Promoting smarter, not harder, can make the difference with discounting
Often promotional strategies aren’t really strategy; they’re responses to market pressure and used to prop up volume. According to SKIM experts Alex Perilli and Joanne Foo, promotions are a structural commercial lever, which must be designed intentionally.
Previous research from McKinsey & Company estimates 59% of CPG trade promotion spend loses money. So, where are so many organisations going wrong?
Looking at the companies getting this right can help, according to Alex Perilli – a senior director with SKIM, a global consulting firm specialising in pricing and revenue management. Trade promotion often represents 20% of revenue, even marginal improvements in effectiveness translate to material profit impact. In this case, the most successful companies treat promotions as a disciplined investment – one that reinforces brand positioning, respects price architecture, and creates genuine value for shoppers, retailers, and the business.
Commenting via SKIM’s website, he explains, “Promotions often fail less because of the math and more because of behaviour. Many times, it can appear clear what a good promotion looks like on paper. The problem is that the conditions under which promotions get decided make it very hard to stick to that. For example, retailers push for deeper discounts and the path of least resistance is to give it to them; a competitor runs an aggressive promotion and the instinct is to match it; and volume targets for the quarter create pressure to do whatever generates sales now, even if it costs more later.”
While individually, none of those might feel like big decisions, when they become the pattern, and “when every promotion is a reaction to something external rather than a deliberate choice”, price architecture gradually distorts and brand value erodes, often so slowly that no one notices until a costly reset is required.
Foo warns that this can have serious consequences in the current economy. In a world where “consumers are more price-sensitive and more willing to switch”, misjudged promotions can have the opposite to their intended impact of bringing in new customers – especially when it involves the “many categories have become structurally promotional”, where “the baseline expectation is a deal.”
She continues, “That makes promotions both more important and more dangerous. Used well, they drive demand and strengthen retailer relationships. Used poorly, they train shoppers to wait for discounts and compress category value over time. In many markets in Asia, where platform-driven campaigns move in real time, the pressure to match the next promotion is relentless. Without a clear framework, that pressure pulls strategy in the wrong direction fast.”
Best practices
How do promotions connect to price architecture and mix? Perilli suggests that every promotion influences which tiers grow and how the price ladder evolves – whether a company intends it to or not. This means that when promotions are designed outside the portfolio system, “they gradually shift volume into lower-margin tiers and compress the ladder.”
“When they’re designed within it, the opposite becomes possible: driving volume into higher-value products at the right moment, within clear guardrails, can strengthen mix and improve margin at the same time,” he expands. “That case becomes stronger when teams are willing to look beyond straight discounting because bundles, multipacks, and occasion-led offers can deliver mix improvement while keeping the price ladder intact. Most businesses know this in theory. The harder part is building the internal case to act on it.”
Working with retailers is also essential to protect long-term pricing and category value. Foo says that this is because “pricing is at the discretion of the retailer”, as the retailer sets the promotional calendar, and shape the commercial context. However, the risk is that this calendar can sometimes be defined “on autopilot”, when there is a changing market that requires more adaptability to court consumers.
According to Foo, “The more productive approach is understanding what each retailer is trying to achieve and structuring promotions that serve both agendas. When you bring data into joint planning conversations, it stops being a negotiation about funding and starts being a conversation about creating shared value.”
Planning around this, the experts agree that a promotion should convert the demand a brand strategy is designed to create, rather than work against it. For high-equity brands, that means “being selective” – as heavy discounting on all fronts would signal to the market that the brand “can’t justify its price”, and this in turn can chip away at “exactly the perception you’ve invested in building”.
“But protecting brand equity doesn’t mean avoiding promotions,” Perilli explains. “It means choosing the right mechanics. An occasion-led promotion, tied to a specific moment or consumer mission, can actually reinforce premium positioning rather than dilute it. For mainstream brands, promotions drive scale; for lower-equity brands, they improve accessibility. In every case the question is the same: does this reinforce the role this brand is supposed to play?”
When it comes to a starting point for promotions planning, there is also usually a common denominator for a starting point. Firms must “be clear about what you’re trying to achieve” – and while growth might usually the goal, that’s not always the case. Successful firms do not assume this – and remember that “sometimes a promotion is about getting new people to try the product, or driving footfall, or moving shoppers up the range”, Foo adds.
“From there,” she notes, “it’s about having the right metrics to know whether it worked. Not just whether sales went up, but whether those sales were incremental. Otherwise, you’ve just pulled forward demand you would have had anyway.
That distinction is what separates a promotional strategy from a cycle of events that’s hard to learn from. And it’s also why rigid playbooks tend to fail. The right framework gives you clear rules to evaluate against, but enough flexibility to adapt when the market shifts.”
