Sales Promotion Metrics Flashcards Preview

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Flashcards in Sales Promotion Metrics Deck (21)
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1
Q

Immediate effects metrics

A
  • Baseline/ incremental sales, promotional lift

- Promotional profitability

2
Q

Longer term indicators

A
  • Percentage sales on deal
  • price waterfall
  • Pass-through
3
Q

Types of sales promotion

A
  • Consumer promotions. Pull strategy: incentivising consumers to buy more e.g. Godiva
  • Trade promotions. Push strategy: incentivising channel members to promote the brand/product in their outlets e.g. Phillips
  • Internal promotions Push strategy: incentivising sales force and other employees to promote the brand/ product through sales or customer service e.g. SouthTrust Bank
4
Q

Paradox of sales promotion

A
  • Increase in sales can be very effective in raising short term sales
  • But this can be detrimental to brand equity
  • Creates a question of short term vs long term, insufficient integration vs successful integration
5
Q

Positive sales scenario

A
  • Consumer franchise building promotions (samples, coupons, demos, games etc.)
6
Q

Negative sales scenario

A

Non consumer franchise building (price off, premiums, rebates etc)

7
Q

Incremental sales

A
  • represent the “lift” in sales resulting from a price promotion
  • Separating sales portions attributable to various marketing activities to generate them
  • Calculated for any period of time (year, quarter, or term of promotion)
8
Q

Baselines sales

A

Baseline sales are those that a firm would have expected to achieve without any promotion. Generally estimated through analysis of historical sales data through regression analysis, test market results and market research

9
Q

Baseline sales, incremental sales and promotional lift purpose

A

measure the short term effects of sales promotion

10
Q

Advertising to sales promotion ratio has changed because?

A
  • Retailer power
  • Managerial acceptance
  • More brands
  • Increased parity
  • Questions on ad effectiveness
11
Q

Promotional lift achieved by?

A

A marketing program measuring incremental sales as a percentage of baseline sales

12
Q

Challenges of baseline sales, incremental sales, promotional lift

A
  • Separating baseline and incremental sales- and components of incremental sales can be extremely difficult. Marketing mix modelling is a step in that direction, but it is a less than perfect tool
  • Baseline estimates is complex and inexact process
  • Multiplicative or additive equations can be used to present lift
    Long-term effects are not addressed (profitability and sales need to be adjusted over time)
13
Q

Promotional profitability purpose

A

to assess the short term returns on a sales promotion

  • to compare if we make more money with or without running the sales promotion
  • the difference between the with and without (Baseline) scenarios
14
Q

Promotional profitability problems

A

short run profitability is not a predictor of long term profitability

15
Q

Percentage of sales on deal

A

manufacturers offer discounts to distributors and retailers to encourage promotions and sales to their customers

16
Q

Percentage of sales on deal purpose

A
  • Measures the % of company sales that are sold with a temporary discount of some form. Temporary discount does not include accounting discounts such as early payment discounts, cooperative allowances, etc.
  • Assess the extent to which products are being sold on sale
  • Helps to understand penetration of the sales promotion efforts but can also raise a red flag about potential threats to brand equity and long-term profitability
17
Q

Problems with percentage sales on deal

A
  • Collecting relevant sales data (splitting on-sale and list prices) can be challenging
  • Not always in control of how much discount is passed along to the end customers
  • Be conscious of whether you are using gross or net figures for the $-based version of this metric
  • Resellers can take advantage of manufacturer pricing incentives (volume purchase, returns, timing etc.)
18
Q

Price waterfall purpose

A
  • To assess to what extent and how promotions decrease the list price (and long run profits) - understand “value leaks”
  • Why do we care? Because on average, a 1% price loss translates to an 8% profit loss (just as a 1% increase translates into a 8% profit gain).
19
Q

Price waterfall construction considerations

A
  • Disaggregate value loss at each step of discounting
  • Consider both on-invoice and off-invoice discounts
  • Calculate overall loss by dividing the net price by the list price
20
Q

Pass through purpose

A
  • To assess whether trade promotions get to consumers in the form of consumer promotions from the retailer - are promotions “passed through” to end-users?
  • While some trade promotions are designed to increase channel member margins, many ultimately want to share “value with consumers
21
Q

Why would pass through not happen

A

Trade promotions are only partly designed to strengthen channel partners’ margins – often the objective is to share value with consumers (irrespective of whether that’s a good idea or not in the first place).