September 21, 2016

Using Data-Driven Sales Strategies to Move the Needle

Price Optimization, Data Analysis

You don't always have control over your promotional items, and that means you don't always have a plan to understand their effects on sitewide sales. Your gut instinct on what works and what doesn't is a good start, but is it giving you all the strategic support you need? Access to critical, integrated data can raise your game to the next level.

Developing a Data-Driven Sales Strategy

To create a data-driven sales strategy, you need to start with clean, actionable data. Then you can leverage it, based on the goals you set. Use these ideas to get started: 

1. New item introduction

Let's say you're ready to introduce a new item. Your current sales strategy might be: Introduce to stores, run reports to discover how frequently it's purchased in or ordered by each store, choose whether or not to keep it on the shelf.

That strategy is a great way to understand if the item's selling quickly and at which sites it's most popular. But what about what's behind the result? Do you know what's negatively or positively impacting those sales, so you can optimize in the future? A strategy like this won't give you information about the impact of other promotions you ran at the same time, the item's merchandising or how your teams were trained to sell it.

Now imagine what you could do if all of that data was integrated and visible relative to your sales goals.

For example, if you knew that your last introduction of a similar item failed, and you knew that the item was placed on an endcap next to a promotional item in 90% of stores, you could make a higher sales goal and experiment with merchandising and placement in an aisle or close to the exit.

The same idea is true for setting a promotional price as you introduce a new item: the more clean and integrated data you can see and use, the better informed your decisions will be.

2. Alcohol and tobacco promotions

Here's an area where your control is limited. With an average of 3,000 SKUs/store, it's likely that about 50% of those are alcohol and tobacco SKUs. You might have 100 items on promotion at the same time, with no insight into how those promotions — which you don't dictate — are driving sales.

Does that particular alcohol promotion earn your location any profit, or are you taking unnecessary hits? The right data sets and visualizations can empower you to make better future decisions about which promotions to accept or deny. It would be hard to make those decisions without a data scientist on staff — unless the analysis and recommendations were visible in one dashboard.

With that information, you can develop a merchandise promotions strategy to drive site-wide sales. You'll be able to ensure that your strategies don't leave any money on the table.

3. Optimized in-store/brand promotions

The promotions you do choose could also benefit from a data-driven strategy. In order to put more weight behind your brand promotions, it's important to understand where you've been and where you're going. Your data sets should include information about past promotions relative to store brand sales, run dates, individual item interest, merchandising, pricing, other promotions, etc.

Can't get all that data on your own? Consider creating small experiments in order to optimize.

First, set a goal or make a hypotheses, e.g. I will sell 10x more of item A if I run the promotion immediately after promotion of item B ends. Then run the promotion. Prove it out, learn, then run the next experiment.

Start with something like: "I'll sell twice as much if I move this item to the front of the store and run the promotion immediately after promotion of item B ends," for example. Let's say you're wrong. Your next experiment might include only placement and no acknowledgment of item B.

Using these small steps to gather more contextually relevant information can be highly beneficial to creating data-driven strategies that increase sales and profits.

The Missing Ingredient

To increase store volumes and sales while still maintaining your lowest-price brand image, you need accurate data and analytics that enable you to make informed decisions. More effective merchandise promotions for greater site-wide sales. What's better than that?

Recommended Next Read: The 4-Stage Journey to Pricing Mastery

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