In dynamic marketing, important decisions are made on-the-spot regarding the customer behavior, events, competitors, period or time and many other factors. Those decisions though should rely on dynamic marketing strategy and business strategy, the company goals and resources, and not less important — on the competition.Get Demo
Would you ever think about giving a discount to your customers just because they’re in a bad mood? Snickers has burst out with a hybrid online+offline advertising campaign, developing anl algorithm which estimates the spirit on the internet and optimizes the in-store price of its candy bar real time.
To make people happier (read — to increase profits), Snickers lows down the prices when the Internet is angry or sad. The system analyzes about 14 K social posts a day, understanding even sarcasm or slang. So, the price at 7-Eleven changes 140 times a day.
This is a perfect example of dynamic marketing. Let’s analyze now, why this campaign was so successful it had been spread from Australia to the US and Europe.
Marketing is not only about promos, but let’s consider it to better understand what drives sales. There are several prerequisites which make a promo campaign successful.
The combination of those factors make the campaign profitable or not.
In this case, the possibilities for your promo campaign are calculated based on cost price. Suppose you replenish your stock with products costing $100k. And you decide to put $30K margin on it. Though, as soon as you regain your $100k, you can sell the remainder of the stock with a discount to achieve your new goals or just in case of emergency (you need money, or you want to vacate the stock).
|Presumed revenue: $130 K|
|$100 K cost||Your space for discounts |
(or $30 K profit)
Here you’re basing the discounts and promos on competitors’ actions. Though, it’s difficult to forecast this kind of promo because you don’t know what your competitors will be up to. It gets worse when the competitors are launching real promo wars, leading to price dumping and low profits. Even a successful campaign with a 90% uplift repeated simultaneously with your competitor may lead to 0% uplift.
Your campaign may be built on your strategy and demand prediction. The indicator which is crucial for promo, in this case, is your goal, e.g., 5% revenue increase. The more significant the discount, the higher should be the volume of products sold. Also, you need to determine what promos to launch now and then (and whether to launch them at all). Here is a task for your data scientists: you need to predict uplift, which may get difficult because of competition (see above, why).
|10% discount (Volume*1.2)*(Price*0.9)||No discount (Volume*Price)||20% discount (Volume*1.5)*(Price*0.8)|
A pure strategy-driven promo may exist only on a market with no competitors. In other cases, it should be combined with competition-driven promos, and that’s where the marketing gets dynamic.
The game gets tough here, as you need to plan the revenue taking into account competitors’ impact in order to get the same 5%. Make an assumption on cross elasticity of demand: what if your competitor increases prices? Will you be able to cope with high demand? From the other side: how will you respond if demand falls if your competitor has cut the prices?
Don’t forget other factors like promo awareness, campaign mechanics etc.
Remember! The earlier you’re alerted to the competitor’s promos, the faster you will neutralize him.
With immediate competitor promo alerts, sales prediction and prognosis of your competitors’ impact from CompeteraTry Competera