Promotions
Analysis of Customer Response to Simple and Complex Promotions
Analysis of Customer Response to Simple and Complex Promotions The value you convey to your customers is a key input into the success of achieving
June 9, 2022
Fresh item promotion planning presents unique challenges and opportunities for merchants and marketers in the retail industry. Unlike center store products with predictable costs and planning cadences, fresh items are highly sensitive to market conditions, making decision-making a complex task.
In this article, we will explore the nuances of fresh item promotion planning, the pain points faced by retailers, and potential solutions to overcome these challenges. Additionally, we will emphasize the value of analytics in empowering merchants and marketers to make informed decisions and optimize their promotional strategies.
To embark on an effective fresh item promotion planning journey, it is crucial to grasp the diverse categories of fresh items. We can broadly classify them into three categories:
Highly seasonal items, such as cherries in June, whole turkeys for Thanksgiving, and corned beef roast for St. Patrick’s Day, have specific periods of high demand. Seasonal items like peaches in Summer and pears in Fall experience fluctuations in demand based on availability. Year-round products such as apples, bananas, and onions have a relatively stable demand throughout the year. Retailers must adapt their promotions and marketing efforts to align with the unique characteristics of each category.
Build-to-sell products, including pasta salad, sandwiches, bread, and donuts, involve a recipe-driven approach. The initial unit cost of these products is influenced by the ingredients used. To anticipate market changes effectively, merchants require the ability to adjust ingredients or final costs. This flexibility enables them to respond promptly to cost fluctuations and optimize profitability.
Break-to-sell products encompass categories like meat and seafood. These items are associated with primal-to-cut yields, where a primal is transformed into sellable cuts.
For example, beef ribs can be divided into short ribs and thin-cut short ribs. The challenge lies in promoting all the cuts belonging to a primal together to prevent substantial wastage.
Merchants need a promotional strategy that aligns expected demand with the yield mix of the primal products. This ensures optimal utilization of inventory and minimizes loss.
Fresh item promotion planning is not without its hurdles. The following challenges demand attention and strategic solutions to navigate the complexities of this domain:
Cost fluctuations pose a significant challenge in fresh item promotion planning. Various factors can contribute to sudden changes in costs, including availability, transportation, regulations, and seasonal variations. For instance, commodity costs may increase due to low availability caused by drought or decrease due to surplus availability resulting from exceptional weather conditions. Fluctuating costs directly impact pricing strategies, profitability, and the overall success of promotions.
Availability constraints can disrupt planned promotions and impact sales. Factors such as product recalls, transportation accidents, seasonal influences, and sourcing relationships can affect the timely availability of fresh items. Ensuring consistent availability is crucial to meeting customer demands. Additionally, retailers must manage sourcing relationships effectively to secure advantages and avoid delays, ensuring their products reach the market promptly.
Labor shortages pose challenges in fresh item promotion planning. Factors like seasonal demand surges and limitations in the available workforce can strain production capacity. Retailers must manage labor resources efficiently to meet promotional demands. Overcoming labor constraints requires optimizing production processes, ensuring effective workforce allocation, and exploring strategies to attract and retain talent.
To overcome the challenges of fresh item promotion planning and maximize value, retailers should consider implementing the following solutions:
Flexibility is key in adapting to market conditions and sudden changes. By integrating a flexible planning process, retailers can adjust their promotions and marketing events just in time. This approach enables them to respond swiftly to cost fluctuations, availability issues, and labor constraints, thereby optimizing promotional outcomes.
To make informed decisions about build-to-sell products, additional metrics must be incorporated into the planning process. Retailers should have a deep understanding of recipes, batch sizes, underlying costs, and the impact on lost sales and wastage based on the committed batch sizes. This analysis empowers merchants to make data-driven decisions, balancing potential loss against sales volume.
Aligning promotional plans across various cuts of break-to-sell products is vital to maximize sales and minimize wastage. By understanding the overall yield percentages of primal products and their cuts, merchants can develop strategies that align with customer demand. This enables retailers to optimize the utilization of inventory and achieve a balanced mix of sales across different cuts.
To effectively address the challenges and implement the suggested solutions, analytics plays a vital role. Leveraging data-driven insights empowers merchants and marketers to make better decisions in fresh item promotion planning. Analytics can provide valuable information on market trends, pricing dynamics, supply chain performance, and customer preferences. By harnessing the power of analytics, retailers gain a competitive advantage, enabling them to optimize sales, reduce loss, and enhance customer satisfaction.
Fresh item promotion planning demands a comprehensive understanding of market dynamics and effective decision-making strategies. By acknowledging the challenges associated with fresh items and embracing flexible planning processes, retailers can navigate the complexities of this domain. The integration of analytics enables merchants and marketers to make informed decisions, align their promotional strategies, and optimize sales and profitability. With the right approach and tools in place, fresh item promotion planning becomes a catalyst for success in the dynamic retail landscape.
About Cognira
About Cognira
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