Creating an eCommerce promotions strategy

In eCommerce, the click of a button can seal a deal or lead to the disappointment of cart abandonment. The need for a robust, well-thought-out promotions strategy cannot be underestimated.

According to research by 2 Visions a staggering 62% of shoppers wait for discounts on clothing before making a purchase. Promotions aren't just a part of the eCommerce game; they're often the game-changer.

Promotions go beyond mere price reductions; they're sophisticated tools that, when leveraged correctly, can significantly enhance customer loyalty, brand visibility, and, ultimately, sales conversions.

However, the effectiveness of these promotions hinges on a nuanced understanding of your audience, precise timing, and the optimal mix of promotional tactics.

Considerations for deciding on a promotions strategy

When formulating your promotions strategy, several critical factors need a thorough evaluation to ensure that the chosen method aligns with your overall business goals without diluting your brand's equity or profitability.

Some of these considerations include:

• Brand identity and positioning
  Understand how discounts and promotions fit within your brand's identity. Luxury brands, for instance, might limit discounts to maintain exclusivity and high perceived value, whereas fast fashion brands might use promotions to drive volume and customer acquisition.
• Profit margins
  Calculating how discounts can impact your profit margins is vital. Deep discounts may drive sales volume but can also erode margins if not carefully balanced. Analyse different discount levels to find a sweet spot that increases sales while maintaining healthy margins.
• Customer expectations and behavior
  Gauge how your target audience responds to promotions. Some customers may only purchase discounted items, which could affect long-term profitability. Identifying and understanding these patterns will help craft offers that appeal to your customer base without discouraging unfavorable buying habits.
• Existing use of offers
  Review your current promotions strategy and its effectiveness. Analyzing past promotions can uncover insights into what works and what doesn't, helping to refine future strategies.
• Competitive landscape
  Keep an eye on your competitors' promotional activities. Staying competitive without engaging in a race to the bottom requires strategic thinking. Discounts should ideally differentiate your brand rather than match competitors' offers.
• Inventory management
  Promotions can be a tool for efficiently managing inventory levels. Strategic discounts on overstocked or seasonal items can free up warehouse space and improve cash flow, but ensure this doesn't negatively impact your brand's perception.

These considerations play a significant role in shaping an effective and sustainable promotions strategy that attracts customers and supports your business objectives and brand positioning.

Choose your approach to eCommerce promotions

Adopting a methodology that aligns with your brand ethos and business objectives is critical when discussing discounts within your eCommerce promotions strategy.

Your approach could be:

• No discounts (other than big sales)
  Some brands avoid discounts altogether, focusing instead on their product's perceived value and exclusivity. This approach can help maintain margins and brand prestige. However, all brands tend to run a sale at some point.
• Discount-led
  A discount-led strategy might be effective for businesses aiming to attract price-sensitive consumers. This could involve regular sales, flash deals, or loyalty discounts to drive traffic and increase purchase frequency. However, caution is advised to avoid undermining perceived value.
• Strategic discounts
  Implementing discounts with strict criteria can help maintain profitability while using savings' appeal. Criteria could include minimum purchase amounts for eligibility, time-bound offers to create urgency, or exclusive discounts for newsletter subscribers or first-time purchasers. This approach encourages more strategic consumer shopping behaviour and can help build a loyal customer base.

Overwhelming consumers with elaborate promotions, discounts, coupons, and loyalty rewards can weaken consumer loyalty, tarnish brand reputation, and suppress new revenue opportunities. Instead, retailers should adopt a streamlined, customer-centric approach.

Smarter Retailer Promotions for a Saturated Market, BCG

Choosing the right discount strategy requires a deep understanding of your target market, competition, and profit margins. It's a balance between attracting customers and preserving the long-term value of your brand.

eCommerce promotion types

• Percentage-based discounts
  This involves offering a specific percentage off the original price, such as 20% off all purchases.
• Value discounts
  This is similar to percentage-based discounts, but a fixed amount is deducted from the original price instead of a percentage. For example, $10 or £10 off on all purchases. We tested with US Polo Assn to determine which worked best.
• Stretch & Save
  Offer discounts or special offers when people hit tiered spend thresholds—e.g., 10% off when they spend £100 or 15% off when they spend $200, just like Shop4runners.
• Free shipping
  This involves offering free shipping on all orders (usually with a minimum spend) to entice customers to purchase.
• Buy one, get one free (BOGOF)
  Offer customers a free item when they purchase one at full price.
• Bundled deals
  Group related products together and offer them at a discounted price. For example, a "summer essentials" bundle with sunscreen, sunglasses, and a beach towel.
• Loyalty programs
  These programs reward customers for their repeat purchases or reaching certain spending thresholds.

Implementing your eCommerce promotions strategy

Understanding your audience - segmentation and personalization

Know thy customers, for they are not a monolith. eCommerce thrives on data, allowing retailers to segment their audience based on shopping behavior, preferences, and past interactions with the brand. Personalization elevates the shopping experience, ensuring the right deals reach the right eyes at the right time.

Timing and planning - seasonal vs. evergreen promotions

While seasonal promotions can ride the wave of holiday shopping frenzies, evergreen promotions ensure steady engagement throughout the year. Timing is everything, and planning your promotions calendar is important in itself. It ensures that your deals capture interest and align with consumer demand waves.

Tools and best practices

Execution is key. With many tools at your fingertips, from email marketing platforms to social media analytics, implementing your promotions strategy can be precision-targeted. Best practices include A/B testing, leveraging user-generated content, and optimizing for mobile.

Measuring success - KPIs and analytics for promotions

What gets measured gets managed. Key Performance Indicators (KPIs) such as conversion rates, average order value, and cart abandonment rates offer invaluable insights into the performance of your promotions. Analytics inform current strategies and pave the way for optimization in future endeavors.

To ensure your promotions strategy delivers value, measure incrementality through, for example, control groups. It's important not just to look at the easy-to-measure things but to really dive into whether your promotions increase revenue and not just convert people who would have bought anyway.