How retail promotions can build more loyalty

The combination of a strong strategic focus built upon a sound platform made up of the right categories, brand, and products is what leads to successful retail promotional campaigns, according to a white paper from strategic consulting firm LEK Consulting.

The white paper, entitled 'Retailers: Making Promotions Pay Their Way', details how retailers can use their promotion campaigns more actively to achieve more than simple awareness and short-term sales lifts, instead building greater customer loyalty.

The paper argues that good promotional campaigns use what the company calls "right-to-left thinking", pinpointing a specific goal for the campaign and then working backward to design all of the key elements needed to meet that goal.

As seen in Figure 1 (below), instead of trying to accomplish too broad a set of objectives, successful campaigns tend begin by defining the desired results and then establishing clear operating principles to ensure that they are achieved.

 
Figure 1: How retail goals drive strategy
Source: LEK Consulting

Choosing the right platform (whether that's a product category, a brand, or simply a specific SKU) is critical, and retailers need to have a thorough understanding of the role that each item plays in their stores.

Based on LEK's own experience, the white paper recommends that retailers should answer several key questions before selecting the a platform on which to base their promotional strategies:

1. How does the item relate to the category?
    
2. What does this promotional item say about our store?
    
3. What kind of store does this item best serve?
    
4. Product or price: which are we promoting? (It is important not to over-promote when you have already created a reason to buy.)
    
5. Can promoting one item help sell other, higher-margin items?

Once the right platform has been chosen, retailers should then answer several more key questions in the process of designing the promotional campaign itself. For example:

1. What is the overall strategy the promotion is supporting and what specific goals should it achieve?
    
2. What is the best offer (e.g. price discount, "two for one", and so on) for the promotion?
    
3. Where should we run the promotion? In all stores, in some stores, or in some departments in some stores?
    
4. When and how often should we promote?
    
5. What is the best way to communicate the promotion? What is the right combination of media, shelf location, external signage, and in-store displays?
    
6. How can we ensure that the promotion generates a return on our investment? Is the minimum expected lift in sales realistic? Do we need vendor support? Are there longer-term metrics and, if so, what are they?
    
7. How will we monitor performance so that we can refine and improve future promotions?

The full white paper has been made available for free download from LEK Consulting's web site - click here (PDF document; no registration required).