Promotional Pricing Strategy: How to Use Advanced Research Techniques to Plan Smarter Sales Events

Black Friday. President's Day. End-of-year clearance. A smart promotional pricing strategy can turn any occasion into a revenue driver, but without the right approach, it becomes a margin killer.

Most brands nail their everyday pricing strategy. But when it comes to promotions? They pick a discount that 'feels right' and cross their fingers.

We’ve all been there - the “let’s just do 25% off and see what happens” approach.

The result is exactly what you'd expect: missed margin, demand spikes you can't predict, and customers who've learned to never pay full price because they know another sale is right around the corner.

As with any product strategy, it’s crucial to understand what your customers truly want, which includes recognizing how they respond to price changes in various contexts. By applying advanced pricing research techniques to your promotional pricing strategy, you can design discounts that drive incremental volume without eroding your brand or long-term profitability.

Why Promotional Pricing Requires a Different Strategy

Promotions change the rules of the game. A typical pricing study identifies the optimal steady-state price based on value perception and willingness to pay. Think of that as finding the right “everyday shelf price.” But a promotional event adds time pressure, emotion, and competitive chaos - a completely different context that changes how customers interpret value.

A customer might pay $50 for your product most days of the year, but during a Black Friday sale, that same $50 might feel expensive if competitors are shouting “40% off.” On the flip side, a poorly targeted discount could eat away margin without driving incremental demand.

That’s why promotional pricing deserves its own analytical framework.

How to Design a Research-Backed Promotional Pricing Strategy

So how do you take the guesswork out of promotions? It starts with structure. Here’s a simple, data-driven framework to help you design promotional pricing that actually drives growth.

Step 1: Define the Purpose

Not all promotions serve the same goal (and that's where most companies mess up). It's important to get specific. Are you trying to:

• Acquire new customers?

• Clear aging inventory?

• Reward loyalty?

• Drive upgrades?

Each goal requires a different pricing approach. A clearance event might tolerate deeper discounts; an acquisition push might pair smaller discounts with value-adds like bonuses or free trials.  

By first aligning your primary objectives, you’ll be able to make smarter decisions on what pricing scenarios to test and ultimately implement.

Step 2: Audit Past Promotions and Identify What to Test

Before you design your next promotion, take a hard look at what’s actually happened in the past. A problem audit helps you avoid repeating mistakes and spot patterns you might have missed. Look at your past promotional pricing strategy: what you did, how it performed, and what you learned.

The goal isn't to dwell on what didn't work, but to gather intelligence so you can be more thoughtful around what you test. Once you understand what’s worked (or hasn’t), you can get strategic about which products and customers to target. 

Promotions don’t have to be universal. Your segmentation data should tell you who’s price-elastic (those who will buy more with a discount) and who’s price-inelastic (those who will buy regardless). That way, you can avoid training your inelastic customers to wait for sales.

Don’t have segmentation data yet? Understanding which customers respond to promotions (and which don’t) is foundational to getting this right. We can help you build a segmentation schema that reveals not just who your customers are, but how they behave and what drives their purchase decisions. 

From there, you can tailor promotions to the right people at the right time.

Step 3: Build a research design with the end in mind

If you want to be able to simulate different scenarios where your product is on promo vs. off.  Or perhaps your competitors are on promotion and you aren’t.  Or a plethora of other scenarios - a conjoint experiment (and the resulting simulator tool) will become your secret weapon. 

If you’re new to conjoint, think of it as a virtual test market. You’re showing customers hypothetical promotions and watching which combinations they’d actually choose so you can predict real-world behavior with data, not guesswork.

Test different scenarios:

• Varying discount levels (no discount, 10% off, 20% off, 40% off)

• Different time frames (24-hour flash sale vs. week-long event)

• “Bonus” offers vs. straight discounts

• Competitor discount levels

Use these simulations to visualize how each variable affects demand, revenue, and profit margin, before you ever launch the sale.

Step 4: Model Elasticity and Cannibalization

Estimate how much of your promotional lift comes from new volume versus shifted or cannibalized purchases. A good promotion drives incremental growth; a bad one just pulls forward revenue at a lower price.

Step 5: Set Guardrails and Evaluate Post-Promotion Behavior

Use data from past promotions to define discount thresholds that maintain profitability. 

Then, after the promotion, measure whether customers return to normal buying behavior or if their perceived value has shifted permanently.

The Psychology of Promotions: Why Framing Matters

Promotions aren’t just about the numbers.  The perception is just as important. And we can look to consumer psychology to help determine not just your promotional pricing, but your messaging. 

Behavioral economics tells us customers respond differently to percentage off versus dollar off messages, and to limited-time vs. limited-quantity framing, and even to brands who are always-on vs. never-on discount. 

When deciding your next promotional strategy, test variations such as:

• “Save 25% today” vs. “Save $10 now”

• “Ends in 24 hours” vs. “Only 100 units left”

• “Buy one, get one free” vs. “50% off”

And try to uncover what buyer sentiment is when your brand goes on sale versus the competition.  You might see a lift, or, in unique circumstances, your product on promotion could lower your brand equity. 

Including these variables in your conjoint or MaxDiff study can reveal which promotional message actually drives action for your audience.

Promotional Pricing Strategy Example: Forecasting a Black Friday Campaign

Let’s create an example from a CPG brand that sells premium coffee pods.  

Every year, the team ran a Black Friday promotion - a 30% sitewide discount - and every year, leadership asked the same question:

“Could we offer less and still drive the same sales?”

To answer that, we designed a conjoint study simulating multiple promotional scenarios. We varied:

• Discount depth: No discount, 10%, 20%, 30%, 40%

• Promotion duration: 1-day flash vs. week-long sale

• Messaging frame: “% off,” “Save $,” and “Limited Time” language

• Competitors

The resulting simulator allowed the team to forecast unit sales, revenue, and profit under every combination.

What they learned

• Moving from 30% to 20% off reduced volume by only ~6%, but protected 9 points of margin.

• The 1-day flash sale created nearly identical total revenue as a 7-day sale because scarcity drove faster purchase decisions.

• The “Limited Time: Ends in 24 Hours” message outperformed “Save 20%” by 18% in likelihood to purchase — a clear win for behavioral framing.

• Perhaps most importantly, price elasticity varied by segment — new customers needed a deeper discount, but existing subscribers were largely price-inelastic.

What changed

Using these results, the team restructured their promotion:

They ran a 24-hour 20% off flash sale with a “Limited Time” message, and segmented email offers: 20% off for new customers, 10% loyalty credit for subscribers. The outcome?

• +12% higher total profit than the prior year’s Black Friday event

• No drop in December sales (proof that the sale didn’t pull demand forward)

• Improved perception scores around “value for money” and “brand trust” in post-event tracking

The takeaway: They stopped guessing their way to a discount and started engineering it.

Key Takeaways for a Stronger Pricing Promotion Strategy

Promotions can absolutely drive incremental volume - but only if they’re designed with data.

Test, simulate, and stress-test before you go live. That’s how you turn promotions from a gamble into a growth strategy.

Ready to stop guessing and start knowing?

Let’s build a promotional pricing simulator tailored to your category - and make your next sale the most profitable one yet.