Delivering Impactful Holiday Promotions with Generative AI

Inflation and supply chain challenges continue to leave retailers struggling to deliver the products and prices their consumers are looking for. According to a recent study from McKinsey, retailers must be prepared to take aggressive action as we head into the holidays and final quarter of the year.  

The study identifies five trends that hold the key to success in the final months of 2023 and beyond. One of which is generative AI, which about 85% of retailers reported experimenting with to improve their customer experience. At Daisy, our brand of generative AI leverages the Halo Effect to generate impactful merchandise plans (for item, price, ordering, allocation, space, and assortment).  

By considering the Halo in holiday promotions, retailers will win with competitive prices and a range of product offerings that satisfy numerous customer segments. This blog will provide an overview of how Halo thinking can be incorporated into holiday promotion planning with generative AI. 

Leveraging the Halo with Generative AI 

Because customers buy meal solutions, not individual items, relationships form between products. For example, a customer purchasing a holiday turkey will also purchase stuffing, cranberry sauce, and gravy. We call this the Halo Effect. 

Historically, when we've seen retailers promote a turkey, we also see all the fixings around the turkey included in the promotion. This is called over theming – and it isn’t necessary for a successful holiday promotion. For example, turkey has high transaction penetration, it appeals to a lot of consumers, and it drives a large basket because of the fixings purchased alongside it. Using Halo economics, retailers can offer a deeply discounted price on the turkey, capturing consumers who are increasingly price sensitive. Then, retailers can recoup margin by keeping the fixings in the Halo at regular price or only slightly discounted. This allows retailers to blend out the basket margin and maintain profitability, while still capturing the attention of consumers with good prices on the key products they care about.  

However, actioning all the Halo relationships across an entire store can be a challenge when relying on human effort alone. With generative AI, we can simulate the impact of every item and deliver promotion plans that determine the right items to promote and when to promote them.  

Upload your flyer for a free promo analysis →

Increasing Personalization and Reach with Generative AI 

Retailers that over theme their promotions also miss out on opportunities to connect with other customer segments, as holiday items don’t resonate with everyone. Retailers that promote a mix of holiday and other Halo drivers (i.e., “micro theming” the promotion) will win during the holiday season by increasing personalization and reach. 

With Halo items eliminated from the ad space (as described above), retailers can now promote an array of non-overlapping Halo driving items that appeal to multiple customer segments. This could be early Black Friday discounts, products for different holidays, or even the “weekly shop” products. The idea is to find items that appeal to many different customer groups to achieve maximum consumer interest. By promoting these key items, retailers will attract more consumers, generate more transactions, and satisfy price conscious consumers with even lower prices (as they will make up margin in the basket).  

Generative AI can be applied to help retailers identify the Halo drivers that appeal to each customer group by: 

• Analyzing vast amounts of customer data - including purchase history, browsing behavior, and more. 
• Leveraging individual customer preferences and behaviors.  
• Segmenting customers into groups based on purchasing behaviors to generate personalized and targeted promotions and marketing campaigns. 

As stated in the McKinsey study, the best performing retailers are those that consistently focus on innovation and pursue new ways to create value.  

Retailers that invest in generative AI tools and implement Halo thinking into their promotional efforts (both during the holiday season and beyond it) will win customers with targeted promotions and competitive pricing that doesn’t sacrifice margin.