Target promotions: How to measure and improve promotional effectiveness through individual customer information

Abstract

This paper proposes a new approach to measuring the effectiveness of consumer promotions, enabled by individual customer information collected via loyalty cards. The paper begins by discussing the complexity associated with measuring promotional effectiveness and the limits of current methodologies, then sets out to demonstrate that a customer-focused approach to promotion measurement — as opposed to the current product-focused perspective — can expand the measurability of promotional effects in three dimensions: • objectives — in that not only sales volume and market share effects can be tracked, but also customer-specific and assortment-wide effects; • time — in that promotional effects can be monitored for longer periods of time and the fulfilment of long-term goals can be measured; • space — thanks to geo-marketing analysis, sense can be made of the variability of promotional response in different retail markets, channels and outlets. This allows for better promotion planning and marketing effectiveness, with consequences that extend beyond economic benefits for the retail company itself and reverberate on relationships with suppliers and cooperative promotion decisions.