Key takeaways:
- Every business will benefit from the adoption of analytics in its marketing strategies.
- Different departments working in coordination and analyzing pricing and promotion strategies with the help of analytics will result in the development of effective marketing strategies.
- Pricing and promotion strategies are interlinked with each other and if focused on together can help increase revenue and customer loyalty.
- Price sensitivity and Promotion affiliation of a specific product is the key to understand which strategy works best for which product.
The business world has thrived on technological advancements to expand itself. Every technological development in the past has been an isolated advancement for the business. The industry is steadily understanding the need for a tool that can provide the analysis of the bigger picture. Analytics acts like this tool that each business can use to gauge the results of its strategy. Every domain is adapting it in their day-to-day work. Analytics in Marketing is one of the key factors that help businesses make key decisions for their strategies regarding product, place, pricing, and promotion strategies. (To know more about marketing mix click here) Using analytics in marketing gives the business better insight into consumer choices and preferences and helps them evaluate particular strategies that they have used. It helps them understand what is working for them and what is not in real-time.
Current scenario and benefits of implementing Analytics:
- Collection of data and using that as a base to develop strategies is a good practice which is how the majority of decisions are made in business houses. A lot of times the data collected can be from an isolated channel.
- Simply evaluating data from social media or from the website to develop strategies may not be a full proof plan and can result in the failure of the best of strategies.
- Analytics in marketing is not restricted to the measurement of only online factors- it also takes into consideration the offline marketing efforts of the business which is what makes it an important tool.
- It gives an overall idea of how the campaign has performed in terms of revenue, growth, and new lead generation.
- Analytics in marketing depends majorly on market feedback. There is an emphasis on the interest, preferences, and activities of the consumers. It helps marketers optimize their campaigns by analysing market performance.
- Analytics in marketing helps the business to make data-driven decisions regarding the kind of products that the consumer is demanding or requires, the place where will they be effectively able to market the product, and the pricing and promotion strategies that will increase their revenue and improve the growth of the business.
Using Analytics in pricing and promotion strategies for an optimal outcome:
Before we focus on how analytics in marketing can help develop better strategies for pricing and promotion, it is important to understand what it means by pricing and promotion strategies. To implement analytics in marketing we need to understand where it will be the most helpful in the Marketing Mix used by businesses. The Marketing Mix is the combination of factors that can be controlled by a business to influence the consumers to buy their products. The key factors that are involved in the marketing mix of any product or service offered by a business are the four Ps: the product, price, place, and promotion. These 4 Ps are influenced by both the internal and external environments of the business. Each of these factors interacts with the other significantly. If the correct blend of all these four factors is used, then there is a high chance for success. (To know more about the 4Ps and & 7Ps visit the link below: https://www.instagram.com/p/CP5ld1-n3t9/?utm_source=ig_web_copy_link)
In a business environment, different departments likely take different decisions regarding one product. The product managers, category managers, and marketing managers may understand the end goal of earning revenue but their strategies may differ. The pricing and promotions strategies that a business implements have a major impact on revenue. In case the decisions taken by each department are not unanimous it can cause great loss for the business both financially and reputation-wise. Analytics can be used for coordinated pricing and promotion strategy implementation decisions, which can help the business gain more loyalty from the customers and garner more revenue.
Importance of implementing Analytics for Pricing strategies:
- Pricing decisions are critically important for any business, as pricing is directly linked to consumer demand and company profits. Price is what the consumer pays for the product or service.
- The price of a product should be appropriate and based on the real value (company side) and the perceived value (consumer side). The price should include all the other costs incurred by the business-like supply costs, manufacturing costs, discounts incurred or given to debtors, etc, and also take into consideration the price offered by the competitors for similar products.
Development of Pricing strategies:
Depending upon the situation and market demand, some products may be priced above their real price to give the effect of luxury goods or priced extremely low so that consumers can try and use the product. While discounts can invite customers to buy the product, they can also cause them to get the impression that the product is less exclusive. This depends on the consumer preferences and their perception of the product. It is therefore important that marketers make pricing choices with utmost care.
The Economics behind Pricing strategies:
Accurate pricing is a major challenge for marketers since there are other complexities involved. Economic factors like demand and supply and their correlation with the price of the good are one major factor that can make or break the transaction. The general rule that: lower the price higher the demand and vice-versa works universally but for a business to earn profits, forecasting forms a major base for this rule. If forecasting is faulty, then demand and supply of goods (products) may not meet equilibrium and will result in losses for the business. Lack of coordination between teams also affects the pricing of a product or service.
Importance of implementing analytics for Promotion strategies:
Promotion is all about strategies and techniques that help communicate a product or service to the audience. The goal of promotions is to present your product, increase demand for it, and help differentiate it from competitors’ products. Promotion is to make sure that the consumer is aware of the product or service the business is selling. It is equally important that the consumer should know ways in which the product will satisfy their needs and why they should pay a certain price for that product. Promotion includes advertising about the product, developing public relations with existing and potential consumers, and formulating a promotional strategy. The end goal is to turn potential customers into real customers.
Uniting Pricing and promotion strategies via Analytics:
Promotion is all about strategies and techniques that help communicate a product or service to the audience. The goal of promotions is to present your product, increase demand for it, and help differentiate it from competitors’ products. Promotion is to make sure that the consumer is aware of the product or service the business is selling. It is equally important that the consumer should know ways in which the product will satisfy their needs and why they should pay a certain price for that product. Promotion includes advertising about the product, developing public relations with existing and potential consumers, and formulating a promotional strategy. The end goal is to turn potential customers into real customers.
Price Sensitivity:
As discussed, consumers are highly sensitive to the price of a product or service. Businesses understand this and develop pricing strategies keeping in mind the real and perceived value of the product. Each consumer has a different perception of a product and each consumer has a different sensitivity towards the product. What one customer finds cheap will be reasonable for the other. The frequency with which one consumer purchases, may be different from the other consumer. Moreover, these variables keep changing with each category of product and also models of products within that same category.
Use of Analytics:
Analytics can be a tool here that will take into consideration factors like consumer choices, preferences competitors’ offerings, company image, brand image, etc for each and every product. With individual factors taken into consideration, the businesses will be able to determine scores for the products. Deciding the price sensitivity score for every product or service will give the business a clear picture of their own products and help them categorize them. Decisions regarding each category will depend upon how price-sensitive the product is.
Three important categories of price sensitivity for products:
1) Top sensitivity products:
These products are those that will affect the consumers most in case the price changes. These are simple everyday products that the consumer buys. The consumer is well aware of the prices of these products and also the price at which the competitors offer the product. A slight change in the price can create more demand or a decline in demand for that product. The business should try and keep the price of these products as low as possible. This will surely give them an edge over their competitors and also ensure that the frequency at which the product is bought is high. This may also result in consumers buying more in quantities which will add up to the revenue.
2) Mid-sensitivity products:
These products are the type of products that are not very frequently shopped. For the consumers, there are other parameters important while buying these products other than price. Price does play an important role but the sensitivity level is low in this case. The price of these products should be competitive. If the product is lowly priced, the consumers may perceive it to be cheap and avoid investing in it. If the product is too expensive, then again, the customer may choose to go to the competitor who offers a lower price. Here consumer perception of the product and perceived value plays an important role.
3) Low sensitivity products:
These products are those where the price is not important for the consumer at all. These are those products that cannot be substituted or compared to other products. There the businesses have a bigger opportunity to earn revenue. By smartly pricing the products, the businesses can earn profits since the consumer will still buy the product even if it is expensive.
Promotion Affinity:
Promotion affinity is used to measure how successful the promotion of the product or service has been. Businesses need to understand whether or not their promotion strategies create awareness, relationships with consumers and end in successful transactions. To have precise knowledge there can be many factors that the businesses can take into consideration like increase in revenue, increase in gross profit, if transactions increased due to discounts, number of products purchased by a single consumer, variance in buying behaviour of the consumer, etc.
Promotion affinity is more complex to bifurcate since a lot of factors are involved. The end goal is to try and understand if the strategies implemented are ultimately resulting in additional revenue and increased conversion of consumers.
Use of Analytics:
This is where analytics in marketing comes into play. Simply having the promotion affinity parameters and price sensitivity category baskets is not enough to develop optimal strategies. The key is to link these two factors together and then find a balance that drives the business closer to its goal. This is done with the help of a matrix that helps find a balance between pricing and promotion strategies for products being sold.
Here are the 4 approaches that businesses can opt for to achieve optimal results:
1) High price sensitivity and high promotion affinity:
In this approach, the business focuses on the product in terms of promotion which helps to increase the frequency of buying of the product. In terms of pricing strategy, since it has high sensitivity, the business keeps the price as low as possible even giving huge discounts if required.
2) High price sensitivity and low promotion affinity:
For these products, the prices that are offered are still low since they are price sensitive but, in this case, the business will keep the prices competitive. The business will not focus on giving promotional discounts here since the products are mostly necessity-type products,
3) Low price sensitivity and high promotion affinity:
Since These products are purchased occasionally businesses keep the prices for these products at a level that matches the higher price offered by competitors. But at the same time, they offer discounts which bring down the price. businesses also play with the type of promotion they do for these products as it is high promotion affinity products which if promoted via correct methods will give the desired increase in revenue.
4) Low price sensitivity and low promotion affinity:
These are products that will be bought no matter what. Here the businesses stop spending on promoting these products and increase their margin in terms of pricing. They bring the price close to that of the competitor even if their costs are low to earn more profit.
Price and promotion are closely interlinked when it comes to the buying behaviour of the consumer. Using analytics in these areas of marketing will help the business find which consumer buys which product at which price due to what promotional technique applied. Analytics in marketing is taking a good shape as more and more businesses and departments within them start making coordinated decisions. The key is to understand the nuances of consumer behaviour and analysing their choices to develop effective strategies to provide them with what they need while effectively garnering more revenue.
Mrunal Nawathe
Content Writer
Vanshaj Kaushik
Graphic Designer
Parth Panchal
Editor
I was wondering if you ever considered changing the structure of your blog? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having 1 or two images. Maybe you could space it out better?
Really enjoyed this article, is there any way I can get an update sent in an email when you publish a new update?
Hello my friend! I want to say that this post is amazing, nice written and include almost all important infos.
I’d like to see more posts like this .