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In mature markets most retailers and FMCG suppliers rely heavily on mass promotion to retain and increase market share – despite a broad agreement that more personalised communication is needed to increase relevance for the consumer. As highly targeted marketing is often perceived as small scale and low impact, it often fails to receive the investment and priority it deserves and is mostly used on an ad hoc basis. What is required is a balance between the two approaches, a customised programme of mixed campaigns devised to meet specific business objectives.
To achieve this balance, investment in personalised offers has to be increased and, at the same time, mass promotional investment must be optimised and reduced to create maximum impact. The results are potentially extremely impressive: a leading French retailer has achieved a 100€m reduction in expenditure and 25€m increase in turnover by rationalising in-store, mass promotions.
Understanding how much to invest where, which promotions should be cut down and where to expand activities starts with evaluation – the beginning of a three step method developed by emnos which can be applied to any project:
· Establish process and tools
· Test and learn
Customers hold the key
Defining a strategic promotional framework for the future begins by looking at the past. Previous promotions hold a wealth of information and are typically evaluated from both the bottom up and the top down. The first, more classic method, measures the incremental revenue generated by each promotion; at both product level and category level to take into account cannibalisation. The second uses advanced modelling techniques to analyse customer behaviour within very wide parameters. This data provides the shoppers’ point of view which is invaluable in determining how to more effectively balance and refine promotions: for example, percentage of investment between mass and personalised campaigns; frequency; number of pages in a leaflet; and share per category.
Customer insights are just as valuable in mass marketing as they are in personalised targeting. The first step is to assess performance by understanding how people react to different approaches: some may never respond to offers; others do but what do they buy; what is the purchasing pattern?
It then becomes possible to predict the best combination and number of offers to distribute over time; and mass campaigns can more efficiently fulfil their key role of driving traffic and attracting new customers.
The next step is to establish the process and tools need to recommend the best mass and targeted offers whilst tracking commitments and performance. Every new promotion is an opportunity to learn more, providing more data to analyse and enabling the model to become increasingly informed. This results in better recommendations made with the customer in mind and, in turn, creates more incremental revenue for both retailer and supplier.
Personal – but on a big scale
To quote an old but nevertheless true business adage, a mere 20% of customers generally account for 80% of sales. Very personalised promotions are an effective way to reward the loyalty of that valuable group; and increase spend through cross or up selling. Complex algorithms can assess billions of options and allocate coupons to each and every customer so they receive a range of reward, activation and innovation coupons – all products you know they like; they will like; or they should try; and at the most appropriate discount price.
Personalisation does not limit the size and impact of the promotion and, although seemingly a contradiction of terms, it can be applied on a massive scale. Launching campaigns every two weeks with offers at an average 30% discount, a second French retailer has taken bespoke targeting to the next level with over two million customers receiving 130 million coupons featuring over 640 brands. The average redemption rate was 8.4% delivering an ROI of up to 800% and overall generating 2% incremental sales.
The perfect combination
To create the best possible mix, targeted and mass promotions should be measured and prioritised together to ensure each generates the strongest impact and highest customer satisfaction levels. There are, however, some challenges to be faced in achieving the perfect promotional combination. It is a new approach and as such, involves risk; and a degree of change management is required to drive success and outcomes. For example, the right processes have to be established; new buying and negotiating strategies developed; and slightly different skills acquired.
But, as the early adopters in France have shown, it can be very profitable to bring together the best of both worlds.
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