Dynamic Marketing for Retailers

Craft offers that deliver what your customers want right now while driving your sales and margins

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.

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Dynamic marketing

Hungerithm: the complexity of dynamic marketing

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.

Dynamic marketing example
Resource: Adweek

Why was it a success?

  1. Perfect match to the brand positioning. Snickers is artfully playing on its “You're Not You When You're Hungry” brand territory.
  2. Data-led execution. Scrupulous studies and the latest advances in data science and programmatic helped the brand reach in right audience with the right message at the right time.
  3. Cooperation of a retailer 7-eleven and a producer in promo campaign may give outstanding results.
  4. Great marketing and promo awareness building (commercial, mobile application).
  5. Taking into account the user behavior (simply speaking — who doesn’t want a chocolate bar to cheer up a little when they are hAngry?)

How to build your dynamic marketing

Four factors which make your campaign successful (or not)

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.

  1. Great price. It should be profitable both for retailer regarding his strategy and for buyer.
  2. Promo visibility. Customers should be aware of your campaign through commercial, smartphone application or in any other way.
  3. Promo should be relevant to your audience. Choose the right geographic targeting and an original brand positioning or insight
  4. Mechanics of the promo campaign. Think out whether to give a discount or a bundle, if you have to promote new product.

The combination of those factors make the campaign profitable or not.

Promotions management

Three levels of promo campaign

Cost-driven promos

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 costYour space for discounts
(or $30 K profit)

Competition-driven promos

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.

Marketing automation

Strategy-driven (demand-driven) promos

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).

Tentative calendar of discounts
March April May
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.

Issues of product matching

Remember! The earlier you’re alerted to the competitor’s promos, the faster you will neutralize him.

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