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Mastering Promotional Pricing: Proactive Holiday Strategies to Protect Your Profits

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Navigating holiday retail pricing strategies during times of economic uncertainty requires a delicate balance between reacting to market conditions and maintaining profitability. As we approach a period characterized by the looming U.S. presidential election, inflationary pressures and fluctuating interest rates, retailers must adopt a more refined, agile and data-driven approach to pricing and promotions.

Fine-Tune Competitive and Promotion Strategies

Retailers need to first identify key categories or regions that drive traffic, build baskets and boost profits. By segmenting products based on these criteria, brands can make informed decisions about where to apply promotional discounts versus maintaining competitive regular prices. This segmentation allows for margin harvesting where appropriate, while ensuring that high-traffic or high-profit categories remain attractive to customers.

In a competitive landscape, knowing which categories to promote and which to hold steady is essential. During periods of uncertainty, it’s tempting to cut prices across the board. However, a more strategic approach would be to promote items that drive foot traffic or online visits while maintaining or even increasing prices on products that consistently build basket size or are high margin. Retailers should leverage their data to identify these key products by category, region and channel and refresh the analysis frequently across various cohorts.

Optimize Seasonal Promotion Plans

Seasonal promotions are a staple in retail, but not all promotions are created equal. Retailers should use historical data to understand the effectiveness of past promotions. Did a particular discount drive sales one season but fall flat the next? By quantifying baseline sales versus incremental sales, including factors like cannibalization and halo effects, retailers can fine-tune the depth, timing and vehicles of their promotions to maximize impact.

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It’s also important to avoid repeating promotions that didn’t work well in the past. Instead, retailers should optimize their promotions based on data-driven insights, adjusting them for the specific nuances of each season. The effectiveness of a promotion can vary significantly based on timing and duration. What works in one period may not be as successful in another, and running a promo for five days rather than three, or vice versa, can make a dramatic impact. This strategic approach to promotion planning can help retailers avoid unnecessary discounting while still driving sales during peak periods.

Refine Customer/Loyalty Promotions

Loyalty programs and customer-specific promotions can be powerful tools for increasing customer lifetime value (LTV). Retailers should focus on defining and refining customer segments to understand the impact of promotions on these groups. Are certain promotions more effective at increasing basket sizes, while others drive more frequent visits?

Understanding the unique preferences and behaviors of different customer segments allows retailers to tailor their promotional efforts more effectively. For example, a discount on a high-margin product might encourage frequent shoppers to add it to their basket, while a special offer on a new product could entice infrequent customers to make a purchase. By optimizing loyalty and customer-specific promotions, retailers can grow baskets, increase trips and maximize long-term value.

Optimize Markdowns Proactively

Markdowns are a necessary part of retail, but they should be approached with a proactive strategy. Retailers need to identify slow-moving items early in the season and begin markdowns before they become a significant burden on inventory. Starting markdowns earlier can help avoid the need for deeper discounts later in the season, which can erode profit margins.

For other products, retailers should dynamically adjust the depth and cadence of markdowns at the SKU or store level based on in-season performance and inventory levels. By quickly reacting to sales trends and inventory data, retailers can maximize sell-through and profits, ensuring that they don’t end up with excessive unsold stock at the end of the season.

In an environment of uncertainty, a one-size-fits-all approach to pricing and promotions is no longer viable. Retailers must leverage data and artificial intelligence tools to fine-tune their competitive strategies, optimize seasonal promotions, tailor customer and loyalty programs and proactively manage markdowns. By adopting a more strategic and data-driven approach, with a seamlessly interconnected AI-native platform, retailers can not only navigate the challenges of the current economic climate but also emerge stronger and more profitable.


Maggie Williams Dryden is the VP and Global Head of Marketing for Impact Analytics, with over 20 years of experience and leadership in driving value for growing organizations. Prior to joining Impact Analytics, she dedicated over a decade to leading and expanding various marketing functions for enterprise software companies specializing in supply chain and IoT technology including Manhattan Associates, e2open, Cloud Logistics and Numerex. A certified sommelier, she holds a B.A. in journalism with an emphasis on strategic communications from the University of Minnesota and currently resides in her home town of Atlanta.

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