Why Discounts Are Usually Less Useful Than You Think

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Promotions in retail are a popular and often effective way to increase sales and income, popularize the products of specific suppliers and increase customer satisfaction with the retail chain. However, in order to evaluate the effectiveness of a promotion, it is not enough to rely only on the calculation of direct sales growth as a result of a namibia whatsapp phone number discount - with this approach, the "pitfalls" of such campaigns are not visible.

Ilya Durov, an expert in advanced analytics, automation and digital transformations in the consumer sector (CPG and retail), talks about which non-obvious indicators need to be taken into account and how to measure the effectiveness of promotions.

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Until now, some retailers rely on a narrow understanding of the mechanism of a promotional campaign. It is based on the assumption that when the price is reduced, quantitative indicators of sales grow. It would be great if this is so. But should the positive dynamics of product sales during the promotional period always be considered a positive effect of the discount?

Big data and advanced AI-based analytics provide answers to this question. The main thing is to imagine yourself in the buyer's place, formulate hypotheses, understand how to test them and how to analyze them.



An integrated approach to assessing the effectiveness of promotional campaigns
Below we will consider what promotional campaign indicators should be taken into account when planning and after.



Sales growth
The main driver of the effect of the proposed discount is a significant increase in the number of goods sold , which compensates for the loss of revenue and income from the promotional price reduction. To measure it, a graph of the dynamics of the number of sales during the promotional period is used. On it, the line of the number of products sold during the promotional period ideally passes much higher than the line of basic average sales in the normal period.

How can a business independently research its audience and promote its products and services on the Internet? We tell you in the course on Internet marketing .
However, upon closer examination, a discount does not always give a positive result in terms of revenue and income. Let's give a simple example. Before the promotion, a supermarket sold 20 units of goods per hour at a price of 50 rubles, earning 1,000 rubles. But with a promotional price of 30 rubles, sales grow to 30 units per hour, then revenue is 900 rubles.

A promotional sale below the base price makes the promotional campaign ineffective. It is obvious that the main indicator of the effectiveness of discounts provided to customers is much more complex than it seems. In this case, elasticity is used to calculate the optimal discount - a well-known indicator of sales sensitivity to price changes.