University of Economics in Prague

Faculty of Business Administration
Program: International Management

The Effectiveness of Sales Promotion in the
FMCG Sector

Author: Bc. Lucie Müllerová
Supervisor: Ing. Miroslav Karlíček, Ph.D.

Declaration of authorship

I hereby declare that I have written this thesis without any help of others. I also declare
that I have mentioned all used sources and have cited them correctly.

Prague, Czech Republic, 20 December 2011
Lucie Müllerová

2

Acknowledgement

I would like to thank Ing. Miroslav Karlíček, Ph.D. for his academic consultancy and
supervision of this thesis.
Additionally, I would like to thank my colleagues at Nestlé for making all necessary
information available to execute my research and for providing me with their support.

3

FMCG . The effects of sales promotion on the overall consumption in the category are analyzed and other factors influencing the consumption are observed. whether sales promotions are beneficial or not for the long-term sales and how the shopper behaviour is influenced by the sales promotion activities. It is studied. Key words: . based on thorough analysis of their effects.Evaluation Program 4 .Sales promotion . impact and characteristics of sales promotions within the category of ready-to-eat cereals.Abstract The overall goal of this thesis is to draw relevant conclusions about the nature.Effectiveness .Efficiency .

................................................ 47 8.......1 Psychographic factors ......1 The process of sales promotion planning and evaluation .............. 15 Factors influencing responsiveness to sales promotion ...................................................................................................................................... 17 2...................................................................................................2 Sales promotion types .......................... 42 8 7................................... 20 3..........................................................4 Long-term effect of sales promotion on brand image ............................................................................ 48 5 ....................................................................3 The initial situation ............. 47 8... 42 7.................... 41 7 Background ........................................Table of contents Declaration………………………………………………………………………………............................3 Effects of sales promotion on brand loyal and brand switching consumers .......................................... 21 3............................................................... 34 5.............................................................................2 Acknowledgement……………………………………………………………………….........................................41 6 Hypotheses statement ...................................1 Effect of sales promotion on consumer decisions .......................................................................................................................................................... 10 1...................... 24 3.....5 Empirical generalizations about sales promotions ..........................................3 Abstract………………………………………………………………………………….. 45 Promo evaluation program ........................... 11 1.... 27 3............................................................................................ 10 1......................................2 Effects of promotion-induced stockpiling on sales .......................2 Demographic factors ...................3 Sales promotion objectives .......... 18 Sales promotion effects ....................................1 About the company .......................................................................................................................................... 28 4 The evaluation procedure .......... 31 5 Sales promotion evaluation .......................... 42 7...............................................2 Processes within the evaluation program .... 17 2...............................................2 The category characteristics ........................4 Introduction……………………………………………………………………………….........5 A) THEORETICAL PART.......................................................................1 Promo evaluation program requirements ......................................................................1 Sales promotion definition ................... 20 3.................................................7 1 2 3 Sales promotion................................. 38 B) PRACTICAL PART.....

..................................................76 List of abbreviations............................................. 61 9........................................2............................................... 53 Hypotheses verification ...................70 Bibliography…………………………………………………………………………………............3 Step three: Promo evaluation .....................................1 Step one: Data preparation ................................................................................................9 8.......................................................................................................... 50 8........2 Verification of Hypothesis 2 ............... 64 Conclusion…………………………………………………………………………………….......... 62 9........................... 48 8........ 61 9.......2..................................................................................................3 Verification of Hypothesis 3 ................................77 6 ................2 Step two: Data processing ..........................................73 List of figures……………………………………………………………………………….........1 Verification of Hypothesis 1 ............................................77 List of used terms...........2.....

Introduction Motivation and context The consumer habits and behaviour change and evolve throughout the time. a. premiums or loyalty programs graduated. which operates in the category of ready-to-eat cereals (further RTEC). but they could serve as good inspiration for any FMCG company in these difficult times. most decisions about purchases occur at the point of purchase. sales promotions were perceived only as a rather unimportant complement to advertisement. Due to the author‟s current position as an analyst within the Cereal Partners Czech.. as well as measuring of their impact.s. Nowadays. The author conducted initial research into this topic and realized the insistent demand for an effective evaluation program from literarily every FMCG manufacturer on the market. Their arguments are most frequently related to the urgent need of planning and focusing promotions efficiently. and so do the marketing activities and approaches of manufacturers. as the economic crisis deepened and buyers‟ appetite for various forms of promotions such as discounts. thus sales promotion activities represent an increasingly important and effective part of company communication mix. the author will have a unique opportunity to design conclusions based on real-life data. however. Sales promotions became even more prevalent discussion topic. a division of Nestlé Česko. The conclusions of the thesis can serve as a helpful source of information for forming the sales promotion strategy not only in Cereal Partners Czech. but they could serve as good inspiration for any FMCG company in these difficult times. Up until recent history. the temporary and even unsustainable nature of certain sales promotions occurs under criticism of numerous academics and practitioners. However. This phenomenon is also reflected in the fact that the supplier‟s budget for sales promotions sometimes even exceeds budget for the advertisement spending. Since most of the volumes were generated via such promotions. Such recommendations can then serve as a helpful source of information for forming the sales promotion strategy not only in Cereal Partners Czech. the fierce nature of FMCG competition would not allow virtually any company to survive without extensive use of them. 7 .

scientific publications concerned with characteristics and classification of sales promotions will be studied and critically analyzed. Initially. Finally. research studies concerned with various effects of sales promotions. executed by Cereal Partners Czech. secondary research of available resources dealing with sales promotions will be performed. A relevant sample of real sales promotions.and posterior evaluations of sales promotions within the company on a regular basis. The evaluation program should enable calculations of the effectiveness and efficiency of various sales promotions. Structure of the thesis In the theoretical part. Various theoretical frameworks will be studied and analyzed in order to identify effects of sales promotions. based on thorough analysis of their effects. suitable evaluation program will be developed. Furthermore. 8 . Design of suitable methodology of sales promotion evaluation will be also constructed on this theoretical foundation. the evaluation tool shall be further integrated to perform pre. and the results from the various sales promotions will be cross-checked and compared. impact and characteristics of sales promotions within the RTEC category. which will enable relevant analyses of the sales promotion effects. which would be significant for the RTEC category. will be evaluated by the program developed especially for the purpose of this thesis by the author. In case of Cereal Partners Czech. their tools and types will be evaluated.Research objectives The overall goal of this thesis is to draw relevant conclusions about the nature. The conclusions shall be drawn while answering the following research agenda:    How is the shoppers‟ behaviour influenced by the sales promotion activities? To which extent are sales promotions beneficial for the long-term sales for RTEC? What are the effects of sales promotion on the overall consumption in the RTEC category and what other factors are influencing the consumption? Methodology In order to fulfil the aim of this thesis. literature resources addressing the evaluation procedures of sales promotions will be examined. in order to run final analyses on the group sample.

Findings from the theoretical background will be directly applied in the practical part of this thesis to define key hypotheses relevant to the RTEC category. the interpretation of most substantial findings will serve as basis for drawing conclusions in respect to the verification of the critical hypotheses of this study. The development of the evaluation program and its functionality shall be described in detail. the hypotheses will be tested on a relevant and extensive sample of sales promotions executed by Cereal Partners Czech. Finally. 9 . Then.

in order to generate immediate sales. Jahodová. Such incentives enhance the product‟s value by adding some benefits that go beyond the product‟s functionality or brand image.: Advertising. Moreover. H. 7th edition. Whereas advertising offers the customer reasons for the purchase. when the world is experiencing the economic crisis. (2007).: Moderní Marketingová Komunikace. p.A) THEORETICAL PART 1 Sales promotion 1. Sales promotion can be defined as a mix of incentivebased marketing activities which directly stimulates the shopper‟s behaviour. Nowadays.. in order to make a good deal and save money. and other aspects of Integrated Marketing Communications. 88 Shimp. increases the effectiveness of trade intermediaries or motivates the sales force. however. sales promotion represents an effective integral part of marketing communication mix. J. sales promotion represents a clear and concrete motive of the purchase. p. where the competition is fierce and thus it is insufficient for a company to differentiate its products just by a strong brand image – Fast Moving Consumer Goods (FMCG) sector is a good example of such environment.1 Sales promotion definition Sales promotion is part of the marketing communication mix. Grada publishing (2010). Promotion. Following trends which developed over the last decades caused the growth of sales promotion importance2:       1 2 Shift of power from manufacturer to retailer Increased price sensitivity of consumers (even deepened due to crisis) Increased brand parity (perception that some brands are equal) Reduced brand loyalty (brands are increasingly similar) Reduced media effectiveness Pressure to achieve short term results in companies Přikrylová. 1 Before. sales promotion activities were considered an unimportant complement to other communication techniques. where products do not differ much. Therefore. consumers are even more sensitive to the sales promotion. 495 10 . sales promotion is commonly used in categories. T.

What often happens. and an inappropriate sales promotion can undermine the overall brand strategy. A disadvantage. Brand loyalty is therefore not increased. What is more.”4 1. p. caused by the temporary price reductions – the price is an important element of the brand positioning. “Moreover. however. Lhotáková.2 Sales promotion types Sales promotion can be classified according to its target audience. the so called “Out of sight. Oeconomica (2010). out of mind” effect. and other aspects of Integrated Marketing Communications.: Advertising. is its ability to influence immediate behaviours and thus generate an immediate and strong sales response. it usually gets back to its pre-promotional level. and when the sales promotion is over. it distracts the consumer from focusing on the brand itself. Hana. Petr. Another advantage is that sales promotion is relatively easy to evaluate due to its measurability. Moreover. Markéta a kol. Sales promotional efforts target following groups (see Figure 1): 3 4  Consumer sales promotions  Trade sales promotions (Retailers)  Sales force promotions Shimp. according to research. Promotion. 173 11 . 496 Machková. 7th edition. is that price sales promotions make the consumers more price sensitive in the long term. and lets him focus only on the sales-promotion incentive. is the possible devaluation of the brand. other negative effect. This logically can lead to brand switching.Strong positive of sales promotion. in contrast to advertising.3 Another drawback is its high cost. (2007). which sales promotions can have. T. which sometimes even exceeds the advertising expenses. is the temporary character of sales promotion. Král. p.: International Marketing. the consumers are actually “trained” by the repeating price sales promotions to seek for deals.

should lead to increased sales volume and share of market. attracting consumers to a product trial or can even represent a reaction to competitor‟s activities (so called pull strategy). a coupon is a certificate providing a consumer who redeem it with a price reduction. This raises a question why companies do price promotions 12 . or 20% for free). activating sales of a maturing product. and other aspects of Integrated Marketing Communications. Promotion. 492 Consumer sales promotions This type of sales promotions utilize a variety of methods and tools. p. T. 7th edition. Price-reduction-based techniques are used in all product categories. A discount is a direct price reduction. multipack. which combined with advertising. (2007).g. and a bonus is an extra quantity of a product at a reduced price (e. The consumer sales promotion tools can be divided into five main groups:      Price promotions Samples and free trials Premiums and gifts In-store marketing Competitions and loyalty programs A discount.Figure 1 Sales promotional targets Source: Shimp. the short period of sales growth is accompanied by a decline. Thus. or by brand switchers. coupon or a bonus belong to the most commonly used tools.: Advertising. However both activating sales and attracting new customers very often end up unsuccessful in the long term. and are based on price reduction of the product – price promotions. as it is largely utilized by current users who would buy the product anyway. sometimes they can serve to attract consumers to a product trial. the total profit can be increased thanks to the additional sales. They are also used to activate sales in FMCG – despite the fact that profit margin per unit is lowered.

Bellman. Nowadays the competitiveness of producers is very high and price reductions can serve as a defensive tool to be prevented from customer loss. Despite its high cost. p.. S. that are located at retail stores have the ability to stimulate impulse purchases. J. there is the highest chance to influence the shopper behaviour immediately. According to the observational studies of the shopper behaviour in the supermarket. retail stores. p. 173-174 7 Shimp.: Marketing Communication: theory and applications. consumers are accustomed to price promotions and seek for them. Moreover. Samples and free trials are used to persuade nonusers to try a product. Sampling or trials are generally used for launches of new brands or innovative products. such as secondary placements. there is a high probability of wastage as current users or nonusers with low potential are reached as well. two thirds of all grocery purchase decisions are made in-store and therefore could be influenced by POP media 7 .R. and also packaging of the product. It includes various point-of-purchase media (POP media). Pearson Education Australia.6 In-store marketing represents activities that take place at the point of purchase. test drives). Research says that about 75% of consumers will try a sample if they receive it. Oeconomica (2010). sighting a POP display and placing an item into the shopping cart takes on average only 9. (2005). Lhotáková. displays. tastings). posters. According to the POPAI (Point-Of-Purchase Advertising Institute) study. In retail stores. 351 Machková. this technique is probably the most effective communication tool to generate trials.: Promotion Management & Marketing Communications. Petr. shelf talkers.that often. Král. especially in FMCG. T.A. These tools represent a very good way to influence the shoppers‟ decisions among brands.: International Marketing. Premiums and gifts are techniques where consumers gain something in addition to the purchased product. The POP media. (1993).g. The answer could be probably found in the business environment itself. universities or even streets.4 seconds and almost 50% of purchases happen 5 Rossiter. whereas free trials are usually used in case of durable goods (e. wobblers. banners. there is a chance he/she will continue purchasing the product on a regular basis. Sampling is typically used in FMCG (e. 5 If the consumer is content with the sample. the POP media have to attract the shopper‟s attention very quickly. 555-558 6 13 . The item should be linked to the brand identity of the product and also should be rewarding for the consumer. This kind of sales promotion will be successful in case the target audience would be willing to pay for the premium anyway. Hana. The Dryden Press. Sampling is usually located in places with high traffic as events.g. p. On the other hand. merchandizing. 3rd edition. However. Markéta a kol.

S. retailers. which later often allows the customer to gain various discounts or advantages. in most countries competitions are subject to legal restrictions. p. Pearson Education Australia. Merchandizing is a technique of such product presentation at retail shelves. which provide the reasons for displaying. However. POP media represent almost the sole form of communication. In the meantime. Trade sales promotions The sales promotion can be targeted also on trade intermediaries (wholesalers.: Advertising. which optimizes the sales potential of products. In case of loyalty programs. a regular utilization of a product is recorded in a loyalty card. stocking or advertising the promoted brand (referred to as push efforts)9. T. Sometimes the aim is to increase the knowledge about the promoted product characteristics. Loyalty programs and consumer competitions are tools which should stimulate consumer loyalty. which also should gain consumers‟ loyalty.8 For private labels (brands of the retail chains). (2005).R. and moreover can support the brand image after the purchase. Creative product packaging also has the ability to influence the consumer. and other aspects of Integrated Marketing Communications. Promotion. (2007). which can be later utilized in forming of the marketing strategy..: Marketing Communication: theory and applications. the producer gains a lot of personal data of the customer and of his/her shopping behaviour. or other channel members). 492 14 . p. Competitions offer monetary and nonmonetary prizes.within less than 5 seconds. 359 Shimp. 7th edition. Bellman. J. Following incentives may be used: 8 9  Trade allowances  Various discounts (dependent on the sold amount or in case of repeated purchase)  Products for free or symbolic price  Share of the point-of-sale advertising cost  Sales competitions or motivational programs (rewards for increased sales volume)  3D advertisement tools (promotional products or gifts)  Category management Rossiter.

education.3 Sales promotion objectives A well-designed sales promotion has the capability to: 10 11  Encourage the sales force enthusiasm for a product in all phases of its life cycle  Facilitate a launch of new products to the market – many retailers refuse to accept new product unless some extra compensation is provided to them  Revive a mature brand and thus prolong the product life cycle  Increase the shelf merchandising space –trade sales promotions often enable the manufacturer to obtain more shelf space or a better placement for a temporary period  Attract customers to a trial of a new product Přikrylová. Rewards for product displays  Guaranteed buyback of products It is important to mention that the two above mentioned sales promotional efforts (pull and push) are not mutually exclusive. Moreover. p. 93 15 . Grada publishing (2010).10 Sales force promotions The purpose of this type of promotion is to encourage the sales force. J. in a form of excursions to exotic destinations) Sales and promotional tools (sales handbooks. J. and therefore consumer sales promotions would often not be likely to succeed unless trade promotions were done. Jahodová. Consequently. contrarily usually occur simultaneously. retailers are more and more powerful.. due to consolidations. informational meetings Incentives (e. p. 92 Přikrylová. promotional items etc.. Grada publishing (2010). H.g. H. Following tools are used:     Competitions in sales volumes or gaining new customers Specialized trainings.: Moderní Marketingová Komunikace. companies usually spend more of their budget on trade promotion than on end-consumer sales promotion. Jahodová.)11 1.: Moderní Marketingová Komunikace. retail sales staff or external sales representatives to better performance.

he is out of the marketplace for a while and therefore will not buy the competitor‟s brand. Strengthen advertising campaign of a brand if well integrated into the communication mix  Offset competitor‟s advertising and sales promotion activities  Encourage repeat purchases of current customers – by various continuity or loyalty programs  Stockpiling – many deal-oriented sales promotions encourage the consumers to buy more of the product than they would normally do.12 Nevertheless. to be able to fulfil such objectives. (2007). Promotion. the producer usually has to offer financial incentives to the channel intermediaries (wholesalers. should require minimal effort from the side of the retailer. The question whether such loading leads to a real increase of consumption in the long term or not will be discussed further on. 499-506 16 . Moreover. and many side effects are brought about by sales promotion. when the consumer is loaded with one brand. In the following chapters. 12 Shimp. and should bring quick results which would also improve the retailer‟s performance. retailers). However. p. in reality the results of sales promotions are influenced by many factors. a successful sales promotion has to have an appropriate timing. Moreover. and other aspects of Integrated Marketing Communications. 7th edition. several influential factors and some effects of sales promotions are discussed based on a secondary research of empirical studies. such as increased sales volume and/or profit margin. T.: Advertising.

p. (1990).10. These three dimensions influence the way in which consumers react to promotional offers. and are driven by the perception of making a “good deal”.: Distinguishing coupon proneness from Value consciousness: An acquisitiontransaction utility theory perspective. Obtained 5. Netemeyer.14 Value consciousness has been defined as “the concern of ratio of quality received to price paid in a purchase transaction. A price conscious consumer will not be willing to pay for distinguishing features of a product. selected psychographic and demographic factors and their impacts are discussed. Consumer behaviour is influenced by many factors. It is what the consumer gets for his money spent. Vilakshan. and so is responsiveness to sales promotion activities. It is a tendency to respond to sales promotions because they are on deal. (March 2009) 17 . not only good knowledge of sales promotional tools and their objectives is important. Journal of Marketing.The Moderating Role of Price Perceptions and Deal Proneness (A Study of FMCG Products).marketsegmentation. Vilakshan. 54–67 16 Venu Gopal Rao: Effect of Sales Promotions on Consumer Preferences . three dimensions of consumer behaviour – Value consciousness.16 Deal proneness was measured as a frequency of purchases made on deal. It is a concern for price paid relative to quality received”. Value conscious consumers are seeking low prices. S.2 Factors influencing responsiveness to sales promotion When companies plan their communication mix. not the actual purchase of the goods that are on 13 Goldberg. XIMB Journal of Management. Joel: What are Psychographics? Source: http://www.com/what_are_psychographics. but it is also vital to know the target audience and its behaviour.The Moderating Role of Price Perceptions and Deal Proneness (A Study of FMCG Products). lifestyle. 15 Value represents the lowest price a consumer would pay for a quality brand.1 Psychographic factors Psychographic factors relate to consumer‟s personality. R. R. D. if the price difference for these features is too large”. it is hard for the manufacturers to estimate reactions of the consumers.html... Deal proneness is a psychological tendency to buy. Price consciousness has been defined as the “degree to which the consumer focuses exclusively on paying low prices”.13 Due to a wide range of diverse products. 54. 2. values. In the following two chapters. (March 2009) 15 Lichtenstein. To determine at least some connections.G. XIMB Journal of Management.2011 14 Venu Gopal Rao: Effect of Sales Promotions on Consumer Preferences . & Burton. interests and attitudes. Deal proneness and Price consciousness – became a subject of studies.

that more educated people have a higher ability to evaluate prices of products and sales promotion schemes. Following factors were studied: gender. Journal of Retailing. It is generally assumed.M.g. are assumed to have fewer funds than economically active consumers. They are therefore more knowledgeable about the offered products and their characteristics. income.. meaning that younger consumers are more likely to search for deals. p. and household size.. p. "An Examination of Deal Proneness across Sales Promotion Types: A Consumer Segmentation Perspective". especially those who are already retired. International Journal of Retail and Distribution Management. 73 (2)..19 Regarding age. some authors found out that there is a negative relationship. p. Burton S. (1978).. in reality it is quite hard to distinguish them in consumer behaviour and use it in praxis.. 369-377 19 Lichtenstein D. 15 (3). 2. Regarding gender. Burton S. Some authors therefore found a positive relationship between age and deal proneness 20 . "Impact of Deals and Deal Retraction on Brand Switching".. Journal of Retailing. However.. and Stemthal B. This differs from country to country. and also the sales promotion schemes. they have also a better 17 Davies Gary and Bell Jonathan.17 For the above mentioned reasons. (1978).G. Journal of Marketing Research. and therefore are often more “prepared” when it comes to e. (1997). On the other hand. age. Tybout A.A. the opinions among researchers vary. p. Deal prone customers carefully compare the benefits and the costs of the purchase on promotion.G. education. Buesing T. 19 (1). women are usually those. women are considered more deal prone consumers than men18 .72-81 21 Lichtenstein D. Peacock P. "An Examination of Deal Proneness across Sales Promotion Types: A Consumer Segmentation Perspective". and Netemeyer R..21 Education in relation to sales promotions has influence on so called thinking costs and searching costs.R. which are generally not used by men very often. but generally older consumers. "Identifying the Deal Prone Segment". Manufacturers should take into account the three above mentioned dimensions while designing a campaign. Journal of Marketing Research. who are responsible for the household shopping. 283-297 18 .R. The age is logically linked with the disposable income of a consumer.promotions. 283-297 20 Dodson J. 25-28 18 Blattberg R. Nevertheless.2 Demographic factors Some researchers and authors focused on the influence that demographic factors have on consumer behaviour and on consumer reactions towards sales promotion activities. and Netemeyer R.. "The Grocery Shopper-Is He Different?". They also generally do more planning on their purchases. 73 (2). (1991) p. some research studies indicate that deal proneness is not related to gender. (1997). the usage of coupons. and Sen S.

. Therefore. Ansári A. (1997)... 15 (3). Nevertheless..access to sources of information about products and sales promotions. (1990). (1999). The general assumption is the bigger the household. p. Buesing T. the more needs the family has. 95-114 27 Blattberg R. 15 (3). Some authors claim there is a positive relation between income and responsiveness to sales promotions.. p. and therefore are considered to be less deal prone. also in this case the opinions of authors are inconsistent. According to Lichtenstein.. 369-377 24 Inman J." Journal of Consumer Research. 10 (2). and some authors even opine there is no relation between these two variables.. consumers with higher income are less limited with their budgets and thus can be more likely to act impulsively and respond to in-store sales promotions. consumers with lower income are more likely to be deal prone. 27 22 Lichtenstein D. 149-160 26 Manchanda P.24 Again. "The 'Shopping Basket': A Model for Multicategory Purchase Incidence Decisions”. and larger families are also more price-sensitive. "A Model of Household Grocery Shopping Behavior. the relationship is not consistent and the research findings are very conflicting. others found negative relation. 73 (2). and Gosh A. Journal of Retailing.J. 18 (2). (1999). Burton S. p. 74-81 25 Bawa K. 22 Income is considered the most important demographic factor affecting consumer behaviour in relation to sales promotion. According to some researchers. 369-377 19 . 17 (1). p. McAlister L. Peacock P. "Identifying the Deal Prone Segment". and Netemeyer R. p. Household size is the only factor. However. Such consumers are also more likely to have a greater interest in money saving.. Journal of Marketing Research. (1978). Some authors however point out that households with presence of small children have less time available to searching activities. Consumers with lower income are generally assumed to have higher financial restraints. which has consistent results of studies. the grocery expenditures increase with the size of family25. and Sen S. p.D.. "Promotion Signal: Proxy for a Price Cut?.. "Identifying the Deal Prone Segment".R. less educated consumers are more likely to be deal prone. and Gupta S. (1978)." Marketing Letters. Buesing T.. Marketing Science. Peacock P. 283-297 23 Blattberg R.G. Journal of Marketing Research. and Hoyer W. "An Examination of Deal Proneness across Sales Promotion Types: A Consumer Segmentation Perspective".. 26 Therefore there should be a positive relationship between size of household and deal proneness. 23 According to this assumption. a positive relationship between education and deal proneness is expected.. and Sen S.

775– 783 34 Priya Jha Dang. The external prices therefore influence the value perceptions and deal evaluations of consumers. R.3 Sales promotion effects 3. 33 Alford. Vol 55.: “Consumers‟ Perceptions of Promotional Framing of Price”. p. (1985). vol. Conversely. Too High to be Good : The Role of Product‟s Price and Form of Incentive in Sales Promotion Evaluations”. it has no influence on the internal price range. 3.31 Transaction utility is the comparison of the price to a reference price of a consumer. p. 199-214. p.: „Mental Accounting and Consumer Choice‟. Thaler. Abhijit: “The Effects of discount level. no. price consciousness and sale proneness on consumers‟ price perception and behavioural intention”. (1985). followed by durable goods. is to create an immediate need to buy a product by adding an extra value. no. 3. 32 Each consumer is assumed to have an internal price level (a reference price) and compare each price of a product with this standard. 4. p. vol. Working Paper. Michael F. Vol 17. Smith. Igor: “Too Good to be True vs. R. Biswas. 34 The main goal of sales promotion. 330 32 Thaler. If a price is outside of the internal level. The final decision will depend on a sum of acquisition and transaction utilities. p.29 Whether it is a gain or a loss depends on how the promotion is presented – monetary promotions are more likely to be perceived as a reduced loss. (1985). 199-214 Thaler. Marketing Science.1 Effect of sales promotion on consumer decisions The Utility theory explains how consumers facing a sales promotion message evaluate the value of a purchase of a product. it is accepted and added to the internal price range. Bruce A. (2000). 3. 4. 28 Acquisition utility is a comparison of the price paid to the product value. Consumers compare the gain and the loss from the transaction. (2002). Marketing Science. IIM Ahmedabad. 257 – 275 31 Makienko.: „Mental Accounting and Consumer Choice‟. in case of more expensive products. Promoted products are supposed to influence the buying behaviour of consumers as they are perceived more valuable than standard products without a promotion. Marketing Science. 4. as already mentioned. Sales promotion can be perceived either as a “gain” or as a “reduced loss”. Vol 33.33 Based on a study of Indian market. p. vol. 30 According to a study. whereas non-monetary promotions are more likely to be seen as a gain. Psychology & Marketing. 199-214 30 Sinha. (2003). Inderjit. the highest contributor to sales promotion schemes is the Fast Moving Consumer Goods (FMCG) sector. R. Journal of Business Research. Abraham Koshy: An Empirical Investigation of Sales Promotion Schemes in India. regular priced product will be sold better if a non-monetary promotion is used than if it was used with a high priced product. Advances in Consumer Research. no. the consumers will be more responsive to monetary promotions than in case of products with a regular price.: „Mental Accounting and Consumer Choice‟. If a price falls into the internal price level. (2003) 28 29 20 .

as price is a good indicator in sales promotion planning. stockpiling evoked by sales promotion enables the retailers transfer cost of inventory holding towards the consumer. Price represents what consumer will have to sacrifice in order to obtain a promoted product. Framing also has the ability to form consumer preferences.2 Effects of promotion-induced stockpiling on sales Sales promotions often lead to stockpiling (loading) of consumers.Such incentives can be divided to monetary (discounts.. p. samples etc.36 Such stockpiling can have ambiguous effects on manufacturers. According to the study results. and Joshua Lieberman: “A Theoretical and Empirical Evaluation of Price Deals for Consumer Nondurables. an expensive gift will be viewed more positively when tagged with an expensive product. (1981). Generally. Priya: “Free Gift with Purchase: Promoting or Discounting the Brand”. First. For example a study by Priya Raghubir (2004) concluded that “Extra product promotion enhances the transaction value. Sales promotions are framed by manufacturers in order to bring positive responses. Journal of Consumer Psychology. 181 – 186 36 Blattberg. According to a study. Many authors have studied effects of sales promotions on consumer preferences. 116–29 35 21 .) and nonmonetary (premiums. Such framing should enable the consumer to estimate the price savings from the possible purchase. Eppen. p. Manufacturers choose between alternative sales promotions with the aim of attracting consumers. monetary sales promotions are favoured by manufacturers. 45 (Winter).” Journal of Marketing. if the consumer buys more on promotion but reduces his future purchases by the same amount. Robert C. The promotion induces consumers to buy sooner or bigger amounts than they would normally do. Vol 14 (1&2). (2004). it can be negative. On the other hand it can be in a negative relationship with purchase probability. Price is usually perceived to be in a positive relationship with quality. Gary D. contests.”35 3. stockpiling can bring two benefits: increase of the whole category consumption and pre-empting the competition by inducing a brand switching behaviour of the consumers (the consumer created inventory of a given brand and reduces future purchases of competitor‟s brand). Second. Price has a major influence on the consumer‟s perception of brand (product).). which are also influenced by demographic and psychographic factors. coupons etc. Whether consumer stockpiling will be beneficial or harmful for the manufacturer depends on the acting of the consumer after the sales promotion is over: Raghubir.

Lutzky. and Neslin. XLIV (August 2007). K. If the extra inventory leads to increased consumption.1.: Decomposition of the Sales Impact of Promotion-Induced Stockpiling. 450–467 37 22 .. Figure 2 Summarization of all stockpiling effects Source: Ailawadi. K.. depending on the fact whether the probability of future purchase increases or declines. p.L.L. Gedenk.: Decomposition of the Sales Impact of Promotion-Induced Stockpiling.. Journal of Marketing Research 450 Vol. but it is not a direct component of the sales promotion bump.38 Figure 2 summarizes the effects of sales promotion-induced stockpiling. it is a positive for the manufacturer called the pre-emptive switching.. 451 Krishna. K. If the extra inventory causes decreased purchases of competing brands. According to a research. The stockpiling component consists of consumption effect. Ch.. S. it can be either harmful or beneficial for the manufacturer.37 4.. Journal of Marketing Research. it is called loyal acceleration and represents a cost to the manufacturer (as his profit margin is usually lower during the promotional period). Gedenk. If the extra inventory influences the future purchases of the promoted brand. The fourth effect – repeat purchase effect – shows how future brand choice is influenced by stockpiling. loyal customers are more likely to loyal acceleration than switchers. loyal acceleration and pre-emptive switches. 31 (February). and Neslin. (1994). 3. Aradhna: “The Effect of Deal Knowledge on Consumer Purchase Behavior. it is beneficial for the manufacturer. S. and it is called the consumption effect.” Journal of Marketing Research. The sales promotion “bump” (effect) consists of two parts – stockpiling and current-brand switching. if the extra inventory pre-empts future purchases of the promoted brand. p. This effect is called repeat purchase effect. XLIV (August 2007). Ch. 450 Vol. p. Lutzky. K. However. 76–91 38 Ailawadi. 2.

XLIV (August 2007). The ketchup category is much more concentrated with a strong market leader. All brands showed a large sales-promotion bump. and it was never quantified and calculated the individual contribution of each effect. and repeat purchases. K.5% and 8% respectively in average) are much larger here than for yogurt.39 Results for the ketchup brands are different.. Lutzky. Loyal acceleration is an important cost. pre-emptive switching and repeat purchases are important benefits of stockpiling. the consumption effect is much smaller than in case of yoghurts. 450 Vol. Gedenk. S. In the study of Decomposition of stockpiling effect. which represented an additional benefit for the manufacturers. Results of the decomposition of the sales-promotion bump of the yoghurt brands reveal that there were significant bumps in all measured brands. and loyal acceleration represented 4%. Heinz. 459 40 Ailawadi.. They used scanned data from AC Nielsen for the two mentioned categories. where the most significant part of the bump was represented by consumption effect. From the financial point of view. The repeat purchase effect is not part of the bump. To conclude. K. the authors analyzed the impact of promotion-induced stockpiling on manufacturer‟s sales.: Decomposition of the Sales Impact of Promotion-Induced Stockpiling.. 39 Ailawadi. K. the market leader had the lowest current-brand switching percentage and highest loyal acceleration.. The current-brand switching is the biggest component (except for the market leader). 90% of the bump). Gedenk. Ch.: Decomposition of the Sales Impact of Promotion-Induced Stockpiling.L. it can be compensated easily by any of the mentioned benefits. even though this effect does not directly belong to the promotional bump. followed by current-brand switching (these two formed approx. the promotional bump was in both categories formed mainly by increased consumption effect. Journal of Marketing Research. Lutzky. 450 Vol. they did not account for the repeat purchase effect. They developed a mathematical model and simulation method for measuring all the four mentioned effects and quantified their importance in two product categories – yoghurt and ketchup. and Neslin. but with a different decomposition.Although a research previous to a study of Ailawadi. and Neslin. however. Gedenk. p. 460-461 23 . Loyal acceleration and pre-emptive switching (around 9.. S. p. followed by pre-emptive switching and loyal acceleration.L. consumption effect. pre-emptive switching accounted for 5%.40 In both categories the repeat purchase effect was positive. Ch. Journal of Marketing Research. XLIV (August 2007). Lutzky and Neslin (2007) has found out that some of these components (effects) exist.. An explanation for such a big consumption effect in this category can be the short life of yoghurt on shelf. K.

Both components (behaviour and attitude) have to be taken into account when concerning consumer loyalty. Marketing Science. 463-466 42 Kopalle. and do not just buy it out of routine. D. J. in the long term. there are two concepts of consumer loyalty: behavioural loyalty and loyalty as an attitude. pre-empts competitor’s sales and has positive repeat purchase. understanding brand loyalty and ways to influence it was of their high interest. 44 Logically. A promotion for one brand can attract some customers to the category who would normally not buy anything there. A. XLIV (August 2007). the bump for competing brands (all together) is much smaller than for the promoted one. Free Press. New York.42 3. as nearly 70% of all shopping decisions take place in-store. Gedenk. for decades. sales promotions influence the consumer decision-making process. Ch. and Marsh.. K. K. marketers therefore try to understand the whole process of decision making and how to 41 Ailawadi. 317–32 43 Aaker. Lutzky.. Praveen K.41 Generally. who show only behaviour loyalty (so called “habitual buyers”). (2001) 24 .Moreover. L. Therefore. manufacturers try to attract the consumer sufficiently enough to make him start buying their brands on a regular basis.: Decomposition of the Sales Impact of Promotion-Induced Stockpiling. followed by loyal acceleration. Geuens. As already mentioned. S..43 When planning their marketing activities. Mela.. The second group is the “truly loyal” customers who are really committed to a particular brand.: Marketing Communications. the findings of the study show sales promotion-induced stockpiling positively.: The Dynamic Effect of Discounting on Sales: Empirical Analysis and Normative Pricing Implications. buy a brand just because of their routine pattern of purchase. p. but still can be harmful to the promoted brand.3 Effects of sales promotion on brand loyal and brand switching consumers According to a theory. P. there can be also a competitive brand sales-promotion bump. Prentice Hall. London. (1996) 44 De Pelsmacker. because it brings consumption effect. Customers. However. 450 Vol. and almost entirely consists of consumption effect. p. Also. (1999). and Neslin. Such bumps are small. it has to be considered that competitors could respond to an increased sales promotion activity with their own sales promotions. 18 (Summer). which makes the future promotions less effective. Building Strong Brands. These are quite likely to switch to another brand if their purchase routine is disrupted. Journal of Marketing Research. have a favourable attitude towards it. Carl F.. and therefore can induce a bump also for competing brands.L. M.. Sales promotion is one of means that can influence consumer shopping behaviour and brand choice. consumers get used to sales promotions very quickly.. and Van den Bergh. According to the analysis.

However. Mei-mei. Marketing Science Institute. p.13 25 . Technology and Management. Cambridge. Man-Tsun Chang.172 .”46 For creating successful marketing strategies. Brand loyalty is therefore a composite of both the behavioural and psychological aspects of consumer behaviour. Some believe sales promotions are harmful for the brand equity. loyal customers help increase company‟s market shares and other indicators. (1978) 47 Schindler. price. Some manufactures target their activities also at brand switchers to increase their customer base and gain even bigger market share.influence it. sales promotion.” Journal of Textile and Apparel.48 The two segments (loyal and non-loyal) also react differently to sales promotions regarding previously mentioned stockpiling. S. is the most significant one for many categories. on the other hand. R.45 Brand loyal customers are thus vital to be kept by the company. and therefore would be willing to pay even higher prices to get their favourite brand. W. and Raj. (1984) 48 Lau.: Brand Loyalty:Measurement and Management.: “How Cents-Off Coupons Motivate the Consumer. Ka-Leung. 1 . are those. who are most attracted by sales promotions. According to a research. While brand loyal consumers tend to 45 Krishnamurthi. Mass. Marketing Science. and Chestnut. Jocz (Ed. According to a definition. New York. style.. J. p. as they increase brand switching.1. (1991). The opinions about sales promotion among researchers differ. service and sales promotion.). and Wing-Sun Liu: “The Brand Loyalty of Sportswear in Hong Kong. Sales promotion also increases the probability of trial of manufacturer‟s brand. 5. Research on Sales Promotion: Collected Papers. L. as they are less price-sensitive. it is important to understand how consumers with different degrees of loyalty respond to sales promotions.: An Empirical Analysis of the Relationship between Brand Loyalty and Consumer Price Elasticity. R..” in Kathrine E. Following aspects can decide whether a consumer will repeat the purchase or switch to another brand: brand name. Brand switchers. a significant portion of the substance of sales promotion effects still remains to be understood. “brand loyalty refers to the biased behavioural response expressed over the time by some decision making unit with respect to one or more alternative brands out of a set of such brands and is a function of a psychological decision making process. Thanks to the incentive in the form of value added.47 A study of the influence of sales promotions on the consumer loyalty in sportswear category in Hong Kong concluded that sales promotion is the main factor that distinguishes brand loyal consumers from brand switchers. Others say sales promotions are beneficial as they increase the knowledge of producer‟s brand. John Wiley and Sons. product quality. It says brand loyalty of loyal consumers is influenced by brand name and style.183 46 Jacoby.2. (2006). 10. P. the consumer feels like a “smart shopper” who feels pride to have realized a good deal. The last factor. store environment.

36-45 49 26 .. 29. Komal: Evaluating the Effect of Consumer Sales Promotions on Brand Loyal and Brand Switching Segments.4. repeat purchase rate after a sales promotion was lower than repeat purchase rate after a purchase for a regular price. Based on results of a study.” Journal of Marketing Research. J.13. (1978).51 A study made by Komal Nagar in 2009 is concerning the effects of sales promotion on purchase behaviour of loyal and non-loyal consumers. Prentice-Hall. 4. Moreover they should develop specific programs for loyal and Grover. which consequently increase price sensitivity.: “Impact of Deals and Deal Retractions on Brand Switching. and Srinivsan. Tybout.476 50 Dodson. the non-loyal consumers have a higher tendency to switch brands due to sales promotions than loyal consumers. It tried to explore the effect of sales promotion on loyal and non-loyal consumers (brand switchers). The study focuses both on behavioural and on psychological aspects of brand loyalty. VISION The Journal of Business Perspective Vol.. the loyal and non-loyal consumers do not differ much in their brand switching behaviour due to sales promotions. C. 50 Further research showed that sales promotion (particularly coupons) for low-involvement products increase purchases. 15 (February). and Neslin. B. and whether the switching behaviour of non-loyal consumers is affected by sales promotions. (October-December 2009). A. No.: “Reflection on a Simultaneous Approach to Market Segmentation and Market Structuring. switchers do not have a strong need to do so as they rely on the fact that there will always be some brand on promotion in the category. The study was conducted in India with focus on two FMCG categories – washing powders and shampoos. R.accelerate their purchases and stockpile. p. 474 .49 Research also revealed that sales promotions influence repeat purchases. A. Englewood Cliffs.. and Strenthal. (1990) 52 Nagar. The results of the study imply that managers should create strategies for products individually as consumer behaviour differs in the two observed categories.: Sales Promotion: Concepts. V. A. M.. Coupons and discounts are supposed to influence the average repeat purchase rate negatively. (1992). However. S. The results also show that age and income are not factors influencing brand loyalty. R. It tries to identify whether a loyal consumer will be attracted to switch to competitor‟s brand by his sales promotion. p. Consumers who switched to a brand voluntarily will have a higher probability to repeat the purchase in the future than those who bought the brand in response to a promotion. NJ. Methods and Strategies.72 -81 51 Blattberg.” Journal of Marketing Research.52 The study further tests whether the brand switching behaviour of consumers with different socio-economic background is affected differently by sales promotion. in case of shampoo category. Findings of the study of Nagar revealed that in washing powder category. Marketers should also try to find out more about the brand switching behaviour of consumers of each of their categories. p.

Komal: Evaluating the Effect of Consumer Sales Promotions on Brand Loyal and Brand Switching Segments. the retailers have a very strong position nowadays. as the brand image can be influenced also by the placement of the brand in-store.54 3.1 . Many companies. No. and therefore play an important role in consumers‟ perception of a brand. Nevertheless. p. 1.: Consumer evaluations of sales promotion: the effect on brand choice. Vol. most of the negative effects of sales promotions are caused by the price reductions. 43-45 54 Lau.: Experimental evidence on the negative effect of product features and sales promotion on brand choice. 39. with rare effects on new customers. 4. A. as they can perceive the product more expensive when the sales promotion is over. A. S. p.non-loyal segments of consumers. p. The research reveals that creating a new loyal customer is five times more expensive than retaining current loyal customer. No. According to a research. Z. price sales promotions increase price sensitivity of some consumers. No. 5.. (2006).56 Premium brands often build the brand image through advertising. Vol. L. 54-70 27 . Most of them... and sales are increased as these customers tend to buy more products from a company they are loyal to. Ries. 1/2. Brand Strategy.” Journal of Textile and Apparel.13 55 Ries.B. Man-Tsun Chang. 23-40 57 Alvarez. were short term ones. apart from reduced costs of gaining such customer. as they have no brand-building effect.53 The consumer retention has several benefits. Ka-Leung.55 Moreover. are however concerned with the impacts sales promotion has on the long term brand image. 30 56 Simonson.4 Long-term effect of sales promotion on brand image Sales promotion is an inevitable tool nowadays. 53 Nagar. (1994). loyal consumers are less price-sensitive. (2005).R. (2002). The question is. as mentioned before. Vol. 164.57 As previously mentioned.: The death of advertising. According to the sources. whether these effects do not happen at the expense of the long-term effects advertising could have had on the company. Technology and Management. Carmon. p. Marketing Science. it is argued that price sales promotions affect mainly current customers. Casielles. European Journal of Marketing. No.. According to studies. there is an evidence of negative effects sales promotions have on brands. however. p. also higher margins are gained as loyal customers are less price-sensitive. 13. Some of the effects of sales promotions have been discussed.13. especially for well-established ones. V.1. especially those with premium brands. VISION The Journal of Business Perspective. sometimes however the image can be diluted by other communication channels. I. and Wing-Sun Liu: “The Brand Loyalty of Sportswear in Hong Kong. (October-December 2009). O‟Curry. Mei-mei.

(1998). M. Vol. they influence price or quantity of a product (bonus packs. Companies should therefore create their communication mix strategically. partly on other research studies and empirical experience. 5. and that their conclusions are sometimes inconsistent.60 3. These price promotions focus mainly on price-sensitive consumers.R. E. However. Vol. There is a risk of perceived decline of value.: Concepts and strategy guidelines for designing value enhancing sales promotions. information. One more view of sales promotion types is to divide them into value-increasing and valueadding. Journal of Product & Brand Management. Trivedi. All of the mentioned tools have a certain relationship-building character. p. Regarding factors influencing consumer responsiveness to sales promotions. Tržiště.5 Empirical generalizations about sales promotions The previous chapters showed that the researchers have differing opinions on many subjects concerning sales promotions.”59 Value-adding promotions on the other hand are more suitable for more affluent target audience and for premium brands. 67-71 60 Mandić. Value-increasing methods are very common in FMCG. Products that are on sales promotion are perceived more valuable by the consumers due to their extra added feature. No. discounts). Journal of Advertising Research. value-adding sales promotions should prevail. Therefore sales promotions have the power to influence consumer behaviour and consequently consumer decision making. samples. generally psychographic and personality factors are considered more important than demographic ones. coupons. with a creative use of both advertising and various types of sales promotions. p. Anderson.S. several generalizations can be concluded. as the company had previously promoted its brands as premium brands. In case of a premium brand. E. Nevertheless.: A Communications Framework to Evaluate Sales Promotion Strategies. 2. partly based on what was previously mentioned. 37. 235 .. No. 417 59 Gardener. Vol. S.. p.246 28 . Danijela: Long-term Impact of Sales Promotion on Brand Image.58 For example “Procter & Gamble‟s unsuccessful Every Day Low Pricing (EDLP) strategy illustrate these conclusions: it was found that the price cuts were associated with decreased value.In chapter one it was already discussed how sales promotions can be classified. Loyalty programs even aim creating relation with the customer and avoiding brand switching. XXI (2009). the reaction to sales promotion differs from category to category and depends on the product characteristics as well. 7. 58 Srinivasan. (1998). point-of-purchase displays and competitions. Among these methods are gifts.

Such lowering also lowers the brand equity. but the future shopping behaviour of the consumers has to be taken into account to see the total effect of stockpiling. The effects also vary for market leader brands and for brands with a little market share. Whether a product is purchased depends on a sum of utilities from both acquisition and transaction utilities. In case of ketchup. they have also influence on periods preceding and following the promotional period. Promotion. As the market leader already owns a big portion of the market. When a brand is promoted. 61 There is clear evidence that sales promotions lead to immediate increases in sales. because they have proportionally less consumers to gain than brands with smaller market share. which is undesirable for the manufacturer. Namely. T. sales of brands in competitive and complementary categories are affected. The consumers can be waiting for a promotional discount or can reduce their spending after they purchase during the promotion and stockpile. an excessive usage of price sales promotions can reduce the consumer‟s responsiveness to a particular sales promotion. Second. the consumer effect was lower and the current brand switching prevailed. there is not such a big potential for growth as in case of market nicher. when sales promotions are done too often. However. In case of perishable goods. every consumer is assumed to have an internal reference price which serves as a benchmark for all purchases. the consumption effect was large. (2007). as consumers increased their usage frequency when they created inventory by the stockpiling. and other aspects of Integrated Marketing Communications. if 61 Shimp. a product which is not used on a daily basis and is less perishable. First.: Advertising. Therefore. p. they can however also reduce the future purchases and keep the same frequency. 519-522 29 . the effect called stockpiling can be either negative or positive for the manufacturer. The decision making process consists of two parts. consumers compare the gains and losses from the purchase. which is not desired by the producers. price paid is compared to the value of the product (monetary promotions are more likely to be perceived as a reduced loss. The effects of consumer stockpiling also depend on the product character. However frequent deals on a brand usually reduce consumer‟s reference price for that brand. whereas non-monetary promotions are more likely to be seen as a gain). Sales promotions in one category influence sales of other categories. consumers get used to it and are waiting to purchase the product when it is promoted. The immediate sales increase anyway. because his ability to charge premium prices will diminish as well. For example. Moreover. the consumers can either stockpile and thus increase their total amount purchased (and also increase the shopping frequency). such as mentioned yoghurt. These promotional peaks occur in the short term. 7th edition. however.When evaluating a product. This is related with the fact that high market share brands are less deal elastic.

T. and on the other hand sales of competitive potato chip category are expected to decrease.: Advertising. p. Nevertheless. when the product is discounted. as it is the final article in the whole value chain. The switching behaviour is therefore asymmetric. price sales promotions increase price sensitivity of some consumers. sales generally increase. 2007. it will attract a lot of switchers who normally buy cheaper brands and thus it will steal their sales. sales increase more substantially. has point of purchase advertising. The retailer plays an important role. 62 63 Shimp. Promotion. where more tools are used. Therefore. 7th edition. The brand switching effects are different for high quality brands and for lower quality brands. 63 Therefore.: Advertising. Promotion. always the most effective solution is integrated campaigns. 62 Sales promotions can increase the brand switching. but they are also beneficial as they increase the knowledge of producer‟s brand and increase the probability of trials. it is not likely to attract switchers from higher quality brands. it can be perceived as a decreased value and quality. T. If a high quality brand is promoted via a price reduction. p. 519-522 Shimp. and other aspects of Integrated Marketing Communications. As was already previously concluded. for more premium brands value adding promotions like gifts and premiums are recommended. The brand loyal consumers tend to accelerate their purchases and stockpile. 519-522 30 . switchers do not have a strong need to do so and rely on other sales promotions. 7th edition. Moreover. and other aspects of Integrated Marketing Communications. when a brand is placed on price deal. if a lower quality brand is promoted. sales of salsa brands probably increase. But when a brand is simultaneously is advertised in the retailer‟s magazines or leaflets. Also. 2007.tortilla chips are promoted. The responses towards sales promotions differ by loyal consumers and brand switchers.

7th edition. So called SMART principle applies in this case.T. realistic and timed. way to write management's goals and objectives. In the stage of planning.A. and other aspects of Integrated Marketing Communications.). often differ from the objectives of the retailer. Promotion. T. T.R. Achieve agreement There are usually more parties involved in the decision making process (brand management.M. to induce brand switching.65 The objectives should be specific. 569-572 Doran. achievable. A simple three-step model can be used64 1.4 The evaluation procedure As was outlined in previous chapters. to encourage more consumption or penetration.: There's a S. both in the stage of planning and in the stage of posterior appraisal to measure how effective they were. sales. Also there are number of objectives that can be achieved by the sales promotion programs. Issue 11 (AMA FORUM). Such objective can be for example to generate short-term incremental sales. there are various sales promotion schemes. 2. 3. measurable. the planner should ask himself several questions: 64 Shimp. the promotion ideas should be evaluated to determine which have the best chance to succeed. G. to improve brand image and so on. Identify the objectives The most important step is to set clear objectives to be accomplished by the sales promotion. Volume 70. Management Review. 35-36 65 31 . The objectives of the manufacturer. Therefore the manufacturer should use a systematic program for evaluating of potential promotions. and therefore a final consent is important. p. (1981). Evaluate the idea When designing a sales promotion program. and their usage differs according to the target audience and brand characteristics. p. etc. Each decision maker has different goals in mind. to encourage trial. moreover.: Advertising. 2007. to gain distribution. Numerous alternatives are available for the producers when planning their sales promotions.

 Is the idea unique or is something similar used by the competition? Creativity even in case of sales promotions plays a very important role. Is the idea a good one? Every idea should be compared to the previously stated objectives. competition prizes etc. 569-572 32 . (2007). After the conduction of a sales promotion. Effectiveness: This feature represents the incremental sales which were accomplished during the promotional period. T. expenses of advertising it and payments to the retailers. 66 Shimp. p. understand and positively respond to the sales promotion? For a sales promotion‟s success it is vital that the sales promotion schemes are user-friendly.  Is the idea cost-effective? The planner should evaluate whether the objectives will be achieved at affordable cost. and other aspects of Integrated Marketing Communications. Promotion. The promotional program can be for example judged in terms of five features – the five “E”66: Expense: It is the sum of direct investments in the sales promotion. Efficiency: It is sales promotion‟s cost per unit sold.  Will this sales promotion idea be appealing for the target audience? The target market should represent a benchmark against which all ideas should be evaluated. This question will be further discussed in the practical part.  Is the sales promotion message clearly presented to the target market? Will the target audience notice.: Advertising. These generally include the cost of creation of the sales promotion materials. 7th edition. there should be a program for its posterior evaluation. Such evaluation can be useful for future sales promotion planning. It is calculated as total cost divided by total units sold during the promotional period.

Logically. 33 . These criteria are just informative suggestions of what should be monitored by the brand managers. Equity enhancement: This characteristic is hardly measured. The evaluation depends on brand positioning and the target audience. every firm has to develop their own models for sales promotion evaluations. as it is more a subjective assessment of whether the sales promotion has enhanced the brand image or not. However.Execution ease: This means the total effort and time invested into the planning and execution of the sales promotion. less demanding sales promotions are preferred if everything else held constant.

the manufacturer must be careful with the brand image. 67 Nestlé S. as some promotional schemes can harm it. Firstly. the expected sales response. it is also influenced by the nature of the product category. The evaluation of sales promotions should focus on the specific objectives against the cost of each sales promotion. and the competitive environment.A. As was already discussed in the previous chapters. The success of a sale promotion depends on many factors. revised 2006) 34 . not much time and effort is devoted to previous and posterior evaluations. which are influenced by changes in consumer insight. the target market. Figure 3 The difference between trade and consumer promotions The following part has been hidden due to confidentiality reasons. Although sales promotion spending is very high. The sales promotional planning and evaluation are continuously developing areas.5 Sales promotion evaluation67 The following part has been hidden due to confidentiality reasons. The following part has been hidden due to confidentiality reasons. it depends on the promotional type itself.: Nestlé Promotion Planning & Evaluation Guidelines. (created 2000.

In case of trade promotions. If such consistency is not ensured. there is a risk of a failure of the promotion and waste of the invested funds. The following part has been hidden due to confidentiality reasons. Therefore. there is no real difference between these two types. The aims of these two types of sales promotions often vary too. not the manufacturer. 35 . Sales promotion planning It is important to plan the sales promotions strategically. they are perceived by the consumers as initiated by the retailer. the only thing Nestlé distinguishes is the style in which the sales promotion is used. or other goals which are not directly reflected in the sales or margin. the trade sales promotion should always aim increased sales and margin in the first place. in order to develop such a promotional program that would add value to manufacturer‟s brands. Whereas consumer sales promotion can aim gaining as much information about the consumer (consumer competition).In fact. each plan must be consistent with the short and long term interests of the promoted brand.

as this does not build the brand. Moreover. The manufacturer is usually not interested in filling warehouses of the retailers or building stocks in stores. Following two KPI‟s are applied for the pre. so called five Es were described. both at the stage of planning (pre-evaluation) and at the stage of evaluation (post-evaluation). efficiency and equity (see Figure 4). As implied by the text above. effectiveness and efficiency are the most important measures for the sales promotion evaluation. Efficiency is the gain or loss of incremental marginal contribution (marginal profit per unit sold) to the manufacturer. Figure 4 Three areas of measurement in sales promotion evaluation The following part has been hidden due to confidentiality reasons. or how much more often he or she chooses our brand versus competitive brand).and post-evaluation. Equity in this case refers to brand equity.”68 Out of the three measures. equity is hardest to measure.Measuring sales promotions The sales promotion has to be measured against its objectives.A. In the previous chapter the main evaluation criteria. effectiveness should be considered before efficiency. which is “the economic value of the brand through the strength of its authority for the consumer (e. these two measures are interrelated and cannot work in isolation. Therefore. Maximizing both of them is a balance.g. three areas are important to be measured in sales promotion evaluation: effectiveness. (created 2000. Effectiveness can be measured as the incremental sales to the end consumer. Efficiency measures how much it costs the manufacturer to gain the effectiveness of the sales promotion.: Nestlé Promotion Planning & Evaluation Guidelines. how much more is he or she willing to pay for our brand than for competition. 68 Nestlé S. The measures must determine whether the sales promotion is effective and efficient. For Nestlé. revised 2006) 36 .

37 .The following part has been hidden due to confidentiality reasons.

It is important to evaluate the promotion in the planning stage as well as after it is executed against the objectives that were set. The process consists of three phases: sales promotion planning.1 The process of sales promotion planning and evaluation The sales promotions should be evaluated to ensure continuous improvement. 38 . Figure 5 describes the whole planning and evaluation process. execution and evaluation. and apply it in the future. Such evaluation enables the manufacturer to understand what went right and what went wrong.5.

First of all. competitor activity. These factors should be monitored and recorded. in-store location. as was already mentioned in previous chapters. The last step is to measure the planned incremental sales and incremental marginal contribution for a sales promotion against the objectives (so called viability analysis). confirmation that the promotion took place. 39 .g.).g.). out of stocks. Second step lies in defining so called Point of Purchase (POP) drivers – factors influencing the level of sales of a product (e. secondary placement. data should be collected on external factors which could affect the promotion (e. Phase 2: Execution of the sales promotion While the sales promotion is executed. SMART objectives must be stated and documented. check whether the agreed quantity was purchased by the retailer etc. promotion price. etc. The POP drivers must be well defined to find out the relevant drivers for particular category and brand. Phase 1: sales promotion planning Sales promotion planning process consists of several steps. Step three is to define sales promotion estimates of revenue and cost.Figure 5 The promotion planning & evaluation process The following part has been hidden due to confidentiality reasons. as the data assist while analyzing the results. number of facing.

what types of promotions to use and on what products. Such information can be applied to the category and brand strategy. Step one is to gather financial data after the promotion is completed. Step two is analyzing results to objectives. Also. Last step of the analysis is to gain learning‟s on what to expect of the promotions. significant differences to plan should be studied and explained.Phase 3: Evaluation of the promotion This phase consists of three steps. This should be done as soon as the data is available. 40 . and in case some data are unavailable then estimates can be used instead. Successes or failures should be analyzed to define what can be improved.

B) PRACTICAL PART
6 Hypotheses statement
As was mentioned several times in the theoretical part, it is undoubted that sales
promotions have the ability to influence the consumer decisions about purchase in the
very last moment and bring an immediate increase of sales volume. As was discussed in
the theoretical part, sales promotions have various effects on consumer behaviour, brand
image, and post-promotional shopping behaviour. They are also very costly and
represent a significant portion of the supplier‟s budget. Therefore, it is important to
carefully plan the sales promotions and anticipate their effects, and consequently
measure the real impacts that the sales promotions caused.
Based on the theoretical findings and generalizations about sales promotions and their
effects, three hypotheses were set. The aim of the practical part is to prove or disprove
their validity.
As the thesis was written with focus on the RTEC category, the hypotheses are related
mainly to this category.
Hypotheses statement:
H1: Sales promotions generally bring about a significant increase in sales, but this
effect is in most cases followed by a drop in sales below the base sales.
H2: Sales promotions of bigger formats of cereal packages are noticeably more
efficient than sales promotions of smaller formats.
H3: Repeated sales promotions lead to increased consumption of RTEC due to the
consumption effect of stockpiling. This effect is even more significant in case of
sales promotions with high promotional bumps and high promotional frequency.
To be able to prove the stated hypotheses a program which would enable the
measurement of sales promotion effects was needed. Therefore, an evaluation program
was developed and a relevant number of sales promotions executed in the RTEC
category were evaluated. The aim of the following chapters is to analyze all the
evaluated sales promotions, and identify some relevant conclusions about their effects.
Moreover, the developed evaluation program will be further used by the company
Cereal Partners Czech to determine the effectiveness and efficiency of the planned and
executed sales promotions.
41

7 Background
As follows from the theoretical part, to determine whether to launch a sales promotion,
and to choose the right sales promotional scheme, it is necessary to evaluate the ideas in
the planning stage. It is, however, just as important to evaluate the sales promotions that
were already executed to see whether they were successful or not, and to learn what
should be improved in the future. Therefore, a reliable evaluation program is necessary
for every manufacturer who is planning and evaluating a sales promotion. Such
evaluation program should consist of two parts, pre-evaluation (for the planning stage)
and post-evaluation (for the stage after the sales promotion execution). During the
author‟s work in Nestlé, a. s., in the division of Cereal Partners Czech Republic (CPC),
an incentive for a creation of such evaluation program arose.

7.1 About the company
Cereal Partners Worldwide (CPW) is a joint venture between Nestlé and General Mills,
and is one of the leading producers of ready-to-eat cereals (RTEC). CPW is
headquartered in Switzerland, and operates in over 130 countries worldwide. One of the
CPW subsidiaries is Cereal Partners Czech Republic, a distributor of the ready-to-eat
cereals in the Czech market, which operates in the country since 1997. In Europe, the
CPW cereals are sold under the Nestlé brand, therefore in the further text will be called
“Nestlé cereals”.69

7.2 The category characteristics
Ready-to-eat cereals (RTEC) in the Czech market represent a dynamic and developing
category. The category can be divided into two main segments, cereals for kids, and
cereals for adults. The category is growing both in value and volume.
The Czech cereal market
The Czech market is still an emerging market regarding the consumption of cereals, as
the product has not penetrated all families yet. Traditionally, a typical Czech breakfast
would consist of bread and butter with cheese or marmalade. Figure 6 shows the
consumption per capita comparison within Europe. In contrast to some other European
countries, such as Great Britain, where the ready-to-eat cereals (RTEC) represent the
most common breakfast variant (ca 6 kg per capita in 2010), the consumption of cereals
per capita in the Czech Republic is still quite low (0.83 kg in 2010). The consumption,
however, is still growing, especially among kids. There is therefore a big potential for
growth and further development of the category.
69

Cereal Partners Worldwide official webpage: http://213.225.147.145/cpw/. Obtained 5.11.2011

42

Figure 6 Consumption of RTEC per capita in 2010
Consumption per capita [kg] / breakfast cereals in 2010
7,00
6,00

6,00
5,00
4,00

3,59

3,00

2,29 2,24 2,19
2,13 2,07
1,92

2,00

1,75

1,45 1,41 1,32
1,27

1,00

1,11 1,09 1,05 0,98
0,87 0,83 0,80 0,78 0,76
0,70

0,52 0,37

0,14

Turkey

Bulgaria

Romania

Latvia

Slovakia

Hungary

Croatia

Lithuania

Czech Republic

Italy

Greece

Slovenia

Austria

Poland

Denmark

Estonia

Spain

Sweden

France

Germany

Switzerland

Belgium

Norway

Portugal

United Kingdom

Ireland

0,00

Source: Internal company calculation from AC Nielsen and Eurostatt national statistics

Figure 7 The development of sales volume of RTEC in the CR
Sales volume of RTEC 2008 - 2010 in the CR
10 000 000

8 514 972

8 627 327

8 702 784

2008

2009

2010

8 000 000
6 000 000
4 000 000
2 000 000
0

Ready-to-eat cereals (kg)
Source: MEMRB data purchased by CPC

The development of the category in the Czech market in recent years is depicted in
Figure 7. The graph shows sales volume in kg in the Czech market (covering the
traditional trade and the modern trade except for Kaufland) over the years 2008 to 2010.
A positive trend can be seen, as the sales volume slightly increases from year to year. A
further growth of the whole category sales is still expected in following years.

43

but offer them for a very low price compared to the rest of brands. and corn flakes). The kid cereals are available in two sizes of packaging.Product Nestlé cereals are divided into three main segments. cereals for kids (Cini Minis. Competitive environment Czech consumers are typical with their preference of national products. Nestlé is the leader in the market. meaning wholesalers. Nesquik. The retailers require a payment for a listing of new product. Therefore. Hruška. To succeed in such a competitive and dynamic environment. Kaufland. Into the modern trade belong all retailers and chains. Globus. Interspar. the products are distributed to the end consumers via the retailers or other customers. trade sales promotions are combined with consumer sales promotions. small (in average 250 grams). Makro and Penny market. why Nestlé executes in average about 400 sales promotion activities yearly. modern trade. As the previous chapters imply. and even medium and small groceries. Chocapic etc. cereals for adults (Fitness. The kid cereals are the crucial segment for the company. and nowadays it is them. and traditional trade. to be visible and attractive for the consumers. the modern trade represents more than three quarters of the sales volume. mostly Czech manufacturers. for example Emco and Pragosoja. nevertheless. the manufacturer has to invest in sales promotion. who are more powerful than the manufacturers. Customers In the FMCG sector. CPC distributes also bars (cereal bars and müsli bars). That is the reason. for leaflet advertisement. and big (in average 500 grams). The structure of the cereal market is following: the stores/chains (further customers) are divided into two main groups. such as Coop. to attract the consumers and be visible enough. and for many other activities. Private labels often imitate the products of the market leader. there are just a few big players. In case of Nestlé cereals. which are often produced by the mentioned Czech manufacturers. for an additional shelf space. Other important competitors are the private labels of retailers. the international retail chains were gaining on power during the last decade. and are therefore not delivered directly. Billa. müsli. and it is also setting the trends in the whole category. Into the traditional trade belongs the rest. Regarding its competition.). it is necessary to regularly come up with sales promotions and advertising. Albert. 44 . such as Tesco. Apart from that. For Nestlé.

small packs of kid cereals. secondary placement.3 The initial situation Before the evaluation program development was started.During the yearly negotiations. Apart from the initially agreed set of conditions. 7. conditions for the future twelve months are agreed between customers and the manufacturer. It is necessary to calculate the costs carefully in order to find out whether such activity is worth or not.g. the manufacturer has to pay for every ad hoc sales promotion.g. bonus packs. the number of leaflets is decided and other rebates of payments are set. To ensure that the promotion evaluation program is flexible enough. The following part has been hidden due to confidentiality reasons. seasonal multipacks. The usual groups are following: fitness products. a selection of any combination of products will have to be enabled. a price off from all invoices is agreed. premium packs. sometimes a single brand or umbrella brand is promoted. or an in-out activity (a promotional product. and consumer competitions. Nevertheless. advertisement in a retailer‟s magazine (e. Albert magazine). Types of sales promotions executed Typical sales promotions executed by CPC are leaflet advertising. such as additional leaflet advertising. müsli. They are usually clustered into groups. such as Cini Minis (single or together with Strawberry Minis) or Nesquik (single or with Nesquik Duo). To be able to sell their products in the retailer‟s stores. 45 . which is not listed). Globus). advertising in retailer‟s catalogue (e. the initial situation of the company was carefully analyzed. Promoted products Almost all Nestlé cereals are promoted. big packs of kid cereals. Usually. the manufacturer has to offer the retailer several incentives. The named promotional tools are often also combined. and bars. in-store secondary placement with usage of POP media.

Internal. to be able to observe and measure the effect. the purchased data cover only the modern trade. as it reports the real sales to the end consumer. AC Nielsen data shows sales to the consumers. and purchased sales data from AC Nielsen. data on a chain level have to be used. The SAP data reports sales to the retailers. Moreover. sales data on a weekly basis is needed. for some products the purchased data is not available. purchased named data for traditional trade is unavailable. the manufacturer is not interested in building stock in customer‟s warehouses or in the stores. For the sales promotion evaluation the purchased data is more valuable. Thus. but what matters are the sales to the consumers. As already stated. Because the sales promotions usually take place for 2 to 3 weeks.Data sources To be able to evaluate the sales promotions. SAP. sales data. as different sales promotions are executed in different retail chains. 46 . CPC has two main data sources available. Moreover. a combination of both purchased data and internal data is needed. a reliable sales data is necessary. and thus has to be substituted by the internal data. however in contrast to internal data. However.

1 Promo evaluation program requirements The required evaluation program should fulfil following prerequisites:  It should enable both pre-evaluation and post-evaluation. The final form should contain a set of cells.  The program should enable a combination of both internal and purchased data. where the promoted products can be selected. Other form should contain a list of products. Part of the entry forms should also be a selection whether a pre-evaluation or post-evaluation is to be performed. The data sources should be combined in such way.  The outputs of the program should contain a calculation of two KPIs – the measures of effectiveness and efficiency (see more in the Nestlé guidelines in Chapter 5). that all important products and stores are covered. A multiple selection should be enabled for cases of a promotion which is executed globally. First. One form should contain a selection of stores. where the sales promotion takes place. Next output should be a graph showing the base sales of the promoted products and the promotional bump. in the evaluation stage it should work with real data. with a preference of purchased data where available. 47 . where all the relevant costs of the evaluated sales promotion will be filled.8 Promo evaluation program 8.  There should be a set of user friendly forms. Second. in the planning stage the program should work with expected sales and cost. where all the entry variables will be filled.

Excel was chosen because it is a relatively simple and user friendly software enabling calculations. each source has a slightly different structure. there are two main sources of CPC data (internal and purchased). The whole process is simplified in Figure 8.1 Step one: Data preparation Figure 8 Step one: Data preparation Source: Author The first step in the construction of the program is the data preparation.2 Processes within the evaluation program The evaluation program (further promo evaluation program) was programmed in Microsoft Excel with the use of VBA Macros. As mentioned previously. The sources differ in the naming of the products and stores. forms and graphs creation. Data processing 3. Data preparation 2. However. and both of them are needed. The time period for which the data is exported was decided to be 52 weeks.8. internal (SAP) data contain more products and stores than the purchased data. Promo evaluation 8. they also contain a specific product code matched to each product. Also. The processes within the promo evaluation program can be divided into three main steps: 1. long enough to measure the base sales and to see the post-promotional effects. and programming of Macros. The structure of the purchased sales data is described in Figure 9: 48 .2.

The internal data is imported onto a sheet called “SAP” (see Figure 10). Figure 10 Internal sales data Source: Author 49 . and the incentives to retailers are calculated also from the price list prices. The purchased data is imported onto a sheet called “NIELSEN”. The final data structure therefore has to be unified also in this aspect. next to each product there is a unique product code. however. and each store (chain) has a unique store code (see Figure 10). However. The final KPI calculations should be done with sales data in value (CZK). not the revenues of the retailers. also in this aspect the two sources vary. the yearly conditions are agreed with the retailers based on the Nestlé price list prices. Moreover. The purchased data is available either in volume (kg) or in value – in final prices set by the retailers.Figure 9 Purchased data structure Chain name 1 Week 1 Product name 1 200 Product name 2 300 Week 2 Week 3 … 350 100 Sales volume in kg 250 458 Week 51 Week 52 450 150 145 369 Blank row Blank row 450 150 … Blank row Blank row Blank row Blank row 200 350 100 Chain name 2 Product name 1 Blank row Source: Author The internal SAP data has a similar structure. The internal data is reported in prices from the Nestlé internal price list. For the purposes of promo evaluation the Nestlé price list data is more suitable because the Nestlé revenues are important for the promo evaluation.

Figure 12 Product_list sheet structure Source: Author 50 .2 Step two: Data processing Figure 11 Step two: Data processing Convert NIELSEN sales volume data to sales value in CZK Create a sheet for each store Rewrite SAP data with NIELSEN data in all stores sheet where available. Paste SAP sales data of each store to corresponding sheets Source: Author Processes within this part are summarized in Figure 11. and price list price per kg for each product. To unify the data from the two mentioned sources a method of indexation was used. This list of all Nestlé cereals serves as an indexation tool. A list of all Nestlé cereal products was prepared on a sheet called “Product_List” (see Figure 12).8. Product_List used. The purpose of this step is to unify the data from the two sources and combine them in such way that the purchased data will replace the internal data where possible. All of the products were matched with the internal product codes. The list contains also gross proceeds of sales (GPS).2. adjusted marginal contribution (AMC) also taken from the annual budget. which is the annual budget sales value. All products from the purchased data were listed plus the rest which was available only in the internal source of data (SAP) was added.

for which the purchased data is available. again. named “NIELSEN” contains a binary variable which has only two values: true or false. there are the Trade terms agreed yearly with the retailers (for more information see Chapter 5). which are not available in the purchased data and are contained only in the internal data. in the last column there is a corresponding store name from the purchased Nielsen data. a “true” value was set. The fourth column. in the next column. This list. serves as an indexation tool. The internal data on each sheet is then replaced by the purchased data where available. in the next column. Figure 13 describes the structure of this sheet. in the first column. an indexation method has to be used again. the program searches all products in the “NIELSEN” sheet. there is a SAP store name. Then. Each sheet is then named by the chain name. the internal data has to be separated so that sales data of each chain are copied onto a separate sheet. and when they are matched with a product name in the “Product_List” sheet. the program finds the corresponding product price in the “Product_List” sheet and multiplies each cell containing sales in kg by the appropriate product price. When this is finished. First. there are the Gross proceeds of sales (GPS) from the annual budget for a particular chain. There is a list of all available stores. Figure 13 Help_Stores sheet description Source: Author 51 . a “false” value was assigned. row by row. For the rest of stores.To unify the prices in which the data is reported. In case of chains. To be able to replace the data. Thus the appropriate sales value data is obtained. they are assigned with the corresponding product code. the program converts the purchased data exported in volume (kg) into sales value (in internal price list prices). Parallel to the Product_List a list of all stores was created and placed on a sheet named “help_stores”.

The program then continues with all stores available in NIELSEN sheet. where the desired combination of SAP and NIELSEN data is contained. It goes through the chain list in the sheet “help_stores” and looks for stores. For the replacement the SAP product code serves as an indexation tool. 52 . each store (chain) sales data is located on a separate sheet. The program then opens a corresponding store sheet and replaces the SAP sales data where available. the program reads the corresponding NIELSEN name of the store and then opens the “NIELSEN” data sheet and copies all the sales data belonging to the mentioned store. Whenever it finds a chain. it copies out all the sales data belonging to this chain and pastes it onto a separate sheet named according to the chain name. As a result. Then the program executes the replacement of SAP data with the purchased NIELSEN data. which are available also in Nielsen data (assigned “true” in the “NIELSEN” column).The program first searches the “SAP” sheet and looks for chain names in the first column. Whenever a row containing “true” is found.

2. Each sales promotion data is located in a separate row. This table is located on a separate sheet and serves as a source of all sales promotion data. The summarization table is prepared Fill in forms on the „Input/Output“ sheet Calculation of KPIs Save the outputs in the Summarization table All promotion inputs are filled in Selection of Pre. customer (where the sales promotion takes place).or Postevaluation Indicated data appear on a linked sheet "Form" The final results and graph are reviewed The data is transferred into Input/Output sheet Fill the name and period of the Promotion A table with the weekly sales of the promoted products for the chosen stores is created If necessary. purchase period (a period for which the 53 . the “Summarization table” is manually filled with data of all evaluated sales promotions (see Figure 15).3 Step three: Promo evaluation The last step consists in the evaluation of the promotion. blue steps automatically) 1. Summarization table preparation First. the blue segments are done automatically by the program. Figure 14 Step three: Promo Evaluation (green steps are done manually.8. 3. This final step can be divided into four main parts (see Figure 14). The green segments represent the steps which have to be done manually by the user. the evaluation period is adjusted Fill all the costs of the promotion from the summarization table Mark the products entering the Promotion Choose the stores involved and run the calculation Base sales and total promotion sales is calculated 4.2. In this step a user of the Promo evaluation program will fill in all the necessary inputs and after a calculation the final KPIs and a graph will be obtained as outputs. The results are approved and automatically filled back in the summarization table The file is saved under the promo name (post) Graph with promo data is created The bubble graph is displayed by filtering out the unnecessary data Calculation of %TT and %AMC The obtained data is filled into Pre/Post evaluation Form on the Input/Output Sheet The Promo KPIs are calculated The file is saved under the promo name (pre) Source: Author 1. Following columns are filled in the table: the name of sales promotion.

After a promotion is pre-evaluated. Status. but also the period after the promotion. and list of costs (POS is the cost of displays and other POS materials. number 2 is filled in. evaluation period (a period which contains all effects of the sales promotion. discount is the price off granted to the customer for the promotional period). serves for identification whether a sales promotion has already been evaluated or not. it is not only the period when the products are promoted. The last column. Figure 15 Summarization table Part one: Part two: Source: Author When a sales promotion is entered in the table. 54 . number 1 is automatically written into the status field. list of promoted products. After a post-evaluation is done.customer is buying Nestlé cereals with a discount). leaflet is the payment to the customer for a presence on its leaflet. so that also the post-promotional effects are included). the status field is left empty. The orange and violet columns next to the Cost (Pre-evaluation and Postevaluation) will be filled automatically after the evaluation process is executed.

Second step is to manually mark which products are promoted and to choose at which stores the promotion takes place (2). there is a set of forms where all information about an evaluated sales promotion is. Figure 16 Input/Output forms 1. Source: Author 55 . partly manually. Evaluation period. where the status is empty (meaning which has not been evaluated yet). 2. the sales promotion data from the first row in the summarization table. called “Input/Output”. filled in. Fill in forms on the “Input/Output“ sheet On the next sheet. partly automatically. When the button New input (1) is pressed. Promotion mechanics and all costs are filled in automatically. is transferred and Promotion name.2.

Calculation of KPIs When all the inputs are filled. a false value is matched and the row with sales values is filled with zeros. To enable the calculation of base sales and total sales. a true value is written next to the product in the “Form” sheet. where 20% of the top and bottom extreme values are trimmed. Then with the use of a user-defined function named “Data_Lookup” (an extended version of Excel lookup function. base sales is calculated as a median of sales values over the past 52 weeks. base sales is the average level of sales volume over some period.base sales and total promotional sales. if it is not.3. which is able to search data on multiple sheets according to the sheet name) the program fills a table with the weekly sales of each promoted product. The total promotional sales (further total sales) is summed up over the evaluation period. First. As defined in Chapter 5. there is a list of all products including their GPS and AMC copied from Product_List. length of the sales promotion (in weeks). it is possible to approach the calculation of the final KPIs. In this program. Figure 17 Form sheet List of selected products Evaluation period Weekly sales per product summed up for all stores 12% Trade terms calculation Sum of GPS and AMC Promo week Base sales and total sales calculations Source: Author On the “Form” sheet. and the selected products. All these partial calculations are done automatically on a linked sheet called “Form” (see Figure 17). two important components need to be calculated . When a product is marked in the check box in the Input form (Figure 16). 56 . the relevant products‟ sales values need to be summed up for all the stores where the sales promotion takes place. however. The following input variables from the Input/Output sheet are referenced: the list of selected stores.

and the base sales is then calculated from these values. The two violet vertical lines border the evaluation period. and %AMC (adjusted marginal contribution) for the chosen combination of products. According to the chosen evaluation period a raw below base sales is entered. The total promotional sales are then simply calculated as a sum of the weekly promotional sales. so that non-promotional sales are multiplied by zero and promotional sales are multiplied by one. where the x axis shows the week number and the y axis shows the total sales and base sales in CZK. The %TT is automatically calculated by the program as a weighted average dividing the sum of TTS (Trade terms) by the sum of GPS of the selected stores (see Figure 13). The sales per week are then summed up in the bottom row. Figure 18 Sales promotion graph Sales promotion 700000 600000 500000 400000 weekly sales base sales evaluation period 300000 200000 100000 0 Source: Author For the final calculation of the KPIs two more components need to be calculated: %TT (trade terms) for the chosen combination of stores.summed up for all the chosen stores. and thus only the promotional sales values are chosen. matching „0“ to a non promo week and „1“ to a promo week. Based on the data from the above mentioned table a graph is created (see Figure 18). The weekly sum of sales is multiplied by the number from the below row. The 57 .

the results are filled back in the form and the final KPI calculations are done automatically with the use of simple formulas.  Promotional benefit represents the pure benefit brought by the promotion and is calculated as  The above mentioned %TT value is referenced from the Form sheet.  Uplift represents the incremental sales and is calculated as:  Total sales value is referenced from the Form sheet.  The %AMC is calculated as a ratio of total AMC and total GPS referenced from the Form sheet. Figure 19 Evaluation form Source: Author Figure 19 depicts the form from the Input/Output sheet that was initially filled the input variables (yellow cells). The rest of all calculations is done on the main Input/Output sheet with the use of simple formulas in the cells in the pre and post-evaluation forms. At the end of all partial calculations. as is depicted in Figure 17.resulting percentage is the trade terms for the selected combination of stores (see Figure 17). 58 .

the text in the inactive form will turn grey. switches to post-evaluation. into a previously specified folder. the file is saved under the name from the “promotion name“ cell. After a pre-evaluation is done. This is done by pressing the “save“ button. the chain. The evaluation process is complete. and new calculations will be performed. Further to this topic will be discussed in the next chapter. Therefore.) and thus display 59 . When the results are obtained. The results can be filtered by various variables (the promoted product group. the post-evaluation effects are sent to the summarization table by pressing the “save output” button. but also as a “storage” where all the obtained results are recorded. an estimation of total expected sales has to be used instead. This is convenient for further analyses of the evaluation results. To distinguish which form is chosen. When a post-evaluation is done. Therefore. the user opens the already existing file containing the pre-evaluation. In the same time. to cover also the post-promotional effects. it is necessary to review the graph and check whether the evaluation period was chosen correctly. the same file is going to be used for future postevaluation. When the period is correct. the summarization table serves not only as a source of sales promotion data. date etc. Saving the outputs into the summarization table As was explained. it is possible to switch between pre and post-evaluation. Chapter 5:  The sales promotion KPI  The incremental sales KPI As is visible in Figure 16. The outputs are also sent back to the summarization table by pressing the “save outputs” button (see Figure 16).The final KPI formulas are adopted from the Nestlé guidelines. 4. data could be overwritten by the post-evaluation values. in case of pre-evaluation no real data are available yet. It is important to include also the postpromotional period. depending on the stage of the sales promotion. Whereas in postevaluation the total sales is calculated from the real sales data as was described in the paragraphs above. As there are formulas in the pre-evaluation form. The KPI calculations are identical for both evaluations with the only difference in the total sales calculation. the formulas have to be converted into values in order to protect the data from further changes.

The size of the bubble represents the promotional benefit calculated as 2. Figure 20 Bubble diagram Source: Author The diagram has three dimensions: 1. The horizontal axis represents the sales promotion KPI (the efficiency) Thus. a bubble diagram is linked to the summarization table showing the filtered data (see Figure 20). the best resulting sales promotions would have a large bubble and would be situated in the upper right corner of the diagram. The vertical axis represents the incremental sales KPI (the effectiveness) 3.only those promotions we wish to compare. 60 . To visualize the results.

but generally a sales promotion is followed by a drop in sales. The effects vary from category to category. For the purposes of this thesis. a discounter and cash and carry. the evaluation program was developed as a tool for analyses of the sales promotion effects. Tesco. All of the evaluated sales promotions took place in 2011. there were 65 sales promotions evaluated. As was discussed in the theoretical part.9 Hypotheses verification As was explained at the beginning of the practical part. Makro. but this effect is in most cases followed by a drop in sales below the base sales. through supermarkets. the mentioned effect indicates that the consumers stockpile and postpone their next purchase as a consequence of the sales promotion. The graph below shows an example of such an effect (see Figure 21).1 Verification of Hypothesis 1 H1: Sales promotions generally bring about a significant increase in sales. sales promotions can have various effects on consumer stockpiling. Billa. Kaufland. It depicts a successful sales promotion which brought increased sales for several weeks. This represents around a half of all the yearly sales promotions executed in the modern trade. 9. The promo evaluation therefore covers all formats of the modern trade ranging from large hypermarkets. Pre/evaluationeffect promo Figure 21 Example of a post promotional 1600000 1400000 Promotional effect Post-promotional effect 1200000 1000000 prodej 800000 base line PROMO_PERIOD 600000 400000 200000 0 Source: Author 61 . both effects should be taken into account and summed up. and covered almost the whole CPC portfolio. To be able to evaluate a sales promotion. but there was a significant drop in sales as a consequence. Tesco. Although a sales promotion can be successful. Penny market and Interspar. The sales promotions were executed in following chains: Ahold. Globus.

As the sales promotions occur regularly. As the payments for leaflets and secondary placements bore by the supplier are fixed. there were 27 sales promotions of big packages and 9 of small packages. it can be concluded that the consumers got used to them and are waiting with their purchases until the product is on deal again. it is probable that sales promotions of products in bigger packages are more efficient than sales promotions of product in smaller packages. 9. It is important to mention that in 10 cases out of the 45 the sales data represented direct purchases from the retailers (as for some products and retail chains the purchased data is unavailable and internal SAP data had to be analyzed instead). People are therefore likely to plan their purchases and seek deals. as the products are quite durable (with usual expiration time of one year) and quite expensive (Nestlé cereals are perceived as a premium brand). several sales promotions of big and small formats of Nestlé products were evaluated and compared.Out of the 65 evaluated sales promotions. but the sold volume is likely to differ in favour of the bigger formats. they represent purchases which are well planned and done on a regular basis. The direct purchases have a slightly different interpretation than the consumer purchases. The rest of analysed sales promotions (35) represented purchases done by the end consumers. To verify this hypothesis. They are moreover often agreed with the supplier in advance.2 Verification of Hypothesis 2 H2: Sales promotions of bigger formats of cereal packages are noticeably more efficient than sales promotions of smaller formats. When analyzing the internal SAP sales data. This effect is also supported by the fact that the economic crisis encourages the search for sales promotions and deal proneness. In case of these direct purchases the post promotional drops of sales were even more significant than in the rest of cases. Out of the 65 sales promotions. The reasoning behind can be the character of the category. The consequent drops of sales can be explained as an effect of consumer stockpiling. This represents around 70% of the total. there was a negative post-promotional effect detected in 45 cases. It was therefore proven that the hypothesis is correct and sales promotions in the RTEC category usually cause slight drops in consequent sales. The cost of the sales promotion is the same for both package sizes. 62 .

The Sales promotion KPI (the measure of efficiency) was compared.73 Promotion 11 1.58 The sales promotion KPIs of small formats range from 0.34 Promotion 6 2.53 Promotion 17 1.96 Promotion 23 0.74 Promotion 26 0. The size of the bubble represents the size of the benefit of the sales promotion in CZK.56 Promotion 15 1.28 Promotion 7 2.33 Promotion 9 0. the large packages (500 grams) are represented by the red bubbles.77 Promotion 10 1.20 to 2. It is apparent that sales promotions of products in bigger packaging resulted in significantly higher KPI values. 63 .92 Promotion 24 0.57 Promotion 14 1.32 to 1.55 Promotion 16 1.46 Promotion 18 1.84 Promotion 2 2. The small packages (250 grams) are represented by blue bubbles. also the average resulted almost twice higher.36 Promotion 19 1.12 Promotion 21 1.05 Promotion 9 1. The results were plotted on a bubble diagram (see Figure 22).11 Promotion 22 0.87 Promotion 25 0. Figure 22 Sales promotion KPIs for small and big kid cereals Sales Sales promotion 250 g promotion KPI Promotion 1 1.27 Promotion 3 1. The score of the two formats is shown in Figure 22.63 Promotion 7 0.42 Promotion 4 2.32 AVG=0. The x axis shows the sales promotion KPI (“promo KPI”).66 Promotion 13 1.86.10 Promotion 5 0.36 Promotion 27 0. The arithmetic average of all the nine values is 0.34 Promotion 5 2.69 Promotion 12 1. The y axis shows the incremental sales KPI – the sales promotion effectiveness. The average of the 27 values is 1.22 Promotion 8 2.30 Promotion 20 1.89 Sales Sales promotion 500 g promotion KPI Promotion 1 2.89. The sales promotion KPIs of big formats range from 0.62 Promotion 8 0.86 Promotion 2 1.20 AVG=1.75 Promotion 6 0. which represents the sales promotion efficiency.75 Promotion 3 2.12 Promotion 4 1.58.84.

It is clearly visible that the two groups differ mainly in two variables: sales promotion efficiency and promotional benefit (size of the bubble).80 250 g 0. Therefore.00 0.00 -0. It is assumed to be the pure sales which would occur independently of the sales promotion activities. 64 .50 3. it can be concluded that sales promotions of large packages are more efficient. large packages Small vs large packages efficiency KPI 1.00 3.50 Promo KPI Source: Author The hypothesis that sales promotions of bigger formats of cereal packages are noticeably more efficient than sales promotions of smaller formats was therefore approved. Figure 23 Bubble diagram small vs. This effect is even more significant in case of sales promotions with high promotional bumps and high promotional frequency. promotion effectiveness is not dependent on the size of the package apparently.3 Verification of Hypothesis 3 H3: Repeated sales promotions lead to increased consumption of RTEC due to the consumption effect of stockpiling.60 500 g 0.50 1.50 0. the large packages are scoring higher values of sales promotion KPI and also the sizes of the bubbles are noticeably larger.40 0.50 2. Base sales represent the sales in periods when no sales promotions occur. 9.00 0.00 2. According to the results. because the fixed cost can be dissolved in the high sales volume.00 1.20 Incremental sales KPI 1. the third variable.20 0.

the average sales were calculated as an arithmetic average of the 52 weekly sales values. 65 .19 28 160 36 812 8 652 31% 3 112 823 4.22 316 010 446 131 130 121 41% 8 1 151 349 3. The figures below (Figure 25 and 26) depict series of sales promotions of both product groups. as the effects of the sales promotions influence the buyers‟ behaviour in a positive way. (CZK) sales (CZK) effect effect index promotions index 112 325 157 557 45 232 40% 3 400 225 3. Both graphs depict noticeably higher average sales value than the base sales value.02 535 679 805 018 269 339 50% 7 2 714 336 5. Products 1 are generally promoted with lower frequency and have relatively small market share.01 70 770 92 863 22 093 31% 3 355 207 5.07 376 029 475 557 99 527 26% 9 1 289 260 3. it is assumed that repeated sales promotions may increase the average sales value. consumers who have stockpiled are likely to increase their consumption frequency and thus consume more on average (so called consumption effect). Moreover. By removing the extreme values. where 20% of the top and bottom extreme values are trimmed. Figure 24 Consumption effect table Product 1 Product group 1 2 Product group 1 3 Product group 1 4 Product group 1 5 Product group 2 6 Product group 2 7 Product group 2 8 Product group 2 9 Product group 2 Customer TESCO INTERSPAR MAKRO BILLA TESCO GLOBUS INTERSPAR AHOLD BILLA Base sales Average Consumption Consumption No.56 34 415 53 899 19 484 57% 5 178 634 5.64 Source: Author Two product groups were evaluated and compared (product group 1 and 2). As was mentioned in the theoretical part. of Range Range abs. To prove this effect.In the created evaluation program. All results were recorded in a table (see Figure 24). Moreover. the difference between base sales and average sales was compared within two product groups and 6 retail chains. the base sales of selected evaluated sales promotions were compared to the average sales values. The base sales were calculated with the use of the mentioned median formula. the base sales is calculated as a median of sales values over the past 52 weeks. The green line represents the average sales over the past 52 weeks.79 801 429 908 135 106 706 13% 11 1 778 764 2. products 2 are frequently promoted and have a large market share. The red line represents the base sales of the given product group.43 190 177 262 196 72 018 38% 8 530 687 2. due to the varying sales promotion frequencies. A frequency of sales promotions was set as a variable. it should be ensured that significant promotional peaks and post promotional drops are removed from the base sales calculation. In contrast.

Tesco 3500000 3000000 2500000 2000000 sales base sales 1500000 average sales 1000000 500000 0 Source: Author To prove the hypothesis. 66 . 57 sales promotions were analyzed and compared. average sales 2 Product group 2 . The results of the analysis were recorded in the table in Figure 24. The sales promotions were grouped into 9 series according to the product group and the retail chain. average sales 1 Product group 1 .Tesco 600000 500000 400000 sales base sales 300000 average sales 200000 100000 0 Source: Author Figure 26 Base sales vs.Figure 25 Base sales vs.

All sales promotion series had a positive consumption effect.00 3. This variable represents the increase of consumption caused by the sales promotions. which clearly confirms the assumption that sales promotions increase the average sales due to the consumption effect of stockpiling. The relationship between the consumption effect and other variables was further analyzed. Figure 27 Consumption effect index vs. The y axis shows the consumption effect index. It shows the height of the highest peak within each series.00 2.00 5. Consumption effect index represents the ratio of consumption effect to the base sales.50 3. Last variable is range index. Absolute range represents the range between a minimum and maximum value within a given series.00 4. range index 60% 50% Consumption effect index 40% 30% 20% 10% 0% 2.In all cases the average sales were noticeably higher than the base sales. The linear trend line 67 . The blue markers represent the relationship between these two variables.50 5. Number of sales promotions is next variable representing the sales promotion frequency of the given product group at a particular retail chain. The difference between average and base sales was set as a variable and called consumption effect. representing the ratio between absolute range and base sales. which is the percentage increase of sales due to the sales promotion.50 Range index Consumption effect index Linear (Consumption effect index) Source: Author The results of the analysis were plotted into a scatter diagram (see Figure 27).50 4. the x axis shows the range index.

depicts the positive correlation between the two variables. However. from the frequency of six promotions per year the consumption effect is decreasing. (Consumption effect index) Source: Author The results depicted in the second diagram did not approve the second part of the hypothesis statement. It is obvious that the consumption effect increases with the size of the promotional bump. number of promotions 60% Consumption effect index 50% 40% 30% 20% 10% 0% 0 2 4 6 8 10 12 Number of promotions Consumption effect index Poly. however. represented by the number of sales promotions within the past 52 weeks. The median calculation where 20% of the extreme values are trimmed proved to be a good approximation of base sales for lower sales promotion frequencies. At the beginning. The reasoning behind can be an inadequate method of base sales calculation. the consumption effect increases with increasing frequency of promotions. This proves the first part of the hypothesis. Figure 28 Consumption effect index vs. In these cases 68 . the declining curve for the higher frequencies does not necessarily mean that consumption effect is negatively related to higher frequencies of sales promotions. The second diagram (Figure 28) depicts the relationship between the consumption effect index and the sales promotion frequency.

To approve or disprove the second statement – high frequency of sales promotions increase the consumption – a further analysis would be needed with a use of an improved base sales calculation methodology. the given base sales calculation does not ensure removing all of the extreme values. As was described in previous paragraphs. The hypothesis thus can be partly approved: Repeated sales promotions lead to increased consumption of RTEC due to the consumption effect of stockpiling. The percentage which is trimmed in the formula could be for example positively correlated to the number of sales promotions per year. However. This is depicted in Figure 25. an improvement to the calculation could be implemented. This effect is even more significant for sales promotions with high promotional bumps. and thus part of the extreme values remain.the sales promotional peaks fit into the 20% extreme values and are thus not included. in case of high frequency of sales promotion. The base sales is therefore overvalued and the resulting consumer effect is lower. 69 . Therefore. the current base sales calculation is suitable only for cases of relatively low sales promotions frequency. This could become a subject of further research and analyses. This base sales calculation also undervalues the sales promotion KPI results for cases of high sales promotion frequency.

It has the ability to influence consumers‟ decisions in the very last moment of purchase. to attract customers to a trial of new product. Sales promotion has two core benefits compared to advertising: 1) the promotion has the ability to generate immediate sales. The findings of this study demonstrate that consumer behaviour is influenced by many factors. to revive a maturing brand. During the planning phase of companies‟ communication mix.Conclusion From the findings of thorough research of various academic resources conducted. as well as the fact that the conclusions of their studies are frequently inconsistent and even contradictory. and 2) the executed promotion activities results can be easily measured. To achieve maximum impact. the author was able to draw the following generalizations: 70 . it is evident that the role of sales promotions evolved over time. Being the most critical factors. it was proven that a well-designed sales promotion has the potential to facilitate launch of new products to the market. Sales promotion is a combination of marketing activities that directly stimulate consumer behaviour. they should appropriately identify and appreciate the nature and behaviour of their target audience. From an unimportant complement of marketing activities it became a significant and from many perspectives even irreplaceable part of companies‟ communication mix. Moreover. manufacturer should create campaigns while integrating all parts of communication mix within the promotion. to encourage repeat purchases of current customers and to increase the frequency of consumer consumption. to offset competitor‟s activities. However. In addition to the abovementioned benefits. and so is responsiveness to sales promotion activities. it can increase the effectiveness of sales force and have eventually profound impact on retailers. as well as from the practical case study. a well prepared sales promotion can strengthen advertising campaign of a brand. to increase the shelf space. multiple psychographic and demographic factors and their impacts were discussed in the theoretical part of this thesis. The secondary research revealed differing opinions of researchers on many subjects concerning sales promotions.

incorporates the manufacturer‟s expenses. sales of brands in competitive and complementary categories are affected. To be able to verify them. Efficiency. The unique tool evaluates a sales promotion from two main perspectives: effectiveness and efficiency. depending e. effectiveness characterizes how successful the sales promotion was in terms of sales volume increase. both in the stage of planning and in the stage of posterior appraisal. on the product character. The aim of the practical part was to analyze all the evaluated sales promotions. and their usage differs according to the target audience and brand characteristics. The stockpiling effect can be either negative or positive for the manufacturer. Products that are on sales promotion are perceived more valuable by the consumers due to their value added feature.  There is clear evidence that sales promotions lead to immediate increases in sales.g.  Sales promotions can increase brand switching. and represents the ratio between benefits and costs of a sales promotion. In this context. namely. they have also influence on periods preceding and following the promotional period. These promotional peaks occur in the short term. However. Numerous alternatives are available for the producers when planning their sales promotions. In the concluding chapter. Several hypotheses about sales promotion effects were defined and tested. the self-developed program was used. but they are also beneficial as they increase the knowledge of producer‟s brand and increase the probability of trials. however. on the other hand. as the evaluation program was successfully created. One of the key outputs of the thesis was achieved. Therefore the manufacturer should use a systematic program for evaluating of potential promotions. The brand switching effects are different for high quality brands and for lower quality brands. all stated hypotheses were tested with the use of the abovementioned self-developed evaluation program and real sales data from the RTEC 71 . The aim was accomplished as 65 sales promotions executed in the RTEC category were evaluated with consistent results throughout the sample. There is a huge amount of sales promotion schemes. and to identify specific and relevant conclusions about their effects. an excessive usage of price sales promotions can reduce the consumer‟s responsiveness to a particular sales promotion.  Sales promotions in one category influence sales of other categories.

 To analyze the relation of the sales promotions frequency and consumption further research would be needed with a use of an improved base sales calculation methodology. because the fixed cost are dissolved in the high sales volume. as the Nestlé products are quite durable and belong to the premium segment. the developed evaluation program can be further utilized by the company for regular planning and evaluations of sales promotions. as they broaden the knowledge about the sales promotion and its effects. Furthermore.  Repeated sales promotions lead to increased consumption of RTEC due to the consumption effect of stockpiling. but also potentially on many other FMCG categories. This effect is even more significant for sales promotions with high promotional bumps. The results can serve as a good source for further theoretical research and studies. Finally. The reasoning behind that can be explained by the character of the category. Findings and results of the thesis are applicable not only on the RTEC category. 72 . findings of the thesis are also beneficial for the academic research.  Sales promotions of bigger formats of cereal packages are noticeably more efficient than sales promotions of smaller formats.category. People are therefore quite likely to plan and postpone their purchases in order to seek deals. The research objectives of the thesis were successfully answered and following key results were drawn from the analysis:  Sales promotions in the RTEC category usually cause slight drops in consequent sales. The results of the thesis have a practical utilization for forming the communication strategy of a FMCG company.

. Journal of Business Research.. (2005) Research papers and studies: 1. H. D.: Advertising. March (2009) 5.: A Theoretical and Empirical Evaluation of Price Deals for Consumer Nondurables. Oeconomica. Bruce A. Vilakshan. Aradhna: The Effect of Deal Knowledge on Consumer Purchase Behavior. (1990) 6. (2010) 2. Eppen. Working Paper. Vol 55. a kol.: Promotion Management & Marketing Communications.The Moderating Role of Price Perceptions and Deal Proneness (A Study of FMCG Products).Bibliography: Scientific publications: 1. Lichtenstein. Přikrylová. (1994) 73 . Jha Dang. IIM Ahmedabad (2003) 3. D.: Moderní Marketingová Komunikace.: Distinguishing coupon proneness from Value consciousness: An acquisition-transaction utility theory perspective. (2010) 4.. R. 45 (Winter). (1985) 2. Machková. J. (1993). Jahodová. XIMB Journal of Management. Krishna. Abhijit: “The Effects of discount level. Promotion. M. Vol 14 (1&2). (1981) 8. R. vol. Abraham: An Empirical Investigation of Sales Promotion Schemes in India. R. & Burton. Journal of Marketing. Journal of Consumer Psychology. 31 (February). Grada publishing. Lhotáková.R. 5. 3rd edition.: Marketing Communication: theory and applications. T.. T. Shimp. and other aspects of Integrated Marketing Communications. C. Journal of Marketing. Koshy. (2002) 7. P.. (2007) 3. H.. Bellman. 3. Alford.: „Mental Accounting and Consumer Choice‟.. Král. S.: International Marketing. (2004) 4.. price consciousness and sale proneness on consumers‟ price perception and behavioural intention”. S. Biswas. Blattberg. Netemeyer. J. Journal of Marketing Research. no. 54. Raghubir: Free Gift with Purchase: Promoting or Discounting the Brand. Rao Venu Gopal: Effect of Sales Promotions on Consumer Preferences . Thaler. Priya. Lieberman. The Dryden Press. Rossiter. R. J. Marketing Science. 4.G. Shimp. Pearson Education Australia. G. 7th edition. Priya.

: Brand Loyalty: Measurement and Management. 18 (Summer). (1998) 24..: How Cents-Off Coupons Motivate the Consumer. S. Z. Journal of Marketing Research. Methods and Strategy. Aaker. Schindler.. S. Journal of Marketing Research.. (1978) 20. Srinivsan. De Pelsmacker. 1. 13.L. R. Vol. (1994) 23. M.. (1992) 19. Free Press. E. 15 (February). Carmon. Vol. V. Van den Bergh.. 450 Vol.1... Journal of Textile and Apparel. 37. New York (1996) 14. S. (1978). Wing-Sun Liu: The Brand Loyalty of Sportswear in Hong Kong. S.: Impact of Deals and Deal Retractions on Brand Switching. Geuens. Cambridge.: Sales Promotion: Concepts. The Journal of Business Perspective. Brand Strategy. S. Ailawadi.. 17. Lau. Komal: Evaluating the Effect of Consumer Sales Promotions on Brand Loyal and Brand Switching Segments. B. Blattberg.. Marketing Science Institute.. R. London. (2001) 12. Gedenk.). Mass (1984). Prentice-Hall. I. Ries. A. K. 164. Mei-mei.. Mela. 4 (2009) 15. K. (1990) 21. Lutzky. Nagar. Journal of Advertising Research. A. No. L.. 2002 22.: Decomposition of the Sales Impact of Promotion-Induced Stockpiling. Journal of Marketing Research.. Krishnamurthi. Praveen. Dodson.R.13. Journal of Product & Brand Management. Gardener.: Concepts and strategy guidelines for designing value enhancing sales promotions.. Srinivasan. 16. 2. 7. 29.: Building Strong Brands. John Wiley and Sons. Strenthal.: “An Empirical Analysis of the Relationship between Brand Loyalty and Consumer Price Elasticity. Marketing Science. No. Simonson. P. Tybout.: The Dynamic Effect of Discounting on Sales: Empirical Analysis and Normative Pricing Implications. D.: Experimental evidence on the negative effect of product features and sales promotion on brand choice. Jocz (Ed.2. 10. Man-Tsun Chang. 5. Research on Sales Promotion: Collected Papers. J. Anderson. NJ. O‟Curry. Trivedi. Neslin. Marketing Science.9. K. M. Ries. 5.: Marketing Communications. R.. (1991) 13. P.” Marketing Science.S. No.: Reflection on a Simultaneous Approach to Market Segmentation and Market Structuring. L. M. Jacoby.. Neslin. No. W. (1999) 11.. Vol. Technology and Management.: The death of advertising. R.: A Communications Framework to Evaluate Sales Promotion Strategies. No. Raj. F. A. C. Englewood Cliffs. (2006) 18. L. Marsh.4. C. E. K. Vol. New York. Ch. XLIV (August 2007) 10. Chestnut. A.. Ka-Leung. A. Prentice Hall. Grover. Kathrine E. (1998) 74 . J. J.

. Gupta.11. J. (1999) 33. (1997) 29. 17 (1). Netemeyer.: Nestlé Promotion Planning & Evaluation Guidelines. Bawa... J: The Grocery Shopper-Is He Different. S: Identifying the Deal Prone Segment. P.R.147.D.: Impact of Deals and Deal Retraction on Brand Switching. Blattberg. Obtained 5. A. D. R. Lichtenstein.225. (1991) 28.A. created 2000. Peacock.R.: There's a S. P.: Long-term Impact of Sales Promotion on Brand Image. S.A. 10 (2).2011 Electronic source: 1. Manchanda.. Mandić..: A Model of Household Grocery Shopping Behavior. B. 19 (1). Gosh. Tybout.: The Shopping Basket: A Model for Multicategory Purchase Incidence Decisions.. Volume 70.... Cereal Partners Worldwide official webpage: http://213. Marketing Science.145/cpw/. Bell. (1978) 27. Journal of Retailing. revised 2006 75 ..marketsegmentation. 18 (2). J. T. Obtained 5. International Journal of Retail and Distribution Management. (1981) Websites: 1.html. J. (1999) 32.com/what_are_psychographics.M.: An Examination of Deal Proneness across Sales Promotion Types: A Consumer Segmentation Perspective. W.J. Issue 11 (AMA FORUM).: Promotion Signal: Proxy for a Price Cut? Journal of Consumer Research. and Sen. 15 (3).T.G.A. Ansári. K. way to write management's goals and objectives. T. Inman. Nestlé S. Stemthal. Hoyer. Journal of Marketing Research. Davies. G. A. Goldberg. Dodson. Management Review. A. Buesing. Journal of Marketing Research.2011 2. Burton..M. Doran. D.25. S. Marketing Letters. Tržiště. McAlister. R. (1990) 31. Vol.: What are Psychographics? Source: http://www.. XXI (2009) 26. L.10. (1978) 30. G.

............................................................................... 34 Figure 4 Three areas of measurement in sales promotion evaluation ............................. range index ........................................................................................................................................................................................................................................................................... 65 Figure 25 Base sales vs.................................................... 39 Figure 6 Consumption of RTEC per capita in 2010 .......................................... 36 Figure 5 The promotion planning & evaluation process ................................. 43 Figure 8 Step one: Data preparation........................ 48 Figure 9 Purchased data structure .......... average sales 2 ......................... 54 Figure 16 Input/Output forms ................ 64 Figure 24 Consumption effect table ..................................................... 58 Figure 20 Bubble diagram.................................................................................................................................. 68 76 ........................................... 50 Figure 13 Help_Stores sheet description...................................... 49 Figure 11 Step two: Data processing ........................................ 22 Figure 3 The difference between trade and consumer promotions ...................... 49 Figure 10 Internal sales data ........ 43 Figure 7 The development of sales volume of RTEC in the CR .................................................................................................................. 51 Figure 14 Step three: Promo Evaluation ................................ 50 Figure 12 Product_list sheet structure .................. 57 Figure 19 Evaluation form ........................................... number of promotions ..................................... 63 Figure 23 Bubble diagram small vs................................................................. 12 Figure 2 Summarization of all stockpiling effects .................................................................................................... 56 Figure 18 Sales promotion graph ................ 66 Figure 26 Base sales vs.......................................... 67 Figure 28 Consumption effect index vs........................ 61 Figure 22 Sales promotion KPIs for small and big kid cereals ......................................................................................................................................... 53 Figure 15 Summarization table ......................................................................................................................................................................................... 60 Figure 21 Example of a post promotional effect ...................................... 66 Figure 27 Consumption effect index vs........... large packages ......List of Figures Figure 1 Sales promotional targets .................................... 55 Figure 17 Form sheet .................................................................................. average sales 1 ...........................

List of abbreviations AMC – adjusted marginal contribution AVG – average CPC – Cereal Partners Czech EDLP – Every Day Low Pricing FMCG – Fast Moving Consumer Goods GPS – Gross proceeds of sales KPI – Key Performance Indicators MC – Marginal contribution POP – Point of Purchase POPAI – Point-Of-Purchase Advertising Institute RTEC – Ready-to-eat cereals S.M.T. obtained by subtracting variable cost from the gross proceeds of sales Promo evaluation – The process of sales promotion evaluation Pre-evaluation – Evaluation of a promotion at the planning stage Post-evaluation – Posterior evaluation of a promotion Purchased data – AC Nielsen data Total trade spend – All expenses. – specific. price reductions and allowances to customers (retailers) for their efforts to sell the products Trade terms – Yearly agreed conditions between a manufacturer and a retailer Uplift (or incremental sales) – The incremental volume sold above the base sales thanks to the sales promotion 77 . realistic and timed TTS – total trade spend TT – Trade terms List of used terms: Adjusted marginal contribution – Marginal contribution plus total trade spend Base sales – Average level of sales volume of a product over some period Effectiveness – A measure of the incremental sales to the end consumer Efficiency – A measure of how much it costs the manufacturer to gain the effectiveness of the sales promotion Marginal contribution – Gross margin.R. achievable. measurable.A.