Reading Time: 6 minutes
Imagine you’re running an email campaign to promote your best-selling products (or even last season’s items). You invested a lot of time and money creating assets to generate hype–and before the event is over, you’re sold out on the items you’re promoting.
It’s a conflicting feeling – on the one hand, it’s good to sell out, right? But on the other, you can’t keep promoting out-of-stock products. So, what do you do?
Sure, you could cut the marketing promotion short or table it for a later date. But you already communicated the sale’s end date to customers. So, at this point, every option is the wrong one. You could:
- Continue with the promotion as planned (AKA spend a lot of money to frustrate customers and miss out on revenue).
- Stop the campaign earlier than promised (AKA spend a lot of money to frustrate customers and miss out on revenue).
In an ideal world, this “what if” is purely hypothetical. But for many brands, this problem happens all too often because their operations and marketing teams aren’t in constant communication.
That means the operations team has no idea that the promotion is happening, and the marketing team has no idea they’re out of stock. So, the email campaign (plus any ads) continues running as planned. And the results? Well, they’re not good.
How promotional stockouts impact ecommerce brands
Here’s what happens when brands run out of stock before a promotion is over:
It sends the wrong first impression
When your marketing emails point prospective customers to sold-out product pages, you send a really bad first impression. And these people will likely question your ability to deliver on promises (namely, your product and service quality).
The wrong first impression can keep customers from ever buying from you (like ever). This drives up your customer acquisition cost (CAC) and crushes any potential for this customer’s lifetime value (CTV).
But say you instead prepare for this promotion’s inventory needs and prevent a stockout. Then, you can deliver on the campaign and show these new customers that you’ve got your act together. And in the process, you build the foundational trust needed to turn these new customers into raving fans of your brand.
Eli Weiss, OLIPOP Director of Customer Experience and Retention, says trust is vital to customer acquisition. In fact, the healthier soda brand has found first-hand that “the more consumers trust [the brand], the more eager they are to try [it], find [it], and learn about [it].”
Sidebar: Eli shares tactical ways the Olipop team builds trust in his episode of The Checkout.
So, if you want to secure your shoppers’ trust, you need to make sure you have enough inventory on hand to fulfill demand – especially if your promotion is catalyzing that demand. And this takes intentional alignment across operational and marketing plans.
It hurts customer relationships
It’s super frustrating when customers get an email offering a discount for something they’ve had their eye on, click through, and find it’s sold out. And this kind of mistake can hurt even the best customer relationships – especially if it happens more than once.
For one, constant stockouts send the wrong message: you don’t know how to care for your business. And this leaves customers wondering how well you can take care of them. After a while, this nagging feeling can drive consumers to shop elsewhere.
In fact, 17% of customers will leave a brand after only 1 bad experience. And 59% will shop elsewhere after multiple flops. Meaning, all the effort you put into building those relationships in the first place will be for nothing.
Luckily, brands that provide solid customer experiences every time have an incredible opportunity to shine right now. That’s because, per Eli from OLIPOP, today’s CX bar is set so low that it’s practically underground.
“If you can meet expectations with what you’re promising [customers], [you’re] already [doing] more than 95% of brands,” Eli shared.
And an easy way to “meet expectations” is by delivering on the promises in your marketing emails. In other words, being in stock of products featured in your emails when you hit “send.”
Perhaps most obvious, it’s bad business
When your inventory levels can’t keep up with a promotion, you generate demand that you can’t fulfill. This means you can build the best-performing emails with lots of opens and clicks. But those emails won’t drive revenue if you’re sold out.
And instead, you’re actually losing money. How so? Out-of-stock products see a 0% conversion rate (after all, customers generally can’t buy what you don’t have).
This means that you invested heavily in planning a promotion and creating supporting assets but didn’t garner enough returns to offset those costs. This ultimately stunts your brand’s growth (the total opposite of what you expect a promotion to do).
That is unless you sell on backorder. With backorders, you can sell units you don’t yet have in stock, keeping cash flowing and unlocking new growth.
And the best part is this method only negligibly underperforms compared to selling that same product in stock. And customers are typically totally fine waiting a little longer for a product they want, as long as you communicate that upfront.
In other words, selling on backorder ensures that a stockout doesn’t leave prospects with a bad taste for your brand, existing customers frustrated, or get in the way of growth.
But with all that said, we’ve only talked worst-case scenario: going out of stock during a promotion. So, let’s walk through how you can (better yet) prevent this embarrassing mishap from happening in the first place!
How to avoid stockouts during marketing promotions
While stockouts are all-too-common for direct-to-consumer brands, they’re also fairly easy to prevent–especially when heading into a big marketing event. The key is to get your operations and marketing team aligned long before launching the promotion.
By getting these 2 departments on the same page, your operations team can bake your marketing event into their demand forecasts. This way, you can proactively prepare for that surge by optimizing your inventory to fulfill the anticipated demand.
“Optimizing your inventory” refers to stocking the ideal number of units to fulfill demand while keeping operational costs low.
In other words, optimization ensures that you don’t buy too much inventory (which turns to dead stock and drives up holding costs) or too little (which leads to stockouts and stunts your brand’s growth). And as a result, it improves your brand’s bottom line and ensures every promotion makes money.
Aligning your marketing and operations teams
First things first, how do you actually get your marketing and operations team aligned? Well, you get them in constant communication.
This can mean implementing weekly marketing-operations syncs to chat through:
- Planned promotions so your ops team can ensure you have enough inventory on hand to support the initiative.
- Overstocked SKUs so your marketing team can design campaigns to sell off this deadstock.
- Understocked SKUs (and when they’ll be restocked) so your marketing initiatives don’t promote these products.
You might also want to create a Slack channel for the 2 teams to chat between syncs.
However, getting everyone aligned using synchronous meetings can be a time-consuming and expensive option. So, alternatively, you can make these meetings monthly or quarterly and get everyone aligned using a tool like Cogsy instead.
Inside the Cogsy platform, your marketing team can put upcoming promotions on a shared marketing events calendar (it takes less than a minute to do this).
And before promotions launch, your marketing team can use Cogsy’s real-time dashboard to quickly double-check that there’s enough inventory available to support the initiative.
If there is, you can confidently send the marketing email as scheduled. If not, you can quickly pivot, pushing the promotion back until the inventory arrives.
Optimizing your inventory
We know – that still doesn’t guarantee that there will ever be enough inventory. So, once your teams are aligned, it’s up to your operations team to actually order the optimal stock levels.
Historically, this meant using spreadsheets to forecast demand for promoted products. This way, the team could then adjust their operational plan to fulfill this demand.
How much inventory your operations team orders will be based on this plan. So, if the spike in demand your promotion causes is reflected in these forecasts, you’ll have enough inventory to support the initiative.
With that said, this spreadsheet forecasting method is super time-consuming and leads to lots of costly mistakes. For instance, every time the promotion changes, the operations team needs to start the forecast over. That’s a lot of room for data to be misentered, throwing off the final plan.
As a result, brands that forecast with spreadsheets rarely order the right amount of inventory. It’s always too much or too little.
But with services like Cogsy, your operations team can consider your marketing team’s needs in seconds – as long as it’s on the marketing event calendar.
Anything inputted there is automatically funneled into the company’s forecasts and operational plans – without your operations team needing to touch a spreadsheet. This way, you’re guaranteed to have enough inventory available to support your marketing campaign.
When you pair your marketing know-how with an ops optimization tool like Cogsy, you can ensure every marketing campaign sets your brand up for massive growth.
About the author
As co-founder and CEO of Cogsy, Adii Pienaar is empowering retail brands to pursue operational excellence. Previously, Adii co-founded ecommerce website builder WooCommerce and ecommerce marketing automation platform Conversio.
Find out more at cogsy.com