How analytics can help optimize your discounting strategy

Employing a discounting plan, as most marketers would agree, is like walking on thin ice. Often emerging from the pressures to attract higher sales volumes, if not done right, discounts can stack up losses instead of returns.

Poor visibility into the real profitability of these initiatives, across customers and complex channels hampers the potential of this tactic. This compels firms to lean on past experiences and conventional yardsticks for critical decisions, resulting in increased risk exposure, reduced margins, and missed opportunities.

Here’s where discounting analytics is taking over. By fusing the two, businesses can create a mechanism that tracks both sales effectiveness and customer value to retain, if not scale margins and customer traction. Given that customers are switching between brands more effortlessly than ever before, tracking their purchase drivers is immensely critical.

A deep dive into their purchase history and demographic details will provide tangible insights into the kind of potential discounts that would click with specific audiences. A more granular segmentation basis their spending propensities and geographic placements can give a brand a clear understanding of their buying power.

A true story

That’s exactly what one of our clients wanted to achieve. Being a global fast food restaurant chain in a hyper-competitive environment they sought answers to these three business questions:

• How engaged are customers with my brand?
• How can I reduce my discounting without affecting my top line?
• What makes them repeat their purchases/stay loyal to my brand?

After an analytics deep-dive the restaurateur hit the market with:

• A list of customers most likely to transact over next one month
• Selective discounting schemes for these potential transactors

These insights also enabled them to craft a tailored discounting campaign, slashing 21% of their discounting overheads and translating to sizeable revenue growth.

For an in-depth understanding of how this restaurateur optimized its discounting to boost returns download the case study.

Finding a sweet spot

For discounts to be effective, evaluating how low businesses can go on margins without affecting profits and brand image will be critical. Studies suggest that if a product is highly discounted always, customers perceive that the brand is making higher margins. This devalues the brand in their minds.

Therefore, understanding what value offering your brand makes in comparison to competition will help better determine your discounts. Analytics helps factor in such value drivers at scale to predict a discount’s impact across customer segments.

Customized dashboards that help visualize this impact, enable sales and marketing executives to stay agile and render decisions basis evolving market conditions. Moreover, scenario-specific models also help keep uncertainties at bay – like price-change-driven demand volatility; and look under the hood for potential opportunities to boost profitability.

In a nutshell, analytics takes the guesswork out of your discounting strategy. By establishing a system to tailor offers, businesses will be able to prioritize customer conversions and loyalty without losing sight of their long term business goals.

Netscribes helps brands harness maximum value out of their pricing and marketing investments with advanced analytics solutions. To request an analytics consultation write to info@netscribes.com