# Boosting Retail ROI: Data-Driven Promotional Pricing Optimisation

> PE-backed European Retailer · Retail & Consumer · QuantSpark Labs

QuantSpark helped a PE-backed European retailer transform their promotional strategy, moving from intuition-based decisions to a data-driven approach.

## At a glance

- **€3.4M** Promotional Margin Enhancement

## What was the problem?

A PE-backed European retailer with €1.3bn annual turnover sought to enhance their promotional strategy and unlock greater value from their substantial promotional investments. Their key challenges included:

*   **Limited Promotional Visibility**: There was no visibility and tracking of promotional performance across their product range, making it difficult to identify patterns and trends. They were unable to distinguish between promotions that generated genuine incremental sales versus those that merely shifted purchase timing.
*   **Opportunity for Data-Driven Decision Making**: Promotional decisions were made based on experience and historical precedent. There was a clear opportunity to supplement this with data-driven insights.
*   **Lack of Standardised Framework**: No standardised framework existed for comparing different promotion types (price reductions, multi-buy offers, cashback schemes) to identify optimal approaches.
*   **Limited Understanding of Cross-Product Effects**: There was limited visibility into how promotions of specific products affected sales of related items, hindering their ability to understand genuine incremental sales versus cross-product effects (cannibalisation or halo).

The retailer recognised these areas as opportunities to optimise their promotional strategies and maximise ROI through enhanced analytics capabilities.

## What did QuantSpark do?

QuantSpark delivered a comprehensive promotional analytics platform, working embedded within the retailer's team. Our approach involved:

*   **Dataset Creation and Feature Engineering**: We created a comprehensive promotional dataset capturing transaction-level data across stores, including promotion types, discount depths, product categories, store characteristics, and baseline sales/margin patterns. Crucially, we engineered features to capture cannibalisation effects (reduced sales of other products) and halo effects (increased sales of complementary items).
*   **Four-KPI Analytics Framework**: We analysed four critical performance indicators to provide a holistic view of promotional effectiveness:
    *   **Sales Uplift %**: Incremental volume driven by promotions.
    *   **Margin Uplift %**: Net margin impact after promotional costs.
    *   **ROI**: Return calculation incorporating incremental margin, halo effects, and cannibalisation impacts.
    *   **Customer Base Penetration**: Whether promotions attracted new customers or increased basket frequency.
*   **Advanced Data Analysis**: We conducted analysis across store size, regional variations, and competitive effects to identify promotional effectiveness patterns previously hidden from the business.
*   **Interactive PowerBI Visualisation**: We developed a comprehensive dashboard enabling exploration of promotional performance across time periods, product categories, and store segments. The dashboard separated price effects from volume effects, showing both immediate promotion impact and longer-term customer behaviour effects.

## What changed?

The implementation of the promotional analytics platform led to immediate and quantifiable business transformation:

*   **Immediate Business Transformation**: The analytics provides comprehensive visibility into promotional performance, enabling buying and commercial teams to understand success drivers and supplement expertise with data-driven insights.
*   **Systematic A/B Testing**: The analysis enabled structured A/B testing across three critical areas:
    *   **Promotion mechanisms**: Testing 1+1 offers vs cashback vs cut-price to identify optimal approaches for different products.
    *   **Product category optimisation**: Systematic testing across supplier brands and categories to maximise promotional effectiveness.
    *   **Leaflet composition**: Testing different SKU quantities in promotional leaflets to optimise customer engagement and basket penetration.
*   **Quantifiable ROI Opportunities**: Analysis identified significant opportunities for promotional ROI improvement, with initial findings suggesting potential for an increase in promotional margin of **€3.4m** through optimised strategies and eliminating unprofitable promotions.
*   **Foundation for Advanced Capabilities**: Building on this foundation, we will develop a predictive promotional costing tool enabling traders to forecast ROI before implementation. We will also expand halo and cannibalisation logic to provide more sophisticated cross-product insights, further amplifying business impact through proactive optimisation.

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