Winning the promo game
How to transform promotions from a dreaded tactic into a desirable business strategy
Welcome to the Sociology of Business. In my last analysis, Showtime, I looked into four strategic scenarios for the evolution of the Fashion Week. Buy my book The Business of Aspiration and find me on Instagram, Twitter, and Threads. With one of the paid subscription options, join The Sociology of Business WhatsApp Community.
Amid consumer slowdown, retailers are forced to strategically consider how to incorporate promotions and discounting into their annual revenue goals. Promotions are usually considered as something that retailers resort to when they don’t have a good marketing budget (if a company can’t attract customers with their brand, they attract them with a good deal on their products), but they are also a preferred solution for getting rid of unsold inventory and a quick fix for sluggish consumer spending.
Promotions are where luxury retailers differentiate from the rest (they prefer outlets to discounting, and some of them, like Prada and Gucci, significantly reduced their wholesale accounts and prefer to control prices through their own sales channels). With a good reason: department stores can cover their costs even if they sell products at 60% off or more of the original price. Others, like Burberry, are buying back unsold products from department stores, in order to control the depth of discounting and protect their brand.
For non-luxury retailers, the areas of consideration when it comes to approaching promotions (without ruining their livelihood) are:
Business
Consider promotions a critical component of your desired quarterly revenue, across sales channels (e-commerce, retail, wholesale, where applicable). Provide different business scenarios leading to this quarterly number and incorporate promotions into scenario planning.
Brand
Create cross-functional alignment on the desired quarterly and annual promotional calendar. This alignment will allow you to test different business scenarios and to create customer expectations. Planned in advance and within the context of customer expectations, these promotional business scenarios won’t devalue your brand’s equity. They will also allow you to consider promotional options deeper in the funnel that are reward-driven, membership-focused and relationship-building versus the top-funnel ones fueled by discounting.
Strategy
Review promotional strategies and best practices that are at your disposal: who is doing it right? where is the innovation? what are the best practices in the context of a rapid growth? what are the best practices when the growth is stable?