INSIGHTS

USING DATA & AI TO ANALYZE PROMOTIONS & PLAN FOR FUTURE SUCCESS

Gorilla Group

Many brands invest heavily in promotions for their customers, spending billions to increase customer affinity, and ultimately drive revenues. More often than not, these promotions either fall short of intended results or fail altogether. What’s the cause of this? A lack of promotion analysis. 
We want to provide our expertise and research to help guide businesses through some of the most effective promotional tactics, and some of the best practices for measuring their effectiveness with promotion analysis. 

DEFINING PROMOTION OBJECTIVES

There is much more to planning a promotion than just extracting numbers. It’s important to define an objective for the promotion and look at some fundamental questions and considerations that will help formulate the objective. 

  • What is the ROI of the promotion?

  • What type of promotions will maximize traffic, engagement, and profit? 

  • What is the sweet spot in terms of the amount of the discount? 

  • What is the proper timing to maximize the impact of the promotion? 

  • How can you predict how much demand and revenue a promotion will generate? 

  • How can promotions be best tailored to the most appropriate audiences? 

These questions can help your business gain a better understanding of the things that will have the largest impact on the effectiveness of your promotions. 

DEFINING AND MEASURING PROMOTION SUCCESS 

While total revenue appears to be the most important indicator of success, it is not the most accurate. In many cases, a closer look at total revenue reveals other products or areas that have been cannibalized as a result of the promotion. It’s important to define a more objective way to measure success. 
Here are a few things to take into account:

  • Pre-promotion sales numbers

  • Defining a baseline of expected sales over a longer period of time (typically, 9 months to a year), which excludes any figures from promotion periods within that time frame 

  • Taking a seasonal average from the prior year for a particular item or promotion during a seasonal period only 

Once the above has been defined, it’s useful to take a holistic look at how a specific promotion will impact your overall business and other products both positively and negatively. There are many moving parts in any promotion making an intentional, specialized analysis crucial. Uplift is the true bottom line of how much additional revenue a promotion generates once all other potentially misleading factors are removed from the equation. True uplift comes down to determining how many customers — that wouldn’t have otherwise made a purchase — did so because of the given promotion.

FRAMEWORK FOR AI-ENHANCED PROMOTION STRATEGY 

Once an organization figures out what strategies work, an AI-enhanced strategy can come into play. By employing AI in your system you can use your inputs — observations, historical data, etc. — to forecast the success of a future promotion. 
Here are two examples of AI-enhanced promotion strategies:

  • Forecasting -  If you can build a system in which promotion planners can input different attributes and historical data to predict and estimate how well a promotion will perform, a true promotion effectiveness model can be created. By iterating and forecasting many different promotion configurations we can identify which promotions are likely to be most performant thereby using historical data of past promotions to optimize our current promotion strategy.

  • Targeting (AKA granular forecasting) - Advances in Big Data empower us to take promotion forecasting to a new level of accuracy by targeting promotions to specific customers that need them the most rather than working in broad strokes. Ideally, we could identify which customers are most likely to contribute the most profit to our organization after a proportionally small discount. To do this effectively, we need to be able to predict how likely a customer is to purchase a product or engage with a particular promotion. 


THE DOS AND DON’TS OF PROMOTION SUCCESS

As useful as technology is, you are still responsible for defining the inputs that will deliver the information you need. Here are a few important things to keep in mind to ensure you’re getting the most out of the information you’re analyzing and utilizing for future promotions. 

  • Work from the top down and follow the money. Prioritize ruthlessly. 

  • Value process, structure, and simplicity.

  • Do your data due diligence. 

  • Don’t undervalue customer retention.

  • Don’t get stuck in spreadsheets. 

  • Don’t blindly use AI. 

There’s no perfect way to evaluate promotion success. But by asking the right questions and conducting the proper analysis, brands can begin to better position themselves to plan future promotions that will ultimately land them on the side of profitability and progress. 
Download our more in-depth brief on Using Data & AI To Analyze Promotions and how your business can approach this and plan for future success.