An integral part of Promax is the ability to model the effect of promotional mechanics e.g. price, shelf-position, marketing spend on the forecasted uplift in sales volume. Full information on how this is done and the options around it are covered in the Promax white paper :  Modelling Multi-Causal Data in Promax PX

Causal factors within Promax are user-defined.  Customer store numbers and store size weightings are valid options.

Understanding the effect of price and volume is one challenge, however, an understanding of profitability is crucial to the most effective planning of promotions.

Promax PX creates a profit/price/volume relationship for every product/customer combination.  It identifies the discount at which maximum profit can be achieved and that discount level at which the profit from the promotion is the same as that achieved by not discounting.

Knowledge of these parameters assists the account manager in pricing.  As every product has a different curve.  Promax also assists in identifying those products that may be included in a promotion that have no response to discount.

Using Promax’s powerful optimisation technology the business planner can test the effects of changing promotion parameters such as frequency, pricing strategy and return on investment to determine the business outcome they desire.

A range of scenarios can be created for any selection of products and these can be compared to assist in the development of a business strategy.

Promax PX provides users with the ability to specify trend adjustments that are applied to the baselines. They can also be manually overridden to adjust for growth and distribution changes.

The Promax PX statistical modelling engine is used to define both the Baseline and Promotional volumes that are used within all planning areas of the solution. Promax PX will store the Statistical Forecast separately so that an analysis of the Statistical Forecast vs. Manual overwrites can be performed.

The essence of advanced trade promotion management requires an understanding of consumer behaviour under normal conditions and during a promotion.  Normal conditions are generally considered as baseline and it is necessary to be able to de-construct the historical demand data to identify the component that makes up baseline sales.  Promax PX has a number of statistical techniques that assists the planner in identifying and modelling baseline sales.  These techniques deal with a variety of data quality conditions from advanced multi-causal statistical models based on point-of-sale information to user-defined baselines that maybe used for “new” products.

Multiple tools allow the creation of a baseline which includes seasonality and trend to which is added the effect from each promotion.

This technique has proven to give a higher level of forecasting accuracy with the least amount of effort from the users.

Promax presents to the supply chain management a forecast of ex-factory sales which has automatically incorporated the baseline and promotional uplift correctly timed to align with the promotional program.

Promax PX can use multi-causal models to predict the effect of price, catalogue, display or any other causal factor that is available to improve the quality of the uplift prediction.
A company adopting this approach to forecasting can expect significant improvements in forecasting accuracy over those techniques that smooth promotional effect into the baseline prediction.  The extent to which forecast accuracy can be improved is a function of the environment and business process however most Promax customers have received significant improvements in this area.

Visibility of customer profitability is a key outcome from Promax. From a strategic perspective Promax allows the analysis of customer profitability and the optimisation of pricing strategies to maximise the bottom-line outcome for the company and its trading partners.

Throughout all stages of planning within Promax PX (Strategic & Tactical) the financial outcomes of the promotional plans are available. These results show information about the profitability of the deal for organisation and retailer. This allows the user to ensure that desired customer profitability targets are met.

Analysis of customer profitability occurs in the planning, execution and post event phases of the promotional program. Powerful goal seeking functionality allows the user to create promotional plans that need the desired financial goals in a quick and efficient manner.

Detailed below is an example of the anticipated ROI that can be achieved in the various impact areas.

Component Impact Area:  % of ROI Savings

• Prediction of promotional event ROI Denial of spending; reduction of spending for “bad” events:  40%
• Reduced deductions; clean invoicing and accounts receivable. Reduced paperwork handling, enquiries, and accounting staff:   30%
• Forecasting accuracy, prediction of promotion event spike volume and timing. Better prediction of promotional lift and baseline sales; lower finished goods inventory; less direct labour; higher customer service levels; higher sales:  20%
• Other business efficiencies. Reduced time spent reacting to problems; crisis meetings; digging for missing promotion information:   10%

Promax promotion optimisation technology will assist clients to reveal opportunities for the more effective application of trade spend budget. In those customers that have applied this approach to their business they have achieved gross profit improvements as much as 5%. The extent to which our clients can expect improvements of this magnitude will be driven by the decisions made by the business and profit targets may not be the sole objective for the business. Promax optimisation technology will allow clients to model alternative scenarios and construct a promotional strategy that is targeted at the business objectives.

That being said, the ROI from a Promax project of reasonable size should see the project investment returned inside a year from the “go live” milestone.

Periodically the business needs to develop a new strategy for the next budget period. The Promax PX strategy planner is the ideal tool to enable the account manager to model a variety of approaches to the promotional programme for the new period. Typically the account manager would want to create a scenario for each approach to the customer and the promotional programme, comparing them to see the difference in the financial outcome.

The strategy planner in Promax PX has been specifically designed to enable this scenario planning (What If Planning) to be carried out. Promotional programs can be rapidly constructed with productivity tools that enable cut-and-paste and repetitive copy. The graphical environment facilitates a drag-and-drop mechanism with colour coding of each promotional type.

The spreadsheet style of Promax PX facilitates an easy “what if” analysis of an individual promotion, and entire promotional program or multiple scenarios involving the exploration of pricing elasticity and promotional frequency. Tools like the strategic optimiser allow the business to explore new strategies of pricing and frequency to maximise profitability or marketshare objectives. The strategy planner allows the assembly of scenarios testing tactical plans for any group of products or customers. Full financial evaluation of every strategy is created and easy comparative techniques provide a clear path for the account manager to evaluate the best plan.

Promax PX allows the business to test a variety of promotional plans – such as adopting a high/low approach, compared to an EDLP approach. The system allows the user to simulate the anticipated results (revenue, profit, costs, etc) of a variety of scenarios. Once the user has selected the desired scenario they can activate that scenario so that it becomes the operational plan.

There is extensive functionality within the Promax PX system to deal with customer terms. Terms are date-based. They can be based on the rate or lump sum. Terms can be cascading, that is, the calculation on one term can be based on the calculation of it higher level term. Terms and rebates can be calculated on retail customer turnover.