Optimize your promotions maintaining your profit margin

Optimize your promotions maintaining your profit margin

07/12/2021 - Price optimization

Setting the limit when applying promotions in your businesses is fundamental for the action to be successful. Although, maintaining the balance between boosting sales and obtaining the maximum profit is an arduous task, it is ideal to generate irresistible promotions for consumers while maintaining the margins. To achieve this, it is necessary to optimize the performance of your promotions.

Why optimize your pricing promotions?

The optimization of pricing actions with promotions is key to maintaining margins applicable to the price of each of your products at all times.  This usually is a delicate question as far as the calculation of benefits is concerned, so the fundamental thing is to establish the limits above where the prices can fluctuate. 

This step helps to improve the effectiveness of the action,  as it is necessary to adapt the strategy and their changes of dynamic pricing to ensure that it meets your objectives. For this, it is necessary to understand what the market’s reaction will be to the promotions and what effect it will have on your account thanks to two factors that play a key role: 

  • The forecast of the volume of sales.
  • The percentage of discount applied to each product.

These are two parameters that you should have very well calculated before setting up your pricing promotions strategy and its subsequent optimization. Through them you will be able to make an estimation very close to reality of the final obtained profit. 

During the course of action, mark the milestones to meet and their times so that you can execute the optimization of the promotions and redirect their effectiveness.

profit margin

Promotions adjusted with the predictive analysis 

Without any doubt, artificial intelligence is one of the great allies of promotion optimization. Tools like Reactev allow you to carry out a prediction based on the scientific method to find out what the effectiveness of a planned action will be. 

For this, keep in mind the parameters like the volume of seasonal sales, the prices of competitors, their fluctuations, and the limits that you have establish for maintaining the margins, among others. The objective is that you can not only measure the effectiveness of the planned campaigns but also to find new optimal promotional proposals among products in your catalog, beneficial for your business and with ample sales previsions. 

This exploration of new opportunities is possible thanks to the tools of price simulation with artificial intelligence. Use the obtained data from past actions and find opportunities to replicate the same campaigns or in product categories that meet the same requirements. 

3 keys to optimize promotions that maintain your margins 

  1.  Choose the best promotional strategy for your product group. Not all of your catalog is apt for BOGO strategies or pack purchases. Analyze with real numbers  what the result will be from applying each concrete promotion. 
  2. Evaluate the risk versus the temporary nature of the offer. Maybe it is worth running the risk of a very aggressive promotion in the face of a concrete demand; in this case, to calculate the activation time that will be the key to have the called effect make up for the difference in the sale amount. For example, you can set a very low price limit when the sales prediction is very high.  This practice is common in the launching of an much awaited cosmetic product, for example, limiting the number of units in the discount, or like we say, setting a cutoff date for obtaining it. 
  3. Establish the minimum limits with a pricing software. This will help you keep in line the prices below which you want to move for specific products.  

We definitely recommend that before you throw yourself into making new promotions in your e-commerce, you get tools that help you to resolve them with success. In this way, you can continue to combine as many promotional actions as your catalog needs and do them with complete security.  Request your test!

Category: Price optimization

Tags: competition, ecommerce, pricing

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Maria Jose Guerrero
Content Manager

The first dynamic pricing solution designed by and for retailers