I’ve gone down the rabbit hole lately trying to understand the retail’s promotional dependency. As a result, I’ve become somewhat of a promotions guru. But when someone in the industry asked me “How do you know if your promotions are working?” I wasn’t quite sure where to begin. The promotional market has become so vast and so complex between the messaging, frequency, and tactics that is hard to pinpoint what is good and bad, what works and what doesn’t work. It would be so easy if this was a yes or no question, right? Unfortunately it isn’t. But don’t worry, there are some ways to tackle this question and we’ve put together a guide to make it a little easier.
What are your goals?
Before you can measure performance, you have to define what your goals really are. Here’s an example for you. In the process of trying to learn Spanish, I read an article that said you need motivation for learning a new language. Are you learning Spanish for your vacation abroad and want to be able to order “dos cervezas”? Great. You have a starting point and a direction of what vocabulary to tackle. Ordered those two beers successfully? Then you’ve met your goal. As simple as it sounds, the promotional market needs to be thought of in much the same way. Why are you running your “20% Off Sitewide” promotion? Is it to clear through your summer inventory before fall apparel comes in? Great. Now you have an area of the business to focus on when measuring performance: summer inventory stock levels.
Because all sales and promotions have a purpose, it is key to identify what that is from the start. Aside from clearing through inventory, here are some other examples of what your goals may be:
- Meet quarterly sales goals
- Stay relevant amongst competitors during market share events
- Bring in new customers
- Increase sell-through rates on full-priced items
- Build customer loyalty
Your goals may vary promotion to promotion and, hey, you may have more than one! But defining what they are is key to your analysis and pinpointing successful promotional tactics for your brand.
Know your metrics
Once you know what you are looking for, it’s important to also know what metrics you have available to you. Aside from general sales numbers, metrics like sessions or visits, inventory numbers, and basket size can tell a more complete customer story against which your defined goals can be measured.
Other key considerations? Find your baseline. What does a business-as-usual day look like for your brand? Admittedly, it can be hard to find a non-sale day for many retailers to know what is “average”, but knowing what that midpoint is and the relevant metrics for that day will give you context to understand whether a promotion is working or not.
Another thing to note: the channel in which you are selling will affect these metrics whether you are digital, brick-and-mortar, or both. While measuring performance digitally can be easier as you trace each click in the customer journey, it doesn’t mean the store data doesn’t exist. You may have to find it through other channels or customer research, but the rich insights will be worth it.
Look at your competitors
By now you know where you stand, but what about your competitors? Right, you don’t have access to their sale numbers, but there are other tools that help you gauge competitor performance and get a pulse on the overall market. From the start, take a look at the promotional value, the frequency, and the marketing content (both visuals and copy) to get a sense of their strategy and goals. How does these compare to yours? As a customer, what seems most appealing or most exclusive between all of the market options?
To get further down into the category and product level, here’s another tip for you: look at your competitor’s sale compared to their new products section. Does it appear that more products are being discounted as opposed to being introduced? Is anything excluded? On top of inventory and discounting, see what promotions may be layered on top of these prices. This provides more detail on competitor’s over- and under-performing categories and what may be an opportunity for you.
So To Answer That Question...
So, did I give you a clean one word answer? Nope, it was more like a 750 word one. But the sale landscape is a tricky one to decode and it requires constant vigilance to stay ahead of the market. But also, each idea of “working” and “effective” is going to be unique to your brand’s strategy. By staying aware of your goals, metrics, and competitors you’re one step closer to being able to answer: “Is it working?”.
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