In-Market Timing

Retailers often allocate a healthy chunk of their promotional efforts and budgets to customers who made the most recent transactions. But these efforts give short shrift to customers who are most likely to buy next. As a result, large and potentially lucrative segments are inadvertently overlooked.

There is some logic in marketing to active customers, but there are problems, as well. For example, many of these engaged customers will continue to shop without needing additional price-based incentives. Retailers who target them with discounts are sacrificing profit unnecessarily.

Less active customers, however, may be those more in need of targeting, because they might be splitting their purchases between competitors. Or they may have a less frequent need to buy within a category, but still might respond well to additional stimulus.

Either way, overspending on highly active customers while underspending on other segments will prevent retailers from optimizing their promotional investments. Marketers can achieve better results by determining when customers will be buying, and therefore when they can be influenced by outreach efforts.

In-market timing strategies begin by understanding the relative importance of intentional vs. impulse spending decisions. This dynamic plays into purchase decisions at both the category and product levels.

Retailers who anticipate when customers are getting ready to buy often gain insight by building a single model to predict this. Then, they face the logistical challenges of synthesizing multiple models to account for both choice and timing in any customer’s purchase decision. This places a burden on their analytics department or vendors, which must be able to take both of these dimensions into consideration in one integrated modeling framework.

What are other factors? Take offer frequency, which is closely linked to the issue of offer timing. Making the same offer more than once to target groups is an accepted and often necessary practice to squeeze the most return out of your marketing programs.

In-market timing strategies can also significantly benefit from competitive analysis. Marketers should consider adding and regularly refreshing information that captures what their competitors are offering, when they make those offers, and in which markets. This data helps marketers adapt the timing and cadence of their offers to either pre-empt or strategically react to their competitors’ offers.

One lesson well learned is when to delay a promotion. In contrast to a “first-in” promotion strategy, which hopefully bears a “lag effect” or carry-over benefit on sales, a “next-in” promotion strategy can take advantage of a lead effect. Under the next-in scenario, customers hold off purchases and wait to see what sales or specials are launched. At this strategy’s greatest effectiveness, competitors’ promotions help generate interest, while your promotions are timed to generate the sale.

David King is CEO of database marketing solutions provider Fulcrum.