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Consumer Shopping Behaviour:
Building Effective Christmas Sales Promotions
Every year retailers spend time and money promoting vouchers, discounts, contests and
many other promotional strategies in an effort to capitalise on the spending frenzy that
takes place in the run up to Christmas. Implementing sales promotions has the potential
to increase sales, attract new customers and even retain loyal customers. Although sales
promotions have a major impact on the behaviour of shoppers, the process by which
consumers respond to these offers is not always clear. Understanding how consumers
interact and engage with promotions helps online retailers effectively design and track
promotions and communications. To build effective Christmas sales promotions that
convert site visitors to shoppers during the festive period it is essential to target your
customer, define and track your goals, and plan the promotion.
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TARGET YOUR CUSTOMER
The cornerstone of building any sales promotion is defining the target consumer. Identifying
the specific audience can help you narrow your promotions effort. Whether you are trying to
attract new customers or retain consumers that have used the brand in the past, exploring the
strategies your target consumers use to make purchases can help determine the success of a
holiday sales promotion.
First, it’s important to remember that consumers’ sensitivity to sales promotions and
perceptions vary by their online retail experiences. While some shoppers associate price-cuts
with the phrase “sales promotions,” others gauge the value of the gain, monetary or otherwise,
by evaluating the lengths they must go to, to attain it.
In either case, both adaptation-level theory and cognitive psychology studies have found that
shoppers compare prices or other attributes to a personal reference price for each level of
quality.1 Consumers have both internal and external reference prices. The current, future and
past prices coupled with the frequency of sales promotions can impact these reference prices.
The time spent processing promotional messaging is another aspect of consumer purchasing
behaviour. High-need-for-cognition shoppers spend time processing all promotional messaging
and do not simply react to promotional signals such as displays that are not accompanied
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by a price cut. Low-need-for-cognition shoppers are primarily influenced by the mere
announcement of a sale. This means that they buy the product without checking the price. In
consumer goods, most shoppers make buying decisions very rapidly with little processing.2
Brand Loyal Customers
• C
ustomers often use multiple purchasing strategies when they encounter sales
promotions on their preferred brands. They tend to be most receptive to sales
promotions on their preferred brands and are generally not tempted to switch
allegiances on the back of a particular promotion.
• B
rand loyal customers tend to primarily use internal reference prices, whereas, brand
switchers often rely on external reference prices.
Frequent Users of Sales Promotions
• P
erceived risk theory, economic theory, and psychographics have painted a relatively
complete picture of frequent users of sales promotions. These shoppers are sensitive
to prices, receptive to price and product information, brand switchers, and frequent
shoppers of the category.1
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DEFINE AND TRACK YOUR GOAL
Determining your desired outcome of a promotion is another key component to building an
effective sales promotion. Setting specific goals for sales, lead generation, and customer
buying patterns can help you track the success of a promotion. Creating goals and aim ahead
of a promotion strategy will help you align all communication messaging around the promotion.
Most importantly, identifying and tracking your promotional goals will help you outline a
potential, financial bottom-line impact. Coming up with realistic goals and then analysing
and tracking promotion progress is essential for business growth. Adding a timeline to the
promotion allows you to analyse your data and compare it with previous discounts and
identical time periods without promotions to determine if it was successful.
By tracking profit growth you can determine whether promotions are driving enough additional
gross margin from selling additional units at lower prices to offset the lost gross margin from
not selling at the higher, original prices. Similarly, tracking baseline sales will show you the
strength of your brand by measuring sales made without promotions. Lastly, monitoring the
percentage of sales at regular price, promotional price and clearance price can help you gauge
the success of your promotion.
Quick Hits:
Key Metrics to Track
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Profit growth and gross margin
Baseline Sales
Frequency of promotions
Percentage of sales at various points of the pricing cycle
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PLAN THE PROMOTION
A properly targeted Christmas sales promotion prompts customers to take action, such as
signing up to mailing lists or making purchases, by offering incentives. These may include price
savings, samples or even brand experiences. When considering which incentive to use for your
sales promotion, remember:
Price Discounts
• A
lthough price discounts should be strong enough to compel shoppers to buy, it is
essential to evaluate the discounts and ensure they are reasonable for your business
and its bottom line.
• L
oss leaders are generally overstocked products with steep discounts used to draw
in new customers while generating high-margin sales. Consider running loss leader
campaigns to reduce overstock inventory, increase traffic and build brand awareness.
• C
onsumers’ perceptions of
savings from a promotional
offer do not differ
significantly between 30%,
40% and 50% discount
levels. However, there is
a significant difference
between 10% and 3050% levels.3 To ensure the
success of your holiday
sales promotion, consider
implementing reasonable
discount levels.
• C
onsider promoting products randomly to prevent competitors from anticipating your
promotions and following them.
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Vouchers
• O
ffering vouchers can increase consumer spend. Research revealed shoppers who
redeemed six voucher codes or more in the last 12 months, spent an average of £835
online. This is 71 per cent higher than the £488 spent on average by light users (who
used less than six codes over the past 12 months).4 This indicates the importance of
engaging with consumers through vouchers.
• C
onsumers using vouchers focus on
price and features and use them to pay
less than other shoppers. The likelihood
of using these offers comes from the
pleasure of paying less than the reference
price. Offering vouchers can give
customers the little nudge they need to
try a new brand or product.
Additional Promotional Strategies
• S
amples and Free Trials – Offering
free samples or trials for high ticket
items tends to entice hesitant shoppers
to make purchases. A Nielsen study5
found incentives are a good way to
entice consumers to try a new brand
and change their brand allegiances. UK
consumers with internet access are more willing to consider switching to a new brand
than consumers globally, ranking a free sample as the third most likely reason to switch.
• Experiences – Providing brand experiences such as product launches and special
appearances can be a big undertaking but generally draws a lot of attention and large
audiences.
• E
xtended Holiday Promotions – Running promotions for a longer period and
extending return policies are a great way to ensure customer satisfaction.
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SUMMARY
The lead up to Christmas is one of the most competitive periods of the year. The options
are endless for shoppers in this period and retailers need to work hard to draw in
consumers with great promotions and discounts. The three strategies mentioned can be
used to build effective Christmas sales promotions.
• T
arget your audience. Rather than a one-size-fits-all approach to promotions,
define and target the audience for the promotion.
• D
efine and Track your Goal. Set specific, realistic goals for the promotion,
forecast promotion financial impact and track customers’ shopping behaviour.
• P
lan the Promotion. There are several different promotion strategies, find the one
that best aligns with your business goals and the target audience.
1
“Consumer Research on Sales Promotions: A State-of-the-Art Literature Review,” Journal of Marketing
Management, accessed September 9, 2013, http://faculty.insead.edu/chandon/personal_page/Documents/ArticleConsumer%20research%20on%20sales%20promotions.pdf.
2
“Consumer Decision Making: Fact or Fiction?” Journal of Consumer Research, accessed September 23,
2013, http://www.jstor.org/discover/10.2307/2488867?uid=3739256&uid=2129&uid=2&uid=70&uid=4&s
id=21102654193241.
3
“Consumer Price and Promotion Expectations: An Experimental Study,” Journal of Marketing Research, accessed
September 9, 2013, http://www.jstor.org/discover/10.2307/3172495?uid=3739256&uid=2129&uid=2&uid=70&uid=
4&sid=21102653643481.
4
“The Impact of Online Voucher codes ,”Forrester and Voucher Codes, accessed October 1, 2013,
http://hosted.vouchercodes.co.uk/forrester/VoucherCodesCoUK-Forrester-Report.pdf
5
“UK consumers are less brand loyal when trying new products ,”Nielsen, accessed October 1, 2013,
http://www.nielsen.com/uk/en/insights/press-room/2013/uk-consumers-are-less-brand-loyal-when-trying-newproducts.html
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