Last week, I participated in Mastercard’s Excellence in Customer Engagement Summit.
Part of my day involved being in conversation with Angie Rieger, Chief Transformation Officer of Lands’ End, and Emilie Kroner, SVP of Retail & Commerce of Mastercard.
We discussed how retail transformation is shaping the customer journey.
But, there were other learnings from my time in Chicago:
Derick Carlson, Manager of Retail Analytics at Maurices, presented on testing promotions in a cross section of stores.
Now, this seemed like a novel idea to me. During my time as a merchant, I had never tested promotions before they went live in all stores.
Testing products? Absolutely.
At Ralph Lauren, I often tested if a floral print would resonate with my customers across Europe by sending the product to 3 stores. I would test full-price sales and how quickly the print would sell before sending to remaining stores. I would go through the same process with seasonal colors in denim or a new sleeve length of our best selling t-shirt.
But, in regards to promotional activity, I was informed of pricing strategies and had a say in promotional activity based on what I had planned for the season. I would buy a selection of products or buy more of a high margin SKU that would be part of a promotional event like Black Friday or Boxing Day. My planning team would work on the timing of the promotion or say that it was time a style must go on a deeper discount.
In Derick’s case, he showcased how the retailer would run multiple weekly promotions by category. Different discounting strategies many times a week. Much of the discounting was to clear inventory or to drive customers into the store.
Using Mastercard’s Test & Learn platform, Derrick’s team eliminated the guesswork in determining what promotions would be most attractive to customers. The promos were also localized near various store locations. Ideally, this would prevent the retailer from engaging in unnecessary markdown activity e.g. discount too little or too much, discounting too frequently etc.
Maurices discovered that they did not need to run so many promotions. Further, the customers that were buying products on sale outside of the “Test & Learn” experiment were also buying the same products at full-price in the test stores. Meaning, those products didn’t need to be on promotion and would sell at full-price.
The bottom line: avoiding markdowns means more margin and more profit.
What would be interesting is if these insights were shared across product teams. Merchandising could use the results of the test to inform assortment strategies and limit the number of markdowns needed to clear inventory. This way, promotions can be used sparingly and would be more meaningful.
However, promotions are not (and should never be) the only way to get customers into the store.
The right product assortment, experiential events and a superior customer service will increase footfall without eroding margins.
