How to Pivot your Marketing Strategy in a Supply Chain Crunch?
The Great Supply Chain Crunch of 2021
The world is facing a serious supply chain crisis this year. Plenty of ordered merchandise did not arrive from Asia, companies relying on Chinese-produced merchandise see drops in stock value, and customers meet empty shelves in the stores.The shortages, however, are much less acute than earlier in the pandemic, according to data from NielsenIQ.
Why is there a supply chain crisis at the moment?
Plenty of products manufactured in Asia are out of stock in the USA and the rest of the world. The world’s supply issues have quite a lot of reasons, most of them stemming from the pandemic. The demand for Chinese-made goods has surged as the global economy emerges from the pandemic. Since the pandemic struck, consumers moved to direct online purchases and goods had to be delivered straight to their houses instead of the store, as it was before. The logistics chain was not prepared for that shift, lacking warehouses, distribution centers, and human resources to offload, transport, and deliver this amount of goods directly to households. At the moment, transport capacity constraints affect the ocean, air, road, and rail freight. Situation in Asia is no better – the coronavirus Delta variant is causing shut-downs in factories across Asia and China’s having energy supply issues. Due to the capacity constraints, the prices of transport have more than tripled, which is also causing some businesses to wait instead of ship goods immediately. The US-China trade conflicts do not help the situation.
What does the supply chain crunch mean for businesses?
As supply chain issues hit the world, businesses need to pivot their marketing strategies. The shortage of products means lower sales and profits, therefore marketing strategies of companies reliant on Asian imports have to be adapted to the new reality.
How to survive a supply shortage as a business?
There are a couple of ways you can try to save your profits as a business hit with supply chain issues using proper marketing strategy:
1. Promote gift cards
If you know you have shortages of products that would likely be purchased as Christmas gifts, you can change your strategy, and instead of promoting the Christmas-perfect presents, promote gift cards with long validity dates. By offering gift cards, you give the possibility to your customers to let their loved ones choose what they prefer out of what is left available or wait until the products they like to come back in stock. You can incentivize gift card purchasing by giving them a higher nominal value, for example by launching a promotion “purchase a $100 gift card and get $105 value on the gift card”.
2. Implement pre-orders
Another option, apart from the “inform me once back in stock” button and gift cards, is introducing pre-orders. Let customers purchase and pay for a product they want and ship it to them once it’s available again. It would be best if you could guarantee when the product will be there but if it is not possible, leave it blank. You may need to offer an incentive (promotion, discount code) to encourage customers to pre-order at your store instead of looking for the same product elsewhere. Here is a couple of ideas on how to incentivize pre-ordering:
- Give a $5 gift card for every pre-ordered item that can be used in your store later on.
- Grant a 5% discount on all pre-ordered items.
- Give double loyalty points for pre-ordered items as opposed to regular, in-stock products.
- Offer free shipping on all pre-ordered items.
Make sure that pre-ordering is legal in your country and which terms and conditions should be attached to the offer.
3. Focus on customer loyalty instead of promotions
If you do not want to discount considering the supply issues or do not have in-stock items or alternative products to discount, you can also shift your promotional budget towards loyalty campaigns. Unfortunately, when products are out of stock, customers start looking for new stores to get the supply they wanted and they tend to shift providers and brands. When COVID-19 pandemic first came, customers shifted to ordering online from pure online players, started purchasing from new DTC brands and often stayed with their new choices even though the stores they used to buy from had the products they wanted back in stock.. Do not let that happen again. Launch a new loyalty scheme or improve the current one, giving customers more value for staying loyal to you. Implement new, better incentives or increase their value.
Some ideas for boosting your loyalty program include:
- Launching free shipping for all loyalty club members.
- Doubling the loyalty points for all purchases.
- Implementing new loyalty incentives, for example gift cards.
- Switching from loyalty points to gift card credits or cashback.
- Giving priority in handling orders for loyalty club members (for example, launching a pre-ordering campaign for them and only after 1 day for everyone else).
- Decreasing the bar to enter the VIP tier.
- Adding new products to the rewards catalog.
- Launching a thank-you campaign for all loyal customers who purchase from you in these difficult times and granting them thank-you vouchers of 3% value of their purchase for a limited time period (once supply issues are back to normal you can end this campaign). It can also work with gift cards.
- Sending incentives to inactive customers to purchase again with you, for example $5 vouchers if they place an order within the next 30 days.
If you do not have a loyalty program in place yet and you want to launch one, we have created a loyalty programs ultimate guide that can help you to get started. We also have an inspirations library where you can find some ready ideas for loyalty program schemes.
4. Upsell, cross-sell and increase customer average basket size
As fewer customers may be shopping with you (if you have stock issues, customers may go to another store) or the ones who do may not find what they were looking for, it is important to focus on upselling and cross-selling to increase the average basket size and, therefore, your profits. Some ideas include creating product bundles from products you actually have in stock, sending personalized recommendations of complimentary items and similar products, creating tiered, volume-based discounts like “buy 1 get one 10% off, buy 2 get 3rd 20% off, buy 3 get 4th free of charge”. You can also implement tiered auto-applied promotions, for example offering 5% off for orders above $100, 10% off for orders above $200 and 15% off for orders over $300 and more. Focus your discounts on bringing high-value orders instead of discounting particular products or launching site-wide discounts to protect your revenue and squeeze the most out of the customers who continue shopping with you despite the supply issues.
5. Discount aggressively once the supply chain crunch is over
You can already start planning a booster campaign for when everything is back to normal. Black Friday in July 2022? Why not? Prepare to discount the products that were out of stock when they are back in the warehouse to get competitive advantage.
6. Focus on online sales
With brick-and-mortar stores running out of products and customers being angry at the never-ending shopping trips when they have to visit more than one store to get something basic, you should focus your efforts on online sales. Customers will likely turn to Google looking for the products they did not find in brick-and-mortar stores. If you have those products or alternative products in stock, make sure your store is SEO-optimized and consider PPC ads. Launching a free shipping promotion can put you in a winning position if customers were initially planning to go to a store to get their products but they did not manage to get them. That way, you offer an alternative to in-person shopping, at no additional cost. If you own brick-and-mortar stores as well as e-commerce, make sure to promote your e-commerce in-store saying that if customers are missing something in the store they can check the availability of the same product in your online store or pre-order it in your e-commerce store. You can even take it further, equip your sales reps with tablets and make them check the availability of the products in your online store for customers or help them order or pre-order it to the store (BOPIS) or to their houses.
7. Do not discount products that you are short of
You can actually increase the price of products (like Procter and Gamble are doing) you know your competitors are short of too. Especially as your prices as a manufacturer and retailer grow. However, if you want to maintain a good brand image, I recommend not to increase the prices further than can be explained (to the consumer). Taking advantage of the global crisis by increasing the prices further than to keep your previous margins may hurt your brand image forever. I would also recommend a good PR strategy to explain the price change, if possible giving details on the price changes that hit you. Be careful, as raising prices on certain products, even if explained well, will decrease the demand on them. You can counteract this effect by offering discounts on other types of products where your margin is higher or offering product bundles, volume discounts and other types of discounts that can help you upsell the more expensive inventory.
If you had promotions planned that included products that are out of stock or whose margins are crunching due to transportation and manufacturing costs, switch off these promotions and plan something else instead. I will give you a couple of ideas below.
8. Start promoting products you have in stock
Especially when it comes to Christmas goods, you should promote them early on. Customers likely know about the shortages and will start their shopping earlier than usual. Jungle Scout, a SaaS-based tool for search and market analytics, is predicting that nearly a third of US consumers plan to start holiday shopping before Halloween. You can take advantage of that by promoting your stock earlier than competitors and making sure you sell out everything you have (which is very likely, given the lower supply). 2 PM magazine has noted retailers starting to sell Christmas stocks as early as September 12th.
9. Discount before Black Friday
While historically, Black Friday was when customers bought the most, this year may be different. As supply issues become well-known to everyone, customers may plan to purchase their Christmas gifts even earlier. If you launch an aggressive price promotion and start discounting for Black Friday, many customers will already be done with their Christmas shopping.
You should focus on discounting and promoting items you actually have in stock, not what you initially planned to discount. A&W Restaurants earlier this year had to cancel a marketing deal for chicken tenders when its supplier couldn’t get extra stock of poultry. Instead, the chain, which has about 560 locations domestically, went with chili-cheese fries.
“Rather than running short, we replaced the promotion with something we could get,” said CEO Kevin Bazner.
10. Do not keep your shelves empty
If you run out of a product, replace it with another, alternative or similar product on your shelves or on your product page. In-store you can also place QR codes with the product page of the out-of-stock product so that customers can check the availability of the same product in your online store. Maybe the stock is missing only in this location and they can order it online with home delivery or BOPIS or at least pre-order the product or request to be notified once it’s back in stock. In your ecommerce, you can add advertisements of alternative products or gift cards on your out-of-stock product page to redirect customers (instead of letting them bounce from your store) or add a form, where they can leave their contact details and be notified once the product is back in stock. Do not expect your customers to come back and re-check on your available stock regularly.
11. Discount alternatives
If some of the products are out of stock, you can discount alternative products to bring more sales to your store and sell what you actually have.. Out of artificial Christmas trees and afraid to lose the customers to the competitors? You can plan a campaign promoting real trees and giving discounts on them, for example, 20% off.
Customers may shift their purchasing patterns because of the price inflation. If you have any products with lower prices or where you can offer discounts, you can launch personalized discounts to churning customers (for example, those who left their basket abandoned) targeting them with promotions on similar items or simply with messages where you list a range of similar products, in case they would rather go with something else. Try to recover abandoned sessions, carts and inactive customers whenever possible, whether they churn due to lack of stock or high prices.
12. Provide accurate information on the state of inventory
You should ensure the information about the availability of your products, whether in-store or online, is up to date. If possible, display exact information on the number of pieces available. This will, first of all, ensure customers receive accurate information and won't be surprised if they don’t find what they were looking for. Second of all, this will help you to sell out “last pieces” faster by creating a feeling of urgency.
13. Prepare a holiday gift guide
...and update it often. You can create a dedicated page promoting perfect Christmas gifts for him, for her, for kids, for grandparents etc. and put the products you have in stock inside. Update it often to ensure it contains only in-stock products. It would work best as a landing page in your ecommerce as it can be updated often and can display live availability information.
14. Promote and discount domestically-sourced products
Look for small, domestically-manufactured products and brands and include them in your offer as a retailer. You can promote the addition of new products or promote the products you already had in your portfolio by launching national-themed campaigns and/or launching an automatically applied promotion like 10% off all domestically-produced products. One benefit of such campaigns is shifting customer focus to products you will have in stock. Another is the brand image benefit of promoting local products. You can connect this campaign with other sustainability or local initiatives to write a consistent brand story around it and not to be judged as a greenwasher.
Supply chain issues can hit your expected profits and make you change your marketing strategy completely. While keeping or increasing your prices may seem like a great strategy, do not use it as your only strategy. There are other ways you can protect your profits and ensure you will still sell a lot this pre-Christmas season. From introducing pre-orders, gift cards, launching promotions on available alternatives, to investing in customer retention programs, there is a lot you can do to sell more despite the shortages.
If you need a promotion engine to launch discount coupons, promotions, loyalty or gift card campaigns, Voucherify is an API-first promotion and loyalty management system that can be quickly integrated into your existing architecture. We have plenty of out-of-the-box integrations to support you with launching your campaigns quickly and effortlessly, without breaking the bank.
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