MARKETING STRATEGY
Definition
A promotional strategy consists of the decisions that define a retailer’s promotional policy: which products to promote, how often, by how much, through which channels, and for what purposes (traffic, inventory turnover, customer acquisition, etc.). A coherent promotional strategy balances price image, profitability, and sales momentum.
Why it's important
- Generate traffic and revenue: Promotions attract customers and boost sales in the short term.
- Clearing inventory: Products that are in excess stock or at the end of the season require promotions to prevent depreciation.
- Building a price image: A retailer that never runs promotions is perceived as expensive, while one that runs too many promotions is perceived as low-end. Striking the right balance is key.
A concrete example
A clothing retailer has defined its annual promotional strategy: four key sales events (winter sales, summer sales, Black Friday, and a spring promotion) featuring broad-based discounts (30%–50% off). Between these events, targeted promotions are held each week on 10–15% of the product range (slow-moving items, end-of-line stock). Key Volume Items (KVIs) are never on sale except during the sales periods. Objective: maintain an overall promotion rate of 25% (25% of sales generated through promotions) while preserving a gross margin of 50%. This strategy is reviewed monthly to make adjustments based on actual performance.
Types of Promotions
- Instant discount: 20% off, €5 off, buy one get one free
- Discount voucher: a coupon to be used on a future purchase (loyalty program)
- Bundle deal: set, bundle (jeans + belt at a discounted price)
- Free gift: included with every purchase
- Flash sale: a very short-lived promotion (lasting just a few hours) designed to create a sense of urgency
- Loyalty card: member prices, points earned
Common Mistakes
- Promoting without a clear goal: Every promotion should serve a specific purpose (traffic, profit margin, inventory). Promoting "just because it's the right time" dilutes its effectiveness.
- Too high a discount rate: when more than 30–40% of sales are discounted, customers stop buying at full price and profit margins plummet.
- Uncoordinated promotions: Launching a promotion on a product that the purchasing department has just restocked at full price leads to overstocking and markdowns.
Learn more
- Research & Data: Price analysis to assess the impact of your past promotions and optimize your future strategy.
- Solutions: Promotion Management to plan, manage, and measure your promotional campaigns.
- Tip: Operational pricing to structure your promotional strategy and align your teams.
- Resources: See our pricing FAQ for more questions about promotions.
Mini FAQ
Using pricing strategy simulations before deployment allows you to test various scenarios (margin, volume, price-image) on a digital twin without exposing the actual product catalog.
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