Promotions: How to Boost Sales Without Lowering Prices

Trust, familiarity, closeness. These are some of the characteristics that distinguish the traditional channel. We are referring to neighborhood stores, local commerce; that place where customers know and maintain a close relationship with the person who serves them. There are usually no major marketing tools or tempting offers there, but the incentive to buy is in the connection.

For many years, mass consumer companies did not pay attention to the traditional channel, they did not see it as a niche to apply trade marketing strategies through promotions, step-by-step discounts, and combos. Is it unnecessary to invest in it or are they missing out on a great opportunity to increase sales?

Perhaps one of the biggest drawbacks to implementing this type of strategy is the lack of information. The very informal nature of the traditional channel makes its system precarious, less professionalized and standardized. But today things are changing: access to new technologies and advances in artificial intelligence offer clear and precise guidelines to redefine business strategies. How do they do it?

The Role of Promotions in the Purchase Decision

Promotions are stimuli towards various senses. From the consumer company’s side, the application of a promotion can fulfill different functions:

• Present and promote new products to consumers
• Establish a strategic product basket
• Move excess accumulated inventory
• Build loyalty with consumers
• Accelerate and increase overall sales

The promotion strategy impacts both the merchant and the end consumers. For the former, it will function as a strong incentive when offering the company’s products. It is important to highlight that the relationship is based on trust, and a suggestion from the store owner will be listened to and very well received by the customers.

On the consumer side, promotions are a clear incentive for purchases. Usually, people who go to the traditional channel already know in advance what they are going to buy. The fact that they come across a promotion will provoke a stimulus to take advantage of it. Accessibility is one of the most valued criteria for consumers.

What Promotions Work in Neighborhood Stores?

As we have pointed out, mass consumer companies have a valuable opportunity to manage their promotions specifically aimed at the traditional channel. This strategy has not been fully explored and there is certainly a lot to be done. For this, it is necessary to work hand in hand with the merchants, giving them tools to boost sales.

What type of promotions can be applied in neighborhood stores?

• Reduced prices: without entering into a notorious price war, implementing a reduced price strategy may have an effective response in two ways: either the price reduction is passed on to the final price, stimulating the consumer, or the merchant will maintain the regular price, generating greater profit and motivating them to recommend these products.
• Step-by-Step Discounts: this consists of offering better prices as the purchase volume increases. They tend to be highly effective, as neuroscience stimulates these initiatives.
• Combos: the combination of two related products is key to influencing the consumer’s purchase decision process. For example: beer and snacks, alcoholic beverages and sodas, coffee and milk.

Technology to Know Customers: What Products to Sell and How Much to Sell?

The key to applying a promotion strategy in any distribution channel lies in the information the company has about its consumers. Offering personalized promotions for each customer, based on which products to promote, allows CPGs to optimize their proposals, managing to make the promotions profitable not only by «lowering the price» but by selecting which products offer better margins and how to combine star products with those of lower turnover to accelerate purchase incentives for the end consumer.

Understanding individual behavior and being able to dynamically adapt it to changes in interests, seasonality or other habits, allows CPGs to apply the proposed commercial strategies.

But, how do we gather and analyze all this information when we work in an informal modality like the traditional channel?

New artificial intelligence technologies can solve this obstacle. Managing store sales through digital systems allows collecting data on product performance and recognizing patterns of customer behavior, within multiple variables.

The analysis of various variables (for example, quantity and type of product, sociodemographic information of the area, etc.) allows knowing the consumers and directing the commercial strategy with precision.

The collected information can be visualized through a dashboard and the artificial intelligence system itself analyzes the variables to offer recommendations and alert about clients who are in danger or have fled. These last ones are very useful for managers and sellers, as they can use them to establish different modalities of promotions in the traditional channel. For example:

• Combos: the system analyzes the best product combinations based on concrete data. The company increases profitability and improves inventory turnover.
• Promotions: the technology has the ability to identify the performance of each product and its incentives to know what type of promotion is most convenient.
• Step-by-Step Discounts: the technology allows to easily and simply configure the discounts according to the quantity of products sold, simplifying the work of the sales force and offering personalized recommendations to the merchant.

Finally, the artificial intelligence system, on the one hand, provides commercial managers with a clear and complete visualization of the performance of each promotion campaign to know if it is effectively fulfilling its objective. It also allows measuring product retention to know if the sale is maintained after the campaign is over. On the other hand, it allows the salesperson to offer what to sell and how much to sell, understanding the purchase frequencies to guarantee the supply of their merchant.

Today, technology is changing the way the traditional channel is worked. Managers now have the possibility to work with innovative tools to boost sales and fulfill their commercial strategies.

A promotion policy developed from data collection, artificial intelligence and machine learning will result in a significant improvement in the performance of each product marketed, increasing the product mix, retention and acquisition of new customers, finding the perfect balance between my brand’s objectives, the store’s needs and the customers’ desires.