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Sometimes promotions do more harm than good

When a recent Revionics-commissioned study conducted by Forrester Consulting unearthed surprising disconnects in retail promotions, including the fact that 52 percent of the weekly or monthly retail promotions go to customers who would happily have paid full price, Revionics decided to probe more deeply into the emotional psyche of the shopper to learn exactly what types of retail promotions are meaningful and impactful — and which are leaving shoppers annoyed and less likely to shop at a retailer. The resulting research, also conducted by Forrester Consulting on behalf of Revionics, draws a stark conclusion evidenced in its title: Indiscriminate promotions cost retailers.

The survey queried shoppers in the United States, United Kingdom, France, Germany and Brazil. Despite having extensive data on historical promotions and shopper preferences, retailers who neglect to do effective promotion performance analysis default to easy but unproductive offers that have unintended negative effects. For example, 37 percent of respondents who received offers on items they would have paid full price or said the offer had neutral or negative impact, with more than half of those saying they would be less likely to shop that store or brand in the future or that they reacted with annoyance.

“It is interesting that many of these unproductive offers come via email, a medium which retailers may find easy or inexpensive to use especially when delivering personalized offers, but which still carries risk if used indiscriminately,” said Cheryl Sullivan, Revionics’ chief marketing and strategy officer. “We clearly see in the study results that unfocused offers fail to elevate a brand, and can even be damaging.”

In addition to considerations of an offer’s channel, the research revealed important item category nuances. As the research noted, “Shoppers prefer promotional offers synchronized with the frequency of their purchase. More frequently purchased items — such as groceries, household essentials, personal care products, and convenience products — are the most likely to benefit from daily or weekly offers.” When determining the right promotional offer, retailers should tread cautiously. Although 65 percent of shoppers appreciated personalized prices, 47 percent of those shoppers also stated they would be angry if someone else received a better price.

Today’s tech-savvy shoppers believe retailers should utilize technology and data analytics to provide targeted, relevant pricing and offers. In fact, 59 percent of shoppers reported that they would refuse to purchase an item if they perceived the price as arbitrary. And consistent with findings from earlier studies, they accept price increases or decreases that remain within the “fair” range if they are based on data science — that is, driven logically and not arbitrarily.

“Retailers who leverage machine-learning based price and promotion capabilities have a clear advantage in delighting their customers with meaningful, carefully crafted prices and promotions,” Sullivan said. “Conversely, retailers who fail to utilize these capabilities risk alienating shoppers, squandering scarce resources and undermining their brand – costly mis-steps that can prove fatal in an increasingly unforgiving retail landscape.”