Handling promotions.

By Filippo Conforti on February 13, 2024

It is no secret that people are sensitive to the possibility of getting a good deal. Think of what happens during Black Friday and Cyber Monday events, or when the sales period arrives for a fashion brand. Promotions are marketing initiatives designed to encourage customers to purchase more products or services.

Product scarcity and limited time offers are old, yet powerful mechanisms to increase sales. This is just a psychological characteristic that keeps working even though people know that "limited" deals are often not truly limited, or that a TV price of $99.99 is actually just 100 dollars that look like 90.

No matter what, promotions will always be a relevant part of any business. There is almost no commerce without promotions. Therefore, it's crucial to understand how promotions work and how complex they can be, especially in certain sectors.

Technically, a promotion adds a discount to the normal price of a product or group of products based on some conditions that must match. Conditions can be evaluated based on cart content, customer, product category, traffic source, etc. The actual promotion adds a line item to the order with a percentage discount, a fixed amount discount, free shipping, free gifts, etc.

In order to evaluate the set of conditions, a rules engine of some sort is required. For example, cart level conditions must be evaluated based on cart content. A promotion can be triggered only if the total amount exceeds a certain threshold, if the cart contains one or more specific products, or if the cart was abandoned and the merchant decides to attach a discount to it to recover the sale.

Promotions can also be tailored to a specific customer or group of customers. Loyalty programs assign customers to different tiers based on their spending history, membership, or status. Each tier provides customers with a discount or specific benefits, such as free shipping. AmazonPrime is an excellent example of a membership program that unlocks special conditions to members.

Other activation rules may include the market, the time window, the payment method, the customer's address, or—in the case of online promotions—the source URL from which a customer landed on a specific page. There are literally no limits to the possibilities.

In my experience, poorly engineered promotion engines are one of the major causes of slow website performance. During a shopping session, the promotion rules engine must run in real time. This means that complex rules can introduce a calculation delay, which can negatively impact the performance of a website or app. Even worse, cumulative promotions must be evaluated together in accordance with specific priority and exclusion rules. Adding a fixed amount discount and calculating a percentage discount, for instance, gives a different result than adding a fixed amount discount after applying a percentage discount. In the case of a non-cumulative promotion, instead, all other promotions must be excluded from the calculation pipeline.

The bottom line is, there is a great deal of complexity around promotions, especially when they require a lot of flexibility. It is for this reason that many popular ecommerce platforms make extensive use of coupons. Using coupon codes to trigger promotions is a simple way to offer discounts without impacting performance. In essence, the promotion logic is not evaluated by the platform, but rather by some external system. Platforms don't care why a customer has a coupon. Basically, they just need to know about the coupon, check its validity, and apply the promotion associated with it. All of this with just a bunch of simple DB queries.

Although this approach is quite limited compared to a rules engine that applies promotions automatically, based on hundreds of possible conditions, it can just be the right compromise for small businesses or for those who don't use promotions extensively. With that being said, if you do not want to settle for such limited logic, be sure to choose the right tool or design your promotion engine very carefully, otherwise you'll fall into the trap of underestimating the impact on your overall architecture.

For a reference that works well in production for the most sophisticated use cases, check out how we model promotions at Commerce Layer, or the level of flexibility provided by a specialized tool like Talon.One.

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