COVID-19 has had the effect of increasing the ROI of promotions across the board. Especially digital but even circulars have experienced no signs of decline during this period. The circular continues to be an important promotional vehicle for North American retailers and remains so despite the rise of digital alternatives. Its use tends to be tied to the personal financial situation of shoppers: as their circumstances weaken, they turn more to cost saving provided in circulars. During improved financial time that trend reverses. Spurred by the effects of the pandemic the circular is a tool on which more customers are relying. However, successful merchants’ organizations are using new analytical technologies to drive the reach and increase the Halo within all the ever-evolving promotional vehicles.
What is Retail Reach?
Reach is simply the number of customers that see your content online or, in the case of the circular read it, and as a result could potentially buy something. Importantly reach is not only driven by how much you spend on distribution or media weight, but also crucially, by the right items and combination of items. Often the analysis and task of establishing the cross-category combination of items is too challenging to be considered by merchant teams even though it is a vital element in driving an online purchase or a retail trip. To illustrate this, imagine a scenario where 5 promotional items on the front page of a circular are all targeted at the same customer segment. This approach doesn’t recognize that the majority of customers in this segment would have made the trip to the store for the first promotion and certainly for the second promotion. A much better strategy is for the merchant to target four additional separate customer groups or segments and increase the overall traffic to their store as illustrated below in Fig. 1.
What is Retail Halo?
Halo, sometimes referred to as associated sales, is the additional items customers buy as a consequence of buying the initial item.
For example, if a customer comes in for a promotion on ground beef, research and experience shows they will pick up other items automatically such as pasta, spaghetti sauce, etc. There are products on the other end of the spectrum that have very little Halo Effect. Good examples of these items are large format water and diapers which are heavy to carry, take up a large part of the customer’s budget, have low margins and are singular in purpose. The consequence of selecting the best Halo items is dramatic for the performance of the circular. In the case of ground beef, it has a halo that is worth almost 5x that of large format water as illustrated in Fig 2.
Combining the dynamics of reach and Halo and executing with precision is crucial for successful circulars, as it is for any other promotional channel. It does however present a significant analytics challenge to merchants due to the enormous volume of data and complexity involved. This is especially true considering the sheer number of items, vendor deals to be incorporated, price points that have to be determined and all in the context of rapidly growing digital channels. It can be a daunting undertaking, but merchants’ organizations are finding the necessary solutions through automation and AI.
The next generation of merchant tools have evolved rapidly over the last few years to meet this challenge. Their success is measured by their ability to consider millions of variables per millisecond and to create the best reach and Halo scenarios for the circular and all other promotional vehicles including digital. They are able to do this, while letting AI and automation replace these tasks typically executed by armies of analysts and data crunchers. There are so many aspects of merchants’ work that require personal relationship with vendors, strategic thinking, and creativity. Optimizing reach and Halo through AI gives merchant organizations the time to do that.