Think for a moment. As a convenience store owner, why do you run promotions in your store? It sounds silly, but why do you run promotions? To
increase your sales? Maybe… But does increasing sales with lower gross margins really mean you increase your profits? Or does it mean that you have
decreased the margin of all the items in the combo, and you now have a new number of the items in the combo you must sell just to get to the level you were
at before the promotion?
Perhaps a better way to look at it is that you run promotions to increase your overall gross margin, not JUST your unit sales. Many promotions we see are
what we like to call “cannibal promotions”. We call them this because they eat away margin for no reason. In other words, the increased quantity of items
sold is not enough to offset the decrease in margin per sale. You need to run the RIGHT promotions to maximize your profits.
Here are some tips on running promotions with the help of a good back office system:
1) Promotions should not be seen simply as a group of random items we stick together and attach a lower sales price to because they are now in a group.
That is just called discounting, which is very different from running a promotion. A Promotion maximizes overall gross margin by substantially increasing
unit sales of the items in the group to exceed the loss of gross margin due to the discount in the promotion.
2) Promotions must be data-driven decisions to make them effective.
You need a good back office system to help you identify what promotions you should be running and then deal with the management of the promotions in your
store(s). After you’ve run promotions, a BOS can also help you analyze which promotions you ran were successful and which were a flop. The historical data
can then be used to help you make predictions and decisions on your future promotions. Sure, you can waste your time filtering these things down by combing
through numerous reports, but if you want to work smarter and not harder, a good analysis tool is a must for good back office software.
3) To make a data-drive decision, you must analyze your item sales.
Since we touched on data reporting in the last post, let’s talk about data analysis for sales. With big data, you do not want tons of paper reports to weed
through. You want tools that bring rules and exceptions, good and bad, to your attention. You also want “good” and “bad” to be definable on your terms. A
3% margin may be great in some cases, where in others it is terrible. Like we said before, a good BOS can create virtually any report you want through
user-definable reports that will allow you see your store trends at that exact moment. There is a huge benefit in being able to see which
specific items are selling in your stores in an isolated manner, according to the specific parameters you set.
4) Promote to get rid of that dead/slow stock
– After analyzing your item sales, you might want to run a promotion to get dead/slow stock off your shelves (and never order that product again). A good
BOS helps you with setting promotions for items that aren’t selling so you can clear them out and use that valuable shelf space for items that do sell with
good margin. For example: Did you try to add a new brand of juice that you thought might be a hit, but no one is purchasing it? Run a promotion on the
juice (like buy one get one free, or add it part of a lunch combo as the drink). Having a built-in Promotions Manager will save you tons of time and energy
when running these promos and will help you get rid of that stock efficiently.
*Bonus Tip* Don’t Forget to Consider Seasonality
. In today’s larger footprint convenience stores, the seasons play a larger role than you think when it comes to your sales. Here at DataMax, we are in Texas, so we have two seasons… hot and less hot. However, stores located in the Northeast, Midwest, etc., see very different seasons. You may realize by
analyzing your sales that in different seasons you sell more or less of an item. You might want to promote your items that are not-so-popular during that
season in order to push them off your shelves. On the flip side, maybe during the winter your hot chocolate sales always increase. By having a promotion that includes the hot chocolate, it will pull along
other items and increase sales for the other items you include in the combo.
As you can see, promotions cannot be effective or bring your store profit if you do not have the appropriate tools to help you through it. Our BOS makes your job exponentially easier with each promotion you run.