Planning And Evaluating Promotions
When planning promotions it is important to define the objective for each promotion. In a previous post, one objective was to move customers up the price point scale.
Here’s a set of common promotional objectives:
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Having defined the objective, planned and launched the promotion, it is essential to evaluate its success. Too many companies do not evaluate promotions diligently because they are too busy planning the next one. If you don’t evaluate success or lack of properly you just won’t learn for the future. The table above includes the judgment criteria for each promotion type.
When considering the sales success it is important to look for the half life. In the diagram below, the chart shows a simplified example of sales shooting up as a promotion is launched.
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As the promotion ends the sales level drops. But where does it drop to? Sometimes it drops lower than the start level. This can be because the consumer now has a stock of the product at home and won’t buy again until that stock is run down. In this case the loss of full margin sales may offset a significant part of the gross profit achieved in the promotional period. In other cases, like that shown here, there is an after effect or a half-life. In this case, people tried the product and some liked it enough to carry on paying full price. This effect may decay over time but while the half-life is still active those consumers are paying full price for the extra volume and this is part of the promotional success evaluation.
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Posted by Brian Hume
2nd May 2018
