3 ways for retailers to fight inflation woes using promotion planning

Dec 5, 2022 • 4 min

After facing two years of supply chain disruption due to the COVID-19 pandemic, retailers are now facing a new challenge: record-setting inflation. The US experienced 8.2% inflation in September 2022 alone, whereas annual inflation in the EU nearly eclipsed 10% during the same period.

Decreased buying power has forced retail customers to make hard decisions about the goods and brands they spend their money on. This need to adhere to a stricter budget comes at a poor time for retailers who find their margins shrinking as the cost of products rises.

Promotion planning is essential to retail success in any market, but the increasing customer desire for cost savings makes savvy promotion planning more critical for retailers than ever. July 2022 alone saw 40% of consumers buying goods on promotion to get more products for less money.

Retailers must lean heavily into promotions to succeed in an increasingly competitive market to entice customers who are actively cutting their spending and changing their buying habits. Here are the three best ways to use data-informed promotion planning to mitigate inflation pressures and get the most value from your promotions.

Offer smart promotions that provide the most value to customers

Both retailers and consumers have grown accustomed to paying more for just about everything this year. The rising costs are painful, but it does present retailers with the opportunity to instill value and provide relief with smart and simple promotions. Customers love discount deals even in healthier economic circumstances, and that same slight discount could feel like a windfall in the current cost-conscious climate and provide much-needed relief to their wallets.

Retailers might offer promotions on products that inflation has hit hardest to capture the attention of their customers. A discount on a dozen eggs might not seem like a thrilling offer until you consider that eggs cost 58.1% more in September 2022 than they did 12 months prior. Flour, coffee, and poultry have also seen dramatic inflationary increases, making any promotion attached to them especially valuable to customers.

Embrace promotion planning to retain—and increase—market share

Discount retailers thrive in cost-conscious environments given their fundamental value proposition: they save customers money. But the methods that discounters employ to achieve their lower pricing points aren’t often feasible for traditional retailers. Those retailers don’t need to beat bargain chains at their own game, but they do need to create a promotion plan that keeps their existing customers coming back for more.

Retailers can also use smart promotional planning to do more than just defend their market share. Inflation and supply chain issues have impacted every retailer, creating an unprecedented willingness on the part of many shoppers to venture elsewhere for the best deals and availability. But with every type of retailer running promotions, those looking to differentiate themselves to increase their share of the market will need to get creative with their planning.

One big way retailers can do this is to identify where else their customers are reducing their spend and then target these goods accordingly. For example, 67% of consumers admitted to cutting back on restaurant spending in July 2022. Creative retailers might apply discounts to related products like spaghetti, marinara sauce, and mushrooms and position home-cooked meals as high-quality and low-cost alternatives to dining out.

Use data to maximize the profitability of your planned promotions

Promotion planning can often feel like guesswork, with many retailers simply basing their campaigns on whatever worked the year before. The pressure of inflation only fuels this sentiment, leaving many of those in charge of planning paralyzed with uncertainty as to what, when, and how to execute promotions.

Companies who take advantage of data-informed planning software don’t struggle with these same insecurities. Fine-tuned promotion planning platforms evaluate reams of data in ways that a single person with a sprawling spreadsheet never could. Such tools help retailers:

Evaluate historical trends

Your internal data contains a wealth of insight into historical demand patterns, all of which can be used to plan timely promotions. Promotion planning software will identify regular occurrences such as seasonal or holiday-specific traffic and adjust with speed and accuracy.

Forecast and plan for future scenarios

Modern promotion planning software also factors in data from the most recent weeks and months to enhance forecasting precision. Inflation hasn’t been this high for much of the world in decades, so year-over-year comparisons will likely reveal wildly different results regarding how and what customers are buying. The combination of historical data, recent data, and AI-driven predictions allows retailers to craft promotion plans that consider both macro trends and more immediate and volatile market changes.

Work smarter, not harder

Many retailers still manage their promotion planning efforts in complex spreadsheets, creating a process that’s inflexible and admin-heavy. The person responsible for deciphering this data already has an unenviable task—one high inflation rates and supply shortages have made even more difficult. Constant fluctuations in market conditions and product availability mean a planned promotion could suddenly become less appealing to a consumer or even unprofitable as prices increase. The person in charge of planning will constantly need to evaluate, reshuffle, and replan initial promotions to ensure success.

Planning software removes the headache for retailers who can instead entrust the burden of updating changing plans and product prices to the effectiveness of machine learning. A robust planning tool will evaluate data and automatically update changes faster than a human possibly could, ensuring that the promotion planning process is handled both accurately and with great agility.

Create smarter & more sustainable promotion planning strategies with RELEX Solutions

Successful promotions require preparation that goes beyond planning the nature and timing of offers. Retailers also need to ensure that they have enough product in stock ahead of a promotion. A well-planned deal will move more inventory than usual, and a stock-out early on will cost retailers both revenue and reputation.

The best product planning software combines elements of promotion planning with other essential facets of supply chain and retail planning. Best-of-breed planning and optimization software enable you to unify your data silos, plan and manage intelligent promotions, and manage replenishment all from a single easy-to-use platform. And with high inflation likely to plague world markets for months to come, retailers should take advantage of every opportunity they can to maximize their bottom line.

Learn more about conquering common promotion planning pain points in this helpful webinar