AI in trade promotion management: CPG leaders weigh benefits and risks
AI in trade promotion management promises to be a gamechanger, but consumer products companies will need to address AI risks.
The holiday season is in full effect, even as pumpkin spice everything and Halloween decorations crowd your closest CVS. Promotional calendars have been slowly inching back for the past several years. First, shoppers got a jump start on holiday shopping the day after they sat down to a Thanksgiving meal with friends and family. Then, all of a sudden some shoppers were lining up, waiting for stores to “open, open, open” the night of Thanksgiving while the seeming stragglers were still putting away leftovers.
Being open on Thanksgiving afternoon was the next frontier. Many retail analysts predict that Black Friday 2017 will be the biggest shopping day of the year, as it was last year. However, there’s a different faction within retail that believes that these shopping holidays have all but lost their luster.
What could be the cause of this shift and what can retailers do about it?
As retailers competed to open earlier on Thanksgiving or even offer “Black Friday” deals in the days and weeks leading up to it, there is a message that was relayed loud and clear to shoppers: there will always be deals. If Black Friday deals were truly the deepest of the year, shoppers would come out in droves and stock up far beyond their holiday needs.
But in reality, Black Friday deals feed into the industry-wide psychological pricing phenomenon. These deals seem too good to pass up. And yet there are other sales year-round that still get shoppers checking out.
Is it because consumers needed the items they bought around Memorial Day, for example, or because retailers did an excellent job of tapping into shopper emotion to trigger those purchases? That may be a bigger question than this one article. But overall, the elongated holiday promotional calendar that has become the norm is causing what brand expert, Denise Lee Yohn, calls “deal-fatigue.”
Retailers have time on their side. Shoppers are looking to get gifts in time for specific holidays, so even if they don’t jump at Black Friday promotions, chances are they’ll make at least some of their purchases between Thanksgiving and Christmas. But others are stretching out their purchases intended for the holidays over months. A Coinstar survey found that over 25% of US adults stockpile discounted holiday gifts over the course of the year, with 33% spending the extra time to find the right gift and 27% waiting until they go on sale.
The original point behind Black Friday is that sales volume is so high that it pushes retailers out of the red and across the threshold to the black.
But should retailers be betting it all on such a short period of time? Since Cyber Week does so well, it clearly isn’t a bad strategy per se. But it isn’t one that inspires consistent confidence.
An increasing number of retailers are announcing that they’ll be closed on Thanksgiving. And REI took an even more extreme approach by also closing on Black Friday to practice what they preach and encourage everyone to get outdoors. (They saw substantial recognition and returns from the marketing campaign in-line with this move.)
It’s interesting to see how holiday promotion tides have changed, from every store on Main Street clambering to get in on Thanksgiving Day sales to giving employees much needed time with family before the busy holiday shopping season arrives.
AI in trade promotion management promises to be a gamechanger, but consumer products companies will need to address AI risks.
If all of your competitors are offering the same commodity products and (un)intentionally egging each other on to offer lower prices, margins and brand value will be depleted in no time. Sure, Black Friday is a day when shoppers expect bargain basement prices from just about any retailer they can think of, but there is an additional lesson in REI’s absence from Black Friday: they didn’t have to compete on price on those highly competitive days. They instead demonstrated their company values.
On the other side, Amazon is a major player in expanding the holiday promotional calendar, but they have also created their own holiday.
When they initially introduced Prime Day, competitors scrambled to try to offer deals that could stand up to the behemoth. Since then, competitors have wised up and planned ahead so that Prime Day no longer shakes them to their core.
As Amazon follows the retail trend of making their proprietary holiday longer, other retailers can learn to step up to the plate in such a competitive market and carve out a space where they can build marketing buzz with their own retail holidays without erasing margins.
Retail is beyond crowded and as the holidays inch closer, unique promotions will be the only way to stand out from the noise. Holiday promotions don’t have to come with cautionary tales of flat screen TV-induced stampedes at 3 am, but instead they can return to the joy we’ve all experienced when we find the perfect gift for someone close to us. Retailers need to create their own days for deals, and deliver enjoyable experiences, otherwise “deal-fatigue” will set in. Make the most out of the increased traffic the holiday season is known for and form a connection that elevates you out of the rat race and fosters loyalty that lasts year-round.