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BCG is right: The era of smart retail promotions is here

Dan Bond
September 4, 2023
5 mins

The Boston Consulting Group (BCG) recently published an article on how retailer promotions must become 'smarter.' This boils down to three recommendations:

  1. Taking a streamlined, customer-centered approach with 1-2-1 targeting
  2. Performing rigorous ROI calculations to ensure profitability
  3. Adopting a unified approach across a retail organization

All three recommendations align with our thinking at RevLifter and the ongoing shift in the competitive retail landscape, where the key to success is increasingly about delivering offers that are personalized to a customer's behavior and interests, and delivering them precisely when they're needed.

Advanced personalization tools like RevLifter's Intelligent Offer Platform were built to address these issues specifically.

Let's dive into the detail.

The problems with 'dumb' promotions

BCG states that 30%-40% of retail promotions are either inefficient or unprofitable. There are two main reasons for this:

Too many promotions

Sales promotions in retail have been around for nearly 150 years - from metal tokens and paper coupons to the online codes of today.

Generally speaking, they are used broadly without understanding into whether someone would have bought without them. Many retailers give away value on a daily basis with untargeted promotions.

The broad approach also causes the issue of promotion clashes and overlaps. This is a problem RevLifter has encountered with retailers we've spoken to, especially larger retailers running different promotions across different channels.

Different offers for email, social media, affiliate marketing, in-store, on-site, and SMS can run simultaneously. To make the situation more complex, they can be provided by different technology providers with no coordination.

And, of course, there are consumer expectations for promotions. BCG states:

"In March 2023, we surveyed approximately 1,000 consumers to understand their perspectives on retail promotions—and about 60% of respondents said that they would prefer to receive more relevant promotions instead of just more promotions."

Too much short-term focus

When sales promotions were first used all those years ago, they were designed to encourage purchases of a new product. Retailers soon realized they were also an effective tactic if they were likely to miss a sales target or had stock that needed shifting.

This has led to promotions being utilizied for a short-term sales boost. ECommerce teams use them, get hooked on the results, and end up oversaturating their customers. As a result, their customers get hooked on waiting for the next promotion.

The era of smart promotions should be about saving the reputation of promotions and showing how they can be used strategically for the long term.

Smart promotions are customer-focused, effective, and strategic

In its article, BCG discusses a few ways for retailers to start thinking about promotions differently and use them more intelligently:

Customer focus

Like RevLifter, BCG sees promotions (we sometimes refer to them as 'interventions') as influencing behavior. Promotions shouldn't always drive purchases. Instead, they should make it more likely that a customer buys one thing over another, buys in a particular way, or buys more.

Understanding where the right points of influence are to create experiences targeted at the customer's needs is critical.

Recent events such as the pandemic and high inflation have brought this into sharp focus. Good deals are a great way to build trust when financial times improve.

To ensure we understand what customers want, we at RevLifter follow a three-step process:

  1. Analyze: Tag an eCommerce site, then dive into the data to identify the gaps and opportunities where offers can make a difference.
  2. Target: Create the offers and use advanced targeting options to ensure they work efficiently.
  3. Optimize: Run tests and experiments on offers to improve their effectiveness over time and find new opportunities to improve results.


BCG emphasizes the importance of measuring ROI on promotions to ensure they're used where they are most effective.

The actual test of whether promotions are working is incrementality. At RevLifter, we use Control Group Reporting to measure whether the deployed promotions and offers drive more incremental revenue, and we use statistical methods to control for other factors.

It's also essential to understand the potential ROI of promotions as accurately as possible. In the 'analyze' stage mentioned above, we provide reports and dashboards to show the size of opportunities - e.g., how many people are coming to a site and copying product names? Would this, therefore, be an effective point to intervene?

As BCG states:

"In our experience, from 40% to 60% of promotions that retailers expect to generate high ROI ultimately result in low ROI."

Performing analysis, studying the data, and working with experts to find insights make it more likely that your forecasts are accurate.

A strategic approach

To us and BCG, internal planning and processes are essential to successful promotions. If a retailer's approach to offers isn't coordinated and consistent, it can create challenges.

We've seen examples where promotions have been triggered on a retailer's website that contradict each other. It's understandable, as these are often launched by different technology partners working with various internal teams with no joined-up thinking.

As a technology partner, we have to ensure we're working with a retailer across all their teams. We won't always be the sole provider of promotions. Still, working with all the teams who use them, and the other technology providers who might serve them in different channels, we can be a central management point for the promotions strategy and orchestration.

How RevLifter thinks about promotions and offers

At RevLifter, our thinking aligns with BCG's thinking around smarter promotions. We want retailers to reconsider how they're used and see them as a way to create better customer experiences that deliver tangible results.

The smart promotions era is here. And technologies like RevLifter's Intelligent Offer Platform have been built to enable retailers to embrace this era today.

Many thanks to BCG for its article and work in this area.