Back to School Lessons for the Holidays

By Michael Kahn, http://www.chiefmarketer.com

An August 14 New York Times story, “Retailers See Back-to-School Sales Slowing,” discusses a weak back to school season for retailers and how marketers resorted to discounts and aggressive promotions more than ever. It also offers important insights as marketers begin to focus their energies on the holidays.

Understanding not only what’s worked in past holiday seasons but learning lessons from this year’s back to school efforts will help retailers put their best foot forward come November.

Drastic Times, Counter Measures

Performics has surveyed consumers for four consecutive months as part of its 2009 Online Buyer Economic Trend Study, and consumer sentiment, especially among women, remains pessimistic.

In April, men and women were relatively in sync when it came to economic outlook, perceptions of their household financial situations and their overall/online spending plans. Exactly 53% of men and women stated that their current economic situation was worse than at the same time last year. In contrast, by July, women responded with continuing caution and pessimism with 54% stating their economic situation was worse than at the same time last year while men showed signs of increased optimism as a reduced 38% responded the same way.

Still, advertisers began to more aggressively motivate consumers to shop during the back to school season. Retailers, even brands not known for discounting, rolled out deep discounts and promotions across the board.

Macy’s, for example, used sales to drive customers into stores. According to the New York Times, one mother went shopping at Macy’s in response to a Shop It To Me e-mail alert deal she received that offered a $36 top for $9.75. Retailers like Macy’s have to weigh the pros and cons of deals like these to ensure they hit the right balance between sacrificing margins and motivating consumers.

Retail marketers can expect to see discounts and aggressive promotions saturating the market this year.

Head of the Class: Forecasting

This all adds up to the holiday planning process being more important than ever this year. Holiday planning should minimally include forecasting, merchandising and promotional plans and should address all parts of the conversion process, from awareness to consideration, preference and purchase.

Studying the recent back-to-school season can help forecast various factors such as cash flow and inventory optimization, “hot” holiday products, and types of offers that motivate consumers. Some useful questions to ask during any forecasting and planning session include:

  • How can we better secure our share of wallet?
  • Will our target consumers shop early in this economy or wait for sales?
  • How will discounts or sales affect our profit margins?
  • What discounts and promotions should we expect from competitors?
  • How should we structure our discounting plan?

Equal parts art and science, implementing a discounting strategy for the holidays can be challenging. Building an effective strategy requires understanding how target consumers will respond to discounts and determining how to best maximize sales without over-sacrificing on margins or volume. For marketers that opt to discount, some of the decisions to be made include:

  • How heavily to discount products
  • Which products to discount
  • How to time discounts to best maximize margins and volume

Michael Kahn (Michael.kahn@performics.com) is senior vice president of marketing at Performics and a monthly contributor to Chief Marketer.

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