Insights

8 Enticing Benefits To Running Sales Promotions

Sales promotions are valuable marketing tools that can deliver fantastic targeted benefits for your company. Often temporary in nature, typically, they use an incentive to attract and engage your customers and motivate them to make a purchase or take a specific action.

When designing a sales promotion, there are various mechanics you can use to help you achieve your goals. These could be cashback rewards, gifts with purchase, trade-ins or buy-and-try offers. Whichever method you choose, your sales promotions can deliver a range of outstanding benefits.

Below, we share 8 enticing benefits of running a sales promotion for your company, highlighting why this tool is one you should include in your sales and marketing strategies.

1) Increased Sales

Increasing sales is a goal that almost every business seeks to achieve, and sales promotions are a highly effective method of accomplishing it. Sales promotions can drive immediate sales and generate revenue for your company. By offering cashbacks or discounts, time-limited offers, or other incentives, you can attract more customers and encourage them to make purchases.

2) New Customer Acquisition

Sales promotions are an excellent tool for winning new customers who may not have considered buying from your company. Using special deals or introductory offers, you can entice prospective customers to try a product or service and encourage them to switch to your brand. The result? – an increase in your customer base.

3) Target Slow-Moving Stock

One of the great things about sales promotions is that you can design them to target specific product lines or services. These may be stock that is slow-moving, end-of-season or of which you have an excess that you wish to clear out. By offering discounts or bundle deals, you can quickly sell off surplus stock, freeing up space and capital for new inventory.

4) Enhanced Brand Awareness

Sales promotions can create buzz and generate attention for your brand. With exciting offers and engaging campaigns, they get people talking, increasing brand visibility and audience reach. An intelligent and compelling sales promotion often creates a ripple effect, with customers who take advantage of the offer sharing their positive experiences with others and extending your reach further.

5) Strengthened Customer Loyalty

Offering exclusive deals or rewards to your current customers can strengthen their loyalty and encourage repeat purchases. Sales promotions can be designed to target existing customers, demonstrating appreciation for their support and incentivising continued engagement with your brand.

6) Enhanced Competitive Edge

In today’s competitive climate, gaining the edge over your competitors will help your business grow and succeed. Sales promotions can differentiate your brand from others in your sector by offering better deals, added value or attractive incentives. These strategies will help entice customers away from your competitors and increase your market share.

7) Upselling and Cross-selling Opportunities

Sales promotions can be an effective strategy to encourage your customers to upgrade their purchases (upselling) or buy complementary products (cross-selling). For example, you can offer bundle deals or incentives for purchasing higher-value items. These promotions will increase the average transaction value and your business’s overall revenue.

8) Build Valuable Data and Customer Insights

Sales promotions provide an excellent opportunity to gather customer data and insights. Often, they require participating customers to provide their details or engage in specific actions, such as signing up for newsletters or filling out surveys. This requirement enables your business to collect valuable data on your customers, their preferences and buying behaviour, which can inform future marketing efforts and personalised targeting.

It's worth noting that while sales promotions offer many significant benefits, they need to be carefully planned and executed to avoid negative consequences like eroding profit margins, encouraging customers to postpone purchases and wait for promotions, or damaging the brand's perceived value. However, with strategic planning, clear objectives, and meticulous evaluation of the outcomes, you can maximise the benefits of sales promotions and help drive the growth of your business.

How Opia Can Help
Opia is a creative sales promotion agency that focuses on collaborative partnerships to successfully create, execute and oversee innovative promotional campaigns for our clients. Having handled over 5 million claims across 40+ countries, we know how to deliver maximum impact with minimal risk.

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by admin

Why The Tech Channel Must Adopt A Through Cycle Mentality

The IT channel is currently facing some strong post-pandemic headwinds. The geopolitical situation, record inflation, lingering supply chain concerns, and the continuing skills gap among other worries have left channel partners considering how they can weather the storm.

When it comes to device sales, both resellers and retailers face additional challenges. We know the channel partners that sold technology devices had an absolutely remarkable pandemic in terms of sales. Equipping the new remote workforce was a priority for organisations, so the partners that could get devices like laptops, notebooks, smartphones, screens and peripherals into the hands of employees enjoyed great success.

But after those boom years, we are now experiencing the inevitable drop in demand, particularly for smartphones, laptops, PCs and other devices.

The global smartphone market has now experienced a fifth consecutive quarter of decline, falling by 12% year-on-year in Q1 2023. Channel analyst Canalys noted that despite price cuts and heavy promotions from vendors, consumer demand remains sluggish. This especially is the case in the low-end segment, as high inflation affects consumer confidence and spending.

Customers – whether B2B or consumer – are holding onto devices for longer and delaying outlays on major purchases and upgrades.

Another important factor for partners are the changes to how people purchase devices, which began during the pandemic when the world went online. Even procurement managers are now comparing and purchasing products directly from their partner’s website, or their retail chain equivalent, which adds to the price pressures throughout the channel and the need to differentiate with some other kind of added value. This has continued post-pandemic, with macroeconomic and cost-of-living pressures sending many consumers online in search of transparent information and the best deals.

Adopting a ‘through-cycle’ view of sales

These ongoing shifts in buying behaviour prompt obvious concerns among resellers and retailers: How much excess stock do they have sitting in their warehouses or in distribution? How similar are the products in price? Are they holding on to stock for too long? Are they offering products at the right price to attract customers but still deliver margins?

In this scenario, vendors and partners may rush to offer sales and discounted products to clear their inventory. However, this only reduces margins – at exactly the same time that inflation might be pushing their costs and the device manufacturing costs higher. It is also almost impossible to later increase prices when customers have seen them sold for less, which also undermines their perceived value of the products. They end up in a race to the bottom on pricing, which is something partners need to avoid at all costs.

Instead the channel must adopt a long term ‘through-cycle’ view of sales to avert short-term panic about the current slowdown. The term describes an approach based on value creation that enables companies to outgrow their peers, both during downturns and in the subsequent recovery. That could be growing their core business, but they may look at geographic expansion, value chain integration, or moving to adjacent markets.

This is already evident in the channel, where both device manufacturers and channel partners have been forced to consider new value propositions based on long term thinking.

“It’s not just about getting a phone or a laptop for the next two years or three years as it might normally be,” said Runar Bjørhovde, research analyst at Canalys. “It’s thinking about the residual value of the device at the end of those three years. Can we trade the device in? Can we sell the device off to another partner? Can we bundle laptops and smartphones together? That’s Apple’s strong value proposition to why their business is still going very well on the B2B side.”

Creating value and building trust

Many retail partners are also embracing online channels by setting up better digital and physical infrastructure suited to large-scale online business. New developments focus on adapting the customer experience and offerings. As part of this, consumer electronics channels are no longer trying to solely be a product reseller. They are increasingly bundling in insurance, tech support, data services, extended warranties and, in many cases, selling mobile subscriptions for MNOs.

The channel is focused on offering customers service choices through bundled solutions to create channel user stickiness and to attract new customers.

Elsewhere, they are increasingly looking to drive the market for devices through refurbish programmes. There is a huge push from the EU around giving devices a second or third life though refurbishment or recycling. This should be an opportunity for vendors or channel partners to develop programmes that sit within that model – and they should take advantage now.

In both these examples, channel organisations must consider what motivates customers to take immediate action and how they can offer the right value and incentives to make that happen. This could take the shape of a promotion that enables organisations to trade-in old devices for discounts or rebates, or to collect and refurbish old equipment, bundling relevant peripherals, even ‘buy and try’ promotions on new products. If the objective is centred around increasing market share, then trading in a competitor’s brand for a new model of your preferred brand might also be an option. Sales promotions are often most effective when multi-layered, and adapted to a commercial need: sales volumes are all very well, but not at the expense of margins that do not make commercial sense.

Channel organisations may consider the market such that they need to think of promotions as a regular part of their business. Partnering with an experienced third party who can advise, source the right promotions at the right price, ensure fulfilment, manage the customer relationship, help with metrics analysis and act as a true partner could be the ideal strategy.  Make the right partner decision and your promotional activity will bring profit and nurture customer loyalty.

“The market contracting is a good way for channel partners to look around and see where the next opportunities are coming from. Where should we invest right now? Are we prepared when the demand growth picks up again?” said Bjørhovde.

Above all, the current market challenges are a chance for partners to create long-term value and solidify their position as a trusted advisor. It’s also an opportunity to build trust through adopting a complete ‘through-cycle’ view of sales.

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The promotion effect on shifting consumer behaviour

Right now, lots of consumers want to find ways to save money. New research from KPMG shows that in the UK 55% have reduced non-essential spending, and 29% feel either much less secure or slightly less secure in March 2023 than they did at the start of January.

Non-essential spending is very much a matter of perception and prioritisation. For some people, it could mean reducing eating out, buying new clothes and accessories, doing fewer small journeys by car or taxi, but maintaining spending elsewhere. Meanwhile for others, it could mean not making any major purchases, such as electronics, home improvements and holidays. Some will do both. However, it doesn’t mean people are no longer buying, just that behaviours are changing and people are more savvy with their money.

The strategy for marketers and retailers is to identify and tap into buyer motivations. This doesn’t mean entering into a continuous spiral of discounting, because while a 10% discount might generate a little sales high, it dents margins and neither creates repeat business, nor loyalty.

What motivates your customers?

What the KPMG research has discovered is that when consumers are considering a purchase, they are likely to look for value and incentives. The data shows that 36% of consumers are buying more promotional items and this is where marketers and retailers can shift consumer behaviour.

Imagine the family home is in need of a new sofa and the purchase has been put off for a few years, first because Covid restrictions made shopping impossible, and then as a result of the downturn squeezing spending on essentials. But the sofa money is squirrelled away.

The right promotion can drive the consumer to action. For example, a promotional offer that includes vouchers for days out for the family might be the right incentive to show how they can spend money on an essential purchase and afford non-essentials at the same time.

This is just one example of how promotions can really help a retailer. There is a persuasive benefit and time-based incentive in the promotion that’s tied to an emotional response, tapping into the consumer’s motivation. If a consumer is ready to buy that sofa, but not feeling financially confident, they’ll be looking around for deals. The retailer who understands the mood of the moment, can win the sale. Achieving this can be very time-specific. Those family day out vouchers will be more attractive if offered at the start of the long school holidays rather than the start of a school term.

While that example is fairly obvious, getting the promotional setup right is often a complex matter. It’s not just about securing a deal that will appeal to consumers. Remember, when times are tough, the consumer’s primary motivation may well be not to buy that sofa, even if the money is earmarked for it.

And yet Opia’s own research has shown that customers are influenced to purchase by sales promotions.  In early 2021, Opia analysed a sample of circa 500,000 claims submitted across more than a hundred sales promotions across multiple markets and sectors to determine customer behaviours towards promotions.

More than eight out of 10 (84%) of customers say they are influenced by promotions to some degree, with 40% either strongly or very strongly influenced. Customers who respond to promotions tend to be those who are generally very engaged; they are actively looking for deals and can be influenced by an appealing offer. In today’s market, this is most consumers, which means there’s a receptive audience for brands embarking on new sales and marketing initiatives.

Promotions that have the most appeal, such as a gift with purchase where an attractive and relevant gift is offered with the product (a perfect example is a pair of high-end wireless headphones with a flagship smartphone) tend to drive significantly higher engagement and sign up to marketing communications (close to 50%) versus campaigns that may come across as more ‘transactional’ or even ‘cheap’, typically with a cash reward. The simple cashback offers show less brand engagement with sign up rates for future marketing coming closer to 25%.

Put customers front and centre

It might sound strange to advise retailers to take a customer-centric approach, but we see far too often that this key point gets overlooked. Understanding customers means understanding what motivates them, and this can make all the difference between promotional success and failure. No one size fits all and buyers in different parts of the world can respond differently to incentives. As such, there is no magic formula beyond the essential considerations to match the right kind of sales promotion to the sector/consumer/geography is of course essential.

Sales promotions are often most effective when multi-layered, and adapted to a commercial need: sales volumes are all very well, but not at the expense of margins that do not make commercial  sense; if it’s a new product promotion, ‘buy or try’ often works best; the higher value promotions will benefit from an expensive gift or higher cashback; if the objective is centred around increasing market share, then trading in a competitor’s brand for a new model of your own might also be an option.

You could decide to use different incentives, promotions or marketing strategies for different types of customer, for example those who are active and loyal, those who have recently switched to you from somewhere else and those who you think are prospects and might be in their research phase.

This strategy could be coupled with an understanding of the top consumer concerns of the moment – If you’re selling an electrical item, might some bundled smart energy management kit be a worthy promotional item as energy costs continue to be high, for example. Or if you are selling a TV, maybe bundling streaming services is a better option. Whether your promotion is a physical item or something delivered online, reliable fulfilment is paramount: a customer whose promotional items turn up late or don’t arrive is a very unhappy customer.

Find the right promotions partner

Once a retailer understands that discounting is a sub-optimal strategy, and promotions a good one, the next step is to put a promotions strategy in place. This is not without challenge for those who try to go it alone. We have touched on some aspects of the job, including the value of segmenting consumers by their relationship to the retailer, understanding different consumer motivations, sourcing promotional items, and getting both marketing and fulfilment right.

Moreover, promotions are unlikely to be a one-off for retailers. As they look to the short and mid-term futures, retailers may consider the market such that they need to think of promotions as a regular part of their business. Partnering with an experienced third party who can advise, source the right promotions at the right price, ensure fulfilment, manage the customer relationship, help with metrics analysis and act as a true partner could be the ideal strategy.  Make the right partner decision and your promotional activity will bring profit and nurture customer loyalty.

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by admin

Why brands must avoid a race to the bottom

Times are tough, profits are hard won and the temptation to win consumer wallets is to start discounting. This can be especially attractive if the business is focused on goods that have done well in the past, but are suffering today as consumers tighten their belts. These types of goods often include big ticket items like cars, household furniture, TVs, phones or laptops, but they certainly aren’t limited to slow moving goods categories, they could equally apply to anything that’s considered a luxury item, whether that’s food stuffs, toiletries or other items.

It is basic business sense that if people aren’t buying what you have to sell, the job is to make the product more attractive. Reducing price might seem like a good move, and it can work. But it isn’t the only way to attract a customer’s attention, and it is far from the best tactic.

Price cutting is a helter-skelter

When a retailer sets the price of goods it takes a lot of things into account, but at the heart of the calculation is maximising profit against what the market will bear. While price reduction might create a small bump in profit for a period, it can be dangerous in several ways.

In terms of the individual business, that small bump in profit doesn’t necessarily carry through to the end of the financial year. Rising costs in areas like manufacturing, distribution, storage, and any power and heating bills, as well as labour costs can wipe that profit bump out. Reducing profit while costs rise could be a recipe for insolvency.

Price cutting can have ramifications for the wider sector too. If a rival firm sees you doing well through price cutting, they might follow suit. Pretty soon the price for particular goods might be standardised across key retailers at a lower rate. Then what do you do? Cut again? How far down this spiral can any business go before it can’t go any further? When profit margins fall, the ability to invest, increase advertising, launch new products and more can all suffer. The slippery slope is a bit like a fairground helter-skelter. Once you are on it, going back is a real challenge.

The effect on brand image

Customers are highly focused on price, but that’s not all they care about. Quality is also really important to them. The rise and rise of cut-price supermarkets has shown that when a retailer can sell for lower prices and maintain high quality, customers looking to save but not drop their standards will move allegiance. But there is another side to this coin. Some food brands are highly prized, and people will pay more for them because of brand, not necessary because of superior quality.

So how does price cutting affect brand reputation? In the US, Tesla car prices have been cut several times this year, with apparently a positive effect on both brand reputation and sales. Tesla owner Elon Musk said “We found that even small changes in the price have a big effect on demand, very big.”. But Tesla is a rich company, and it has a huge economy of scale when it comes to vehicle production. It has also said it is in the business of cutting the cost of its next generation vehicles in half. So cost cutting is part of a wider and well publicised strategy.

For most businesses, the situation is different. Price and brand value are intertwined, and customers need to trust that the price of a good has been set fairly. If you look at a range of basic commodities like TVs, laptop computers, fridges, cars, you’ll see similarly specified goods at a range of prices within a narrow band, with maybe an outlier or two at the value and premium ends. Brand matters at all points along the spectrum.

So, if one brand cuts prices, it might make sales. But when it decides to raise prices again, consumers may respond with a raised eyebrow, and question the change: Why has the price risen? Does the company need to increase profit? Is it in trouble? If it fails what happens to my after-sales service? Or is it just profiteering?

Differentiation and profitability through promotions

If discounting is a poor option for most businesses, what can they do when times get tough? The answer is get a promotions strategy in place. Targeted promotions, which offer the customer a focused additional benefit alongside the goods they want, can be hugely effective.

That TV purchase which has been put off for a year but now comes with a free streaming subscription might be very appealing. The new sofa that includes a heavy cashback on the old one, plus its removal to a charity or recycling facility might be enough to seal the deal. The dishwasher that comes bundled with a hefty supply of dishwasher tablets could win the day.

Promotions like these don’t reduce margins for the retailer, and they can be managed in a highly sophisticated way – time specific, customer targeted, and with third party suppliers who are only too happy to include their goods with yours.

Partnering with a company whose entire business model is based on running promotions, from goods sourcing to campaign management and fulfilment, can ensure a retailer maintains profitability and offers customers truly differentiating value.

Forget the race to the bottom that is discounting. Join the race to the top that is brand value enhancement through promotions.

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by admin

Fraud in retail promotions is a growing threat

Promotional fraud, like other forms of fraud in retail, is on the rise. Ravelin’s Online Merchant Perspectives Fraud & Payments Survey 2022 revealed that digital sales fraud continued its rising trend in 2022, and around 62% of merchants saw new fraud types emerge. Promotions abuse was said to be on the rise by 55% of those surveyed.

The cost of dealing with fraud is far greater than the cost of just ‘taking the hit’ on profits; according to Lexis Nexis’s True Cost of Fraud report in the US, every $1 of fraud costs retail and ecommerce merchants $3.75. While the attitudes towards fraud have always been a balance between zero tolerance and an acceptance that closing the fraud window completely isn’t feasible, in the current economic circumstances, as brands and merchants feel the financial pinch, many are less able to absorb the cost of fraud even at low levels.

Fraud is not a victimless crime.  Vendors who take the hit experience shrinkage – i.e. reduced profit levels – and must increase their overall costs, which get passed onto customers. For example, if a fraud is based on a free goods or an introductory offer promotion, and fraudsters take the free or low cost goods and cancel a subscription after the promotion ends, a vendor has not only given away goods, it has lost new business. And if a vendor is subject to a particularly significant, focussed fraud that is publicised, its reputation may suffer.

Types of promotional fraud

Fraud is present on most promotions. The industry standard for banking is a fraud rate of less than 5% of customer contact, this provides a benchmark for other industries and a typical fraud rate for retail promotions is between 0.3 to 0.7% of claims, with 3 to 5% of claims requiring investigation.

Fraud analysts focus on the Fraud Triangle, comprising motivation, rationalisation and opportunity. As far as brands and retailers are concerned it is opportunity that must be the focus for fraud prevention, because this is the only part of the triangle they have any control over.

Brands and retailers must ensure that fraud prevention is an active part of every promotion. Some types of fraud are much more prevalent than others, and these are often extremely easy for people to put in place, and so it is very important for vendors to be aware of them and watchful for them.

The most common types of fraud are:

1. Falsely modified documents: a fraudster edits documentation relating to a real purchase in order to claim a promotional reward – buying a low value item and making it look like they have bought the more expensive item that qualifies for the reward. Spotting edited documentation is incredibly difficult using the human eye alone. Factors such as the sophistication of readily available editing software and simple human fatigue come in to play. But our software tools are faster and more efficient at flagging potential fraudulent submissions, and once identified, we can investigate further.
2. Malicious returns: these scams occur when a person purchases an item from a retail store or online, immediately claims the promotion, but with the intent to return it immediately or use duplicate receipts to get the money back and the promotion.
3. Maximum redemption limit: the fraudsters use promotional codes many times, using multiple email addresses, or multiple home delivery addresses, for example. A human would struggle to correlate the many variables that can be at play here, but our software tools can do this task as a matter of course, on every promotional code redemption, not just on a random subset.

Threat analytics and promotional understanding go hand in hand

To understand promotional fraud, it’s important that the fraud team understands the promotion itself, including the relevant purchases and mechanics. Unlike other merchant frauds, promotional fraud is very unique. Threat analytics help to flag suspicious activity and trigger alerts – based around digital identity, IP addresses, browsers and hundreds of combinations of data – but it’s the threat analysts themselves that have to investigate and take action or allow the customer transactions to go ahead.

That is an equally important consideration: the customer journey has to remain frictionless. Fraud governance can’t be so severe as to make the act of claiming a promotion too difficult for legitimate customers as that impacts negatively on the brand. Hence, it’s important to risk assess every promotion based on the type of promotion, mechanic, value, volume of claims expected and speed of fulfilment.

This has never mattered more. All promotions are different, all vendors are different. The trend for fraud is upwards, not downwards, and vendors are more conscious than ever of the fact that finances are tight, and profit margins at risk. When putting promotions in place, brands and merchants need to know that their in-house fraud teams are supported by specialist teams with the experience to spot and prevent fraud in high profile promotions campaigns.

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by admin

Financial Frugality and the Technology Device Market

The global economy is not having a great time at the moment. In January 2023 the International Monetary Fund (IMF) forecast that global growth for the year would be 2.9%. The predicted rise in 2024 is slight at 3.1%. Advanced economies will be hit hardest says the IMF, with growth forecast at just 1.2% this year, down from 2.7% in 2022.

When this trickles down to individuals, it is often in the shape of rising costs across many sectors:  energy, food, fuel, entertainment, and the purchase of essential and non-essential items. Not surprisingly, consumers are hunkering down, budgeting carefully, and in many cases wondering where they can cut back.

What this means for technology sales

When it comes to the tech sector, people are holding onto devices for longer and postponing upgrades. Some reports already put the average age of a phone at trade-in at over 3.5 years and the next year or more will be a tough market. Canalys figures for Q4 2022 show worldwide smartphone shipments fell 18%, the wearable band market fell 18%, smart personal audio fell 26%, and PC shipments (desktops and notebooks combined) fell 29% (and down 16% across the year).

With so many consumers taking a much more careful approach to spending, it is important for technology vendors and retailers to consider the margins and value of products they offer, providing the right mix from an affordable ‘value range’ through to premium products, avoiding any duplicate ranges between price points. Significantly, GFKsays that in the tech and durables sector across Europe both high and low income customers rate price as the most important purchase factor (70% and 78% respectively), with product features running a close second (67% and 61%). Desirability characteristics might relate to a strong feature set, filling a gap in what is already owned, or providing a necessary upgrade.

Those involved in technology product marketing and sales will need to work hard in this environment. While they can’t change the wider economy, they can adopt strategies that can help maximise sales volume and revenue. Slashing prices can stimulate customer interest and action, but it can also create immediate impacts elsewhere that are hard to recover from, such as price competition and devaluing brand perception.

Develop laser-focus and pare down the offer

During any downturn, products benefit from a strong focus on value. Marketing and promotions must articulate a straightforward value proposition of product benefits in relation to cost.

Sensibly priced promotions can help shift inventory that is unsold, even as consumers reduce spending. But the strategy needs to be thought through. For example, it can be effective to bundle low margin, high stocked items alongside other products to show value and create demand.

Paring down the offer might also be helpful for vendors in some technology sectors. For example, instead of having five or more price points for different offer combinations or service levels, bring it down to three – entry, mid-market and premium. Work out where the main profit will come: premium ranges often remain resilient in downturns.

Make informed, strategic decisions on whether to offer discounts, trade-in offers, reward vouchers, loyalty bonuses, or use other means, targeting specific segments with the most appropriate offers – and be very realistic about both likely take-up and margin per transition. Know what inventory sits unsold, the cost of storage, and decide on the mix of profit, dispose at cost or loss lead as the way to go. Now more than ever it is also important to be agile. Fail fast may be something of an overused phrase, but deploy the strategy wisely. Watch competitors and react where that seems appropriate by tweaking your own strategies. Understand potential cross sell opportunities.

Technology vendors must avoid empty messages that fail to resonate or turn-off consumers, such as a derisory discount in the face of the headline inflation rate, of which consumers are well aware thanks to their personal cash flow and the media. If a gift is offered, keeping it super-relevant to the purchase item and marketing it well might mean an item sourced at a relatively low cost brings in a high take-up and strong profit. On the other hand, you might consider a strategy is successful if it helps more with brand-building than profitability.

Avoid over-reacting to competitor discounts

84% of customers are influenced to purchase by sales promotions, according to Opia’s research, and promotions bring on board both brand switchers and new customers as well as providing existing customers with an incentive not to switch.

While of the many options available, discounting sits in the mix, at all costs avoid a “fire-sale” mentality. Huge price reductions can suggest to consumers that the seller is struggling or that their profit was vastly inflated before the reduction – or both. Brand loyalty can take a nosedive in this situation. As the old saying goes, trust takes years to earn, minutes to lose.

One company taking a fire-sale mentality is bad for the company. Another following suit, and then another in a fight to win customers is bad for the sector. In a race to the bottom like this nobody wins. Short term financial gains for the consumer quickly turn into long term profit erosion, reduction in product and service quality, consumer dissatisfaction and a sector in freefall.

The coming months won’t be easy for technology vendors and their industry partners selling the goods. Those with well formulated promotional strategies, who are prepared to be agile in the face of customer response, and who understand the consumers they are selling to as well as the nuances of profitability and brand-building to a granular level with each promotion they run, have the greatest opportunity to manage inventory and remain profitable.

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by admin

Effective Promotions in a Downturn

Hitting commercial objectives in retail has never been easy and there’s no doubt that it’s harder right now. According to global retail analysts GfK in its State of Consumer Technology report, only 20% of consumers consider it is a good time to make a purchase; almost half (43%) believe it’s better to wait.

Globally, there are tough times across all market segments and the ‘non-essential’ or big-ticket items in the Slow Moving Consumer Goods segment face some particular challenges. The total sales value of consumer technology declined 5.5% in the first half of last year, compared to the same period in 2021[1], sowing the seeds for a downward trend that has maintained since then. Likewise, industry analysts Gartner said worldwide PC shipments declined 28.5% in Q4 2022, its steepest decline since Gartner began tracking the market in the mid-1990s[2].

Despite some recent glimmers of hope that show UK and EU consumer confidence is improving, though US confidence fell again in recent months, many retailers are gloomy about their prospects. However, the bottom line is that though confidence is low, consumers are still willing to invest in products and brands and retailers must learn to navigate this landscape through relevant sales strategies.

There are three main business pressures facing them:

• Bigger drop in demand than expected
• Unrealistic expectations to perform in comparison to the post-Covid boom
• Stock and Inventory build-out in the channel while corporate HQ Is considering new / adjusted products to launch to the market to respond to change in demand.

The danger is that as demand drops it can be tempting to resort to fire sale discounts and huge price drops. Brand managers and retailers must resist. Consumers often don’t realize the magnitude of the price cut or they don’t even notice the reduction at all. What’s more, price drops risk squeezing margins even further as inflation pushes costs up from manufacturing and throughout the supply-chain. In this sense, fire sales are a race to the bottom, often sparking a price war, with a consequential and unsustainable impact on revenues and profitability.

Instead, sales and marketing teams within brands and retailers need to look at the mix of levers they can pull to get customer attention, stimulate interest and desire, and lead the customer to take action and purchase. The successful brands will be the ones that take a consumer-centric approach to the value they offer. The message is simple: if consumers are going to spend, give them reasons to spend with you.

Retailers can drive demand by focusing on affordability solutions, such as trade-in of old devices to reduce upgrade costs, bundling accessories, or offering rewards which help towards food, fuel and energy bills or even holidays, gift cards or cashback.  And they can provide greater reassurance to customers with solutions that don’t impact on margins, such as reliability promotions, warranty upgrades and satisfaction guarantees, which can all drive differentiation and offer peace of mind to customers.

• Cashback promotions highlight the discount, not the reduced price point, creating an irresistible promotional prospect for customers: a specially reduced and time-limited deal, which motivates purchases and delivers a substantial increase in product sales over the longer term.
• Gift with purchases and bundles are a great mechanic in a challenging economy to drive down stocks and uplift sales.
• Buy and try promotions reassure potential buyers that the risk of purchasing is reduced by giving consumers a risk-free, no-obligation trial period. It is proven to drive action and increase average unit prices.
• Trade-ins incentivise customers to upgrade their old equipment via a conditional, time-limited reward in cash or as a gift.
• When bought with… promotions give consumers a credible percentage discount at the point of purchase to drive uplift in sales of accessories, increase the total order value and inventory turnover.

Getting the right approach to incentives is a careful mix of art and science. There has never been a single lever. One incentive-based sales campaign might be part of the long-term strategy, and another might be set up, managed and closed over a short period to take advantage of an unexpected opportunity.

The major benefits of these promotions during a downturn are that they can generate demand and trigger customers into action. More than that, they enable you to be relevant to customers right here and now and show that you understand why they might otherwise delay a purchase.

If we have learned anything from previous recessions, it’s that over-relying on price discounts is a one-way street to lower margins and brand perception. There may need to be changes to the product mix or prioritising different audiences to protect margins, but by pulling these promotional levers we can reassure customers, demonstrate added-value and stimulate demand. All of which puts brands and retailers in a much better position to outperform against market expectations and emerge stronger as the economy recovers.

[1] Source GfK State of Consumer Technology and Durables report (November 2022)

[2] Source Gartner PC Quarterly Statistics Worldwide by Region (January 2023)

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Stay Connected to Your Customers

Help them embrace change

Businesses around the world are accelerating adoption of remote working technologies, providing their teams with new and innovative ways of interacting with their colleagues to get the job done.

To help you to bring the biggest benefit to your customers, the team at Opia have developed a suite of gifting incentives and promotional ideas for clients and staff to help you remain relevant and drive preference & loyalty during these challenging times.

Read more

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