Promax » Promotional Planning

Why Promote?

admin — Tue, 23 Jun 2009 05:01:07 +0000

Promotions have been a regular part of the Grocery retailing scene for many years now – maybe 30 or more years. When I was first involved in Grocery, nearly fifteen years ago, this question typically was dismissed as obvious. The theory that was put forward at that time was that a promotion was run so that the rate of sale after the promotion would be higher than that before – in other words one was led to believe that the objective was to gain a permanent increase in the rate of sale. Now that scan data is readily available (sales through the cash register) we realise that this is not something that can be guaranteed, indeed the vast majority of products appear to continue with precisely the same sales pattern as existed prior to the promotion. If it is in a growth cycle, that probably continues, if it is in decline, that also continues. Why then do we promote?

Download the full Why Promote? Case Study PDF

Controlling Trade Spend

admin — Tue, 23 Jun 2009 04:54:59 +0000

So you have done your promotional planning, does that mean no more problems? Unfortunately not. It is still quite easy to end up with a severe overspend situation. This is because most promotions have no limit on the amount the chain may wish to buy. Why this should be so is one of those things that has become ‘part of the way we do business’, and has no basis in logic. It is just as illogical as extended buy periods, for businesses where there is perpetual motion and a pipeline of product! But it causes very real problems. Even with the most careful of planning, unless you monitor the trade spend during the year, you will almost certainly get a big surprise at the end of the year. Planning alone will not control trade spend. In this section we are not concerned whether the trade spend is worthwhile, only with keeping the total costs within predefined boundaries.

Download the full Controlling Trade Spend Case Study PDF

The Mirage of Promotional Lift

admin — Tue, 23 Jun 2009 04:50:48 +0000

The availability of retail scan data means that suppliers can now evaluate their promotions in terms of the additional sales that were sold through to the consumer. In this paper we will look at the issues surrounding this, and some of the problems.

Download the full The Mirage of Promotional Lift Case Study PDF

A Quick Outline of the Promotional Planning framework

admin — Tue, 23 Jun 2009 04:49:12 +0000

For some time those seeking to measure promotions have talked about efficiency and effectiveness. However I have never seen a universally accepted definition of these terms, and in my book I set out a number of ways of measuring each. It seems logical to me to use the term efficiency to relate to the overall promotional program – a period of time that is reasonably long, and the inclusion of all promotional costs for a number of promotions compared to the total sales over that period. On this basis, efficiency is a measure of the average cost of trade spend. To relate this to a single promotion, the promotional costs would be expressed as a percentage of the sales on that promotion. Individual promotional efficiencies would be related to the overall promotional program efficiency in terms of the frequency with which that promotion is repeated. To use an example, if a single promotion has an efficiency cost of 20% to sales, and the frequency is such that 30% of the total sales in a period are on a promotion, then the overall efficiency will be 6% of sales.

Effectiveness on the other hand would seem to relate to any gain in sales achieved by the promotion, and be measured in terms of the costs to achieve that gain. A simple theoretical model using real world price/volume relationships indicates that efficiency and effectiveness can have a minimum point – that there are optimum price points. It also indicates that both measures reach a minimum at about the same price point. This suggests that if you optimise effectiveness you will optimise efficiency at the same time. However my own experience indicates that this is not the case, and indeed I have now developed a promotional evaluation system which proves this to be the case. If effectiveness and efficiency are independent, there are four possible states for a product on a promotion.

Download the full A quick outline of the Promotional Planning framework Case Study PDF

Composition of Incremental Lift

admin — Tue, 23 Jun 2009 04:46:03 +0000

This is a precis of a research paper entitled ‘The Decomposition of Promotional Response: An Empirical Generalisation’ by David R. Bell, Jeongwen Chiang and V. Padmanabhan, published by Marketing Science.

This very interesting paper based on research conducted in 1999, studies 173 brands in 13 categories in the USA over a 52 week period, based on the household expenditure of 250 families and 3 stores. The overall conclusion is that the percentage of promotional lift attributable to brand switching is an average of 75%, which is somewhat below previous studies. In 1988 Gupta measured this at 84%, and A.C.Nielsen more recently (precise date unknown, but published in 1996) at 80%.

Of even more interest is the category by category variance. Categories were selected to encompass both those that are known to expand consumption, as well as those that are ‘storable’ or ‘necessities’.The balance of the lift not attributable to brand switching was also analysed into the two components of category expansion (genuine additional incremental volume) and accelerated purchase (reduction in expected inter-purchase interval). A determination was also made of the relative impact of brand factors, category factors and consumer factors to identify which is the most significant. All in all, they are able to explain 70% of the actual promotional response. One of the significant findings is that category effects are more significant than brand effects, and consumer effects (i.e. demographics) are quite minimal.

Download the full Composition of incremental lift Case Study PDF

We need to have “buying rules” to cater for buying patterns (order offset) and cannibalization of similar SKUs.

admin — Mon, 22 Jun 2009 23:07:09 +0000

Promax PX fully supports buying rules and patterns. It is also possible to load similar products as part of a multi-causal model to measure cannibalization.

What does Promax do to help us avoid clashing promotions?

admin — Mon, 22 Jun 2009 23:06:48 +0000

The Promax PX sales Gantt report & Gantt view clearly shows promotional clashes.

Promax PX allows the user to define customers for which they need to avoid clashing promotions. For example, define Customer 1 & 2 as clash customers for Customer 3, the user will be notified of a clash when they save or confirm a promotion.

Can I break down the customer discounts/costs that apply to a promotion and apportioned them to products within promotion?

admin — Mon, 22 Jun 2009 23:06:27 +0000

Shown above is an example of a Promax analytics report configured for a Promax customer that leverage’s the wealth of information that can be stored in the Promax system. These reports can be generated at any level of the product and customer hierarchy. In this instance the client chose to report the information via the Promax analytics OLAP cube and Microsoft Excel pivot tables. You will note in this report there are an extensive breakdown of discount categories and costs that have been included in this client’s consideration of the Promax system. This report can be developed for any product/customer combination. It should be noted however that this is not a standard reports from the Promax system but one that was prepared through the configuration of the Promax analytics OLAP cube. These configurations service can be provided by Promax consultants.

Can I do a financial analysis of promotion to include lost margin on substituted base sales? i.e Profit on promotion versus “do nothing” scenario.

admin — Mon, 22 Jun 2009 23:06:06 +0000

Fundamental to the analysis of promotional effectiveness is the understanding of the difference between normal conditions and those under promotion. This lies at the core of Promax’s approach to promotional planning. From the process of planning a detailed promotion to the many ways of developing scenarios within the application Promax analyses the difference between “do nothing” and that of a promotion and provides a comprehensive financial analysis of the outcomes

Can Promax determine promotion uplift based on causal factors, with a breakdown of each element?

admin — Mon, 22 Jun 2009 23:05:46 +0000

This is fully supported. Promax uses causal factors to create promotional uplift and will breakdown each constituent component into an element of lift.