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Mastering Markdown Strategies: Markdown campaigns planning
By carefully analyzing historical sales data, identifying products for markdown, setting appropriate markdown levels, and timing campaigns effectively, businesses can unlock new opportunities for revenue growth and customer engagement.
This article is the second in a series of 3:
- Objectives of markdown strategies (1/3)
- Markdown Campaigns Planning (2/2)
- Markdown Execution & Optimization (3/3)
Analyzing Historical Sales Data:
One of the foundational steps in markdown planning is analyzing historical sales data. By reviewing past sales performance, businesses can identify trends, patterns, and seasonality that inform future markdown decisions. Key metrics such as sales volume, product performance, and customer behavior provide valuable insights into demand forecasting and inventory management.
Identifying Products for Markdown:
Effective markdown planning hinges on selecting the right products for markdown. Criteria such as slow-moving inventory, seasonality, and upcoming product refresh cycles help businesses prioritize items with the highest markdown potential. Techniques like ABC analysis and inventory aging reports aid in categorizing products based on their markdown suitability while maintaining a balanced product assortment. Anyways, two rules need to be followed:
Respect range consistency
Ensuring consistency across your product range poses a significant challenge when executing promotional campaigns. It’s essential to prevent premature discontinuation by carefully managing promotions to maintain the balance between various products. For instance, avoiding the cannibalization of a 2-liter product by implementing an overly aggressive promotion on the 1-liter counterpart is crucial. By maintaining this balance, you preserve the integrity of your product assortment and prevent potential disruptions to consumer preferences and purchasing patterns.
Identify and prevent cannibalization between competing products
To prevent cannibalization between competing products, it’s essential to maintain the non-promotional product at its regular price within your standard pricing strategy. This ensures stability and consistency in pricing, mitigating any potential distortions that may arise from competing offers. By anchoring the non-promotional product at its usual price, you uphold the perceived value of both products and avoid undermining their market positioning. This strategic approach fosters consumer confidence and preserves the integrity of your pricing strategy, ultimately supporting sustainable sales performance across your product portfolio.
Setting Markdown Levels:
Setting optimal markdown levels is essential for achieving desired objectives while protecting margins. Businesses can employ various markdown strategies, including percentage-based discounts, fixed price reductions, or tiered pricing, based on product value, demand elasticity, and competitive pricing. Striking the right balance between discount depth and margin protection is crucial for sustainable profitability.
We’ve defined a methodology in 4 steps towards better control and productivity gain of your markdown strategy:
- Define your promotional business rules: begin by establishing clear guidelines for markdown values and precisely delineating the eligible scope. Clarity in these rules forms the foundation for effective markdown strategies.
- Prioritize promotional price implementation: Recognize the significance of promotional pricing within your overall business framework. Allocate resources and attention accordingly to ensure that markdown strategies receive the necessary focus and priority.
- Simulate the impact of your business rules: utilize our simulation tool to forecast the potential outcomes of implementing your markdown strategy. Moreover, you can and you should simulate at different levels (price ranges, stores, etc.) in order not to lower your margin more than needed. This step allows for informed decision-making and helps anticipate any potential challenges or opportunities.
- Implement automated relevant recommendations aligned with your rules setup: leverage automation to streamline the execution of markdown strategies. Implementing automated systems that align with your predefined rules ensures consistency and efficiency in pricing decisions.
Integration with Overall Pricing Strategy:
Markdown planning should be integrated seamlessly with the broader pricing strategy. Synergies with other pricing tactics such as reactive pricing, segmentation, and consumer-centric pricing enhance overall pricing effectiveness. Aligning markdown planning with long-term pricing objectives and business goals ensures consistency and coherence in pricing strategy execution.
Ready to elevate your pricing strategy with markdowns? Connect with PricingHUB for expert guidance and resources tailored to your business needs. Share your experiences and insights on markdown strategies in the comments below—we’d love to hear from you! ready to learn how to execute and optimize your markdown campaigns?
