product-oriented, but they actually attempt to meet various business objectives: increase sales, reduce inventory costs, improve brand image, etc. Therefore, when generating promotional scenarios, a company needs to manage a multitude of data to ensure the success of its offers and markdowns.
Furthermore, the prospect or customer is at the heart of promotional and dynamic pricing mechanisms. As promotions are dedicated to cultivate customer interest and purchase behaviors, companies need to think about their pricing strategy according to the customer's behavior and the point of sale.
What are the objectives behind the implementation of promotional campaigns? What data should be taken into account when generating promotional scenarios? How to ensure the launch and success of a promotional campaign? Which tools can automate the complex processes involved in promotional campaigns? Find here all the aspects to consider when establishing a dynamic pricing strategy.
Objectives behind the use of promotions
Promotions are considered as part of a marketing mix strategy. This strategy allows us to think about the positioning of companies on the targeted market. It takes into account the product to be sold, its price, its distribution and its promotion.
The four elements mentioned are linked to each other. Indeed, varying the price can have an impact on its distribution and the flow of its stocks for example. Pricing or the strategy chosen by a company to set the price of a product allows to reach different objectives:
- position itself in the market by adopting a strategy of skimming (high price) or penetration (low price);
- push customers to buy the product to avoid overstocking and tying up cash in reserves;
- increase brand awareness and build brand reputation through special offers and promotions.
Other business goals are related to the pricing and promotional strategies adopted by the company, such as: increase in turnover, margin, number of units sold. The choice of promotions made is aimed at different segments of the target market. Some offers target buyers who are already customers of the company and seek to ensure their retention or loyalty (loyalty cards with a prize pool, private sales, etc.). Other types of promotions seek to attract new prospects and new customers (contests, multi-payments and Black Friday among others).
Data needed to develop a promotional scenario
In order to set up a promotional scenario for a given product, it is first necessary to define the business objective to be reached: increase in sales, optimization of margins or increase in turnover for example.
Once this is determined, the input data must include internal company constraints such as the budget to be allocated to the promotion in question, the percentage discount to be adopted during the promotional period and the duration of the promotion. Exogenous information must then be added to better understand the context in which the promotion will be launched. Among this external information, we mainly find: the rates applied by the competition, the audience targeted by the promotion, the behavior and the expectations of the customers formalized in the form of variables.
Structure of a promotional scenario.
A promotion must consider a product or an assortment of products in order to increase their sales. Sales promotions seek to induce buying behavior over a short period of time. They aim to create a sense of urgency and scarcity with the target customer. In order to carry out a sales promotion, marketing teams need to convey a simple, understandable and easy-to-execute message to the targeted customer or prospect.
Once the value proposition or promotional message is designated, the offer or discount must contrast with the product's usual price to attract the customer's attention. The markdown or promotion must also be defined over a short enough time interval to generate a sense of urgency in the buyer. The duration of promotions varies depending on the type of product and the business objective behind it. Some offers can last for a few hours, others for weeks or months.
Moreover, promotions must be chosen according to the role they have to play within the acquisition tunnel of the company. Also, a flash sale in a point of sale in a given city will not have the same impact as a contest on the brand's social networks for example. Some offers will target large audiences while others are designed to clear the stock of products in a specific store quickly.
Thus, a promotion is linked to a product or an assortment of products, to the communication channels that will be dedicated to it (social networks, newsletters, billboards, paid referencing, etc.) depending on the type of prospect or customer targeted. Finally, in self-service sales, merchandising is also taken into account during promotional actions (duration and location of display, presence on the shelf, etc.).
Generation of promotional scenarios and tools
With the multiplication of sales channels, means of communication and the number of points of sale, companies can encounter a colossal level of complexity when creating promotional scenarios. Also, manual methods or traditional BI (business intelligence) methods cannot encompass all the dimensions necessary to choose prices for each reference.
In the age of personalization, understanding the underlying trends of each product and point of sale, taking into account customer behaviors within each physical or virtual store cannot be done on a human scale. The advent of data science and artificial intelligence tools makes it possible to generate automated and more precise promotional scenarios.
Machine learning tools allow for the creation of personalized promotional scenarios based on the product, the customer and the point of sale. Machine learning algorithms enable real-time dynamic pricing that takes into account market characteristics, competitive behaviors and the specificities of companies and their sales units.
In conclusion, pricing strategies coupled with promotional scenarios aim to generate and optimize sales, retain existing customers, attract new customers, increase the company's revenue and margins. Faced with the increasing complexity of the implementation of these actions, companies can use tools based on artificial intelligence to reduce the costs of their implementation and ensure that all the dimensions necessary for the success of a promotional scenario are taken into account (customer behavior, type of prospect or customer, product or product assortment, competition, characteristics of the point of sale, etc.)
Les outils issus du machine learning autorisent la création de scénarios promotionnels personnalisés en fonction du produit, du client et du point de vente. Les algorithmes de l’apprentissage automatique rendent possible une tarification dynamique en temps réel prenant en compte à la fois les caractéristiques du marché, les comportements de la concurrence et les spécificités des entreprises et de leurs unités de vente.
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