Almost every retail brand has used mass promotions. Have you offered one or more of the following on your online store:
- 20% off sitewide
- 30% off on all products within a Collection
- 20-50% off on select products
The above-mentioned promotions are referred to as “mass promotions”, as they are offered to all your customers in an effort to reach as many of them. Mass promotions are heavily relied upon to increase sales. In fact, the Boston Consulting Group (BCG), a global consulting powerhouse, notes that mass promotions tend to account for 10-45% of the total sales, and as high as 80% based on our own experience working with small and medium size brands Although mass promotions are a powerful instrument for increasing sales and profits, they are also difficult to use effectively. In fact, BCG research has shown that 20-50% of discount promotions generate no noticeable increase in sales, or worse, have a negative impact. Another 20-30% reduce profits, as they don’t generate an increase in sales sufficient to offset the discounts offered.
mass promotions tend to account for 10-45% of the total sales, and as high as 80% based on our own experience working with small and medium size brands
There are significant drawbacks to mass promotions, and we’ll highlight the top 3.
Drawback #1: Lack of a defined objective.
Most brands don’t set a specific objective to achieve with their mass promotions. Are you trying to:
- Spurr traffic
- Improve price perception among customers
- Raise sales or profits
- Boost customer loyalty
- Enhance brand awareness
Without a clear objective, you are not setup in a way to measure the effectiveness of your mass promotions, and that brings us to Drawback #2.
Drawback #2: Inability to measure effectiveness.
In order to effectively measure the effectiveness of mass promotions, you first need to determine what metrics to track to deliver on the objective you set out to achieve. Once these metrics are determined, you now need to assess whether or not the mass promotions are delivering the expected results. This analysis ought to consider discount levels, seasonality, and cannibalization (the sales that promoted products took away from similar products), to name a few.
Unfortunately, brands tend to repeat promotions, year over year, as it is an easy and safe approach to planning, but it does limit the ability to evolve the promotions and improve their performance over time.
Drawback #3: Ignoring customers’ needs and desires.
With mass promotions, by definition, you’re trying to appeal to all customers at once, and inherently, you are ignoring each customer’s needs and preferences. Yet, 91% of customers are more likely to shop with brands that provide relevant offers to products and services that meet their needs and desires1.
An alternative to mass promotions is personalized offers, whereby each offer is curated specifically to each of your customers based on their needs and desires
So, are mass promotions bad for your brand? The short answer is, for the majority of brands, mass promotions can be very ineffective and thus bad. An alternative to mass promotions is personalized offers, whereby each offer is curated specifically to each of your customers based on their needs and desires.
Want to learn more about how Polymatiks can help you deliver personalized offers at scale? Click here to book your demo or email us at email@example.com.