You have crunched and analyzed the data. You have homed in on an assortment of specific products to offer to targeted customers with a defined set of attributes. You have built a promotional campaign with introductory prices to entice these customers to purchase items from you that you are confident they are currently buying elsewhere. You even have prepared attractive sales collateral emphasizing the products’ attributes you believe are most closely aligned with the customers’ needs and preferences. But there is still one important piece of the puzzle you have not put in place: When is the right time to make the offer? Predictive science can help sales and marketing decision makers improve the likelihood of launching promotions to coincide with a customer’s willingness to change his or her current buying habits and accept your offer.
When are your customers most likely to change their buying habits?
Habits and Decisions
Habits are much talked about in sales and marketing circles these days. In a recently released book “The Power of Habit: Why We Do What We Do in Life and Business” New York Times reporter Charles Duhigg approaches this subject from the interaction between habits, decision making and the human brain. Our brains are constantly working to convert active decision making exercises into habits, writes Duhigg, because it conserves energy to do so. Decision making requires a great expenditure of time and mental effort. Even what we think of as relatively simple activities, such as backing the car down the driveway, require the fine-tuned calibration of many complex parallel processes running in the brain (think about the first time you actually backed a car down your driveway, before it became an ingrained habit). In the world of business this argument extends to the way people make purchasing decisions – in short, wherever possible we convert the energy of active decision making into passive habit. Once comfortably set in these habits we are reluctant to change them.
Breaking the Habit
With this in mind we come back to the problem of timing when we go out to customers with enticements to get them to buy products from us that they are currently buying elsewhere. We have to assume that these customers are comfortably set in their current purchasing habits and therefore that it will be hard to dislodge them under most circumstances, even with incentives like price discounts. We look to the data to see if there are clues as to when the optimal time might be. In other words, for any targeted product promotion to a particular customer we try to identify a set of factors than can best predict when the customer is likely to be most open to changing his or her current purchasing habits.
Seasonality – It’s Not that Simple
Seasonality may play a role – many products are seasonal by nature and purchasing incidence will logically be brisker during the peak season. Does that mean that the height of the busy season is the right time to launch the promotion? Perhaps it does not mean that at all. Think again about habits and decisions. Better yet, put yourself in the shoes of a purchasing manager for a catering business that specializes in holiday events. You can imagine that in the week before Thanksgiving this purchasing manager is buying lots of cranberry sauce. How receptive is she going to be to a promotion you launch at this time, with price discounts and other incentives to purchase cranberry sauce from you?
Before you say “very receptive” and rush to launch a cranberry sauce promotion, think about what’s going on in her life. What this purchasing manager probably cares about more than anything else right now is having lots of cranberry sauce and other seasonal items stocked on the shelves so that there will not be a shortage on Thanksgiving Day when they will be rushing around from one catering venue to the next. Put another way, she does not want to have to think about whether she is getting the best deal from her current supplier – she knows that in the past the supplier has met the organization’s needs to have plenty of cranberry sauce on hand. Using the same supplier this year is just one less thing to worry about during a time when plenty of other stressful decisions will be placing demands on her brain cells. So in fact it may be a very bad time for this promotion.
Let the Data do the Talking
If this is true, then how can you make smart decisions about promotional timing other than relying on lucky guesswork? At Sentrana we believe that the best way to approach questions of timing is from the ground up – let the data point the way rather than imposing a preconceived intuition into the model. In situations similar to that of the hypothetical purchasing manager in the previous paragraph, we have discovered a tendency for first-time purchases (i.e. when a customer buys a product from a supplier that he previously obtained elsewhere) to occur around two months before peak seasonality. So going back to the previous example, if you were to approach the catering purchasing manager in September with a promotional campaign for cranberry sauce, including an introductory price discount and some well-crafted supporting collateral (such as recipes or suggested uses) then you may well get her attention and be better positioned for a successful outcome.
The data are out there – you have extensive historical sales records from which to obtain useful insights about things like the relationship between first-time purchases and seasonality peaks. Let the data do the talking, and focus your own efforts on connecting the dots that will help you build a promotional calendar with a higher likelihood of aligning the right products to the right customers at the right time.