1.

It's essential to consider the effects of each factor on direct sales, brand image, and other impacts on
the company. To identify the concerned effects, I can briefly outline mitigating the risk and impact as
follows :

Factor Causes Risk and Impact

Promotion of one size could harm
Cannibalization sales of another size within the
same brand/product category.
Excessive promotional offers can
Brand Equity eliminate the exclusivity and added
Erosion value of the brand in the eyes of
consumers.
Massive promotions may encourage
Consumer consumers to stockpile products,
Stockpiling leading to decreased purchases in
the future
Retailers might buy large quantities
Forward of the product during the promotion
Buying to resell at the regular price,
disrupting the purchasing cycle
retailers do not reduce the price to
Passthrough consumers according to the given
discount
Reduces sales of other products within the
same brand category, lowers overall profit
margins and disrupts product portfolio
strategy.
It decreases the perception of brand quality
and value, reduces consumers' willingness to
pay premium prices, and damages long-term
customer loyalty.
It causes unpredictable demand fluctuations,
decreases subsequent purchases and
complicates inventory management and
planning.
It creates fluctuations in the supply chain,
disrupts the normal purchasing cycle,
generates a bullwhip effect, and worsens
production planning.
Reduces promotion effectiveness, affects
consumer value perception and complicates
the relationship with retailers.

It is crucial to evaluate the potential impact of the promotions program at all levels of the channel,
including the company, retailers, and consumers. The decision to proceed with promotions should
depend on addressing these concerns and ensuring that promotions ultimately benefit all parties
involved. The factors mentioned above are indeed critical when deciding on how to run sales
promotions effectively for GCP, particularly the concern about cannibalization. This is because GCP's
products, especially Dinardo products, are identical with no variation except for packaging size,
making it easy for consumers to compare prices by weight. Hence, GCP must devise a more effective
strategy to mitigate excessive cannibalization. Cannibalization can be measured by comparing the
ROMI (Return on Marketing Investment) of potentially overlapping products, such as Dinardo 32 oz
versus 16 oz, during promotions to assess if they impact each other. This is the approach Sanchez
plans to adopt to demonstrate the effects of cannibalization.
2. I advise Sanchez to consider running a national sales promotion for the Natural Meals brand because
of the following reasons:
a. The data suggests that Natural Meals has been experiencing significant growth, approximately
15% per year, and offers higher margins due to premium pricing. Additionally, the brand has
never been promoted on a national level before, presenting an opportunity to drive demand and
increase store traffic. The potential benefits of a national sales promotion for Natural Meals,
 including increased demand for healthier meal options and greater retailer margins, make it a
compelling option.

b. Promoting natural meals is the product with less impact on the cannibalization effect and can
lead to better profitability; by looking at the data historical data sales and promotion, it can tell
the effect of promotion in Dinardo’s every promotion, either 32 lunch and 16 lunch, will affect the
sales of others in other hand. We can se data sales volume (unit) sold September 2006 – Aug
2006 :
Promotion D32 (unit) D16 (unit) NM (unit) Revenue total (Mil)
None of Product promotion 7.174.739 3.798.942 3.888.150 $ 743.523
32 Ounch on promotion 10.460.943 424.648 3.495.502 $ 668.444
16 Ounch on promotion 5.740.724 6.210.220 3.715.377 $ 710.483

We observe that promoting one Dinardo product always affects other products. For instance,
promoting D’32 increases sales by 45%, but it decreases D’16 sales by 88%. Conversely,
promoting D’16 boosts sales by 63%, yet it reduces D’32 sales by 20%, indicating that each
D’16 and D’32 promotion cannibalizes the other. Furthermore, promoting these products has
minimal impact on natural meals. Refraining from promoting Dinardio and natural meals
probably yields the highest revenue. Additionally, if we are promoting natural meals, as I
mentioned in point a, holds the potential for significantly optimizing profit.

c. To make more informed decisions, also calculate the ROMI comparison between D’32, D’16,
and Natural Meal. This will indicate which product is better to promote and is likely to yield better
sales results, as evidenced by the data collected and calculated below:
Return on Marketing Investment (ROMI)
D'32 D'16 Natural Meals
Before Cannibalization 19,27% -11,91%
12,1%
After Cannibalization -128,83% -55,54%
The ROMI data comparison for the products D'32, D'16, and Natural Meals suggests that Natural
Meals is the best product to promote. While D'32 had good returns initially, after considering the
sales it took away from other products (cannibalization), it actually lost a lot of value. D'16 wasn't
doing well to begin with, and cannibalization made it worse. Natural Meals, on the other hand,
showed positive returns even after cannibalization, making it a clear choice for promotion
because it's more likely to increase sales without hurting the brand.
Exhibit 1, D32 V D16 ROMI Calculation
D32 VS D16
Key Metric Dinardo 32 (Unit) Dinardo 16 (Unit)
Gross Revenue ($/lb) 2,10 2,40
Variable cost ($/lb) 0,74 0,83
Promo Cost/Promo Point 191.223 182.485

Calculation Before Cannibalization

Average Monthly Volume 2006-2006 Dinardo 32 (Unit) Dinardo 16 (Unit)
When That item on promotion 10.460.943 6.210.220
When that item is not on promotion 6.816.235 3.088.565
when nothing is in Promotion 7.174.739 3.798.942
Incremental Volume from promotion 3.286.204 2.411.278

Revenue Change from promotion $ 6.901.028,59 $ 5.787.067,30

Varible Cost $ 2.425.218,62 $ 2.006.690,97
Promoting Cost from promotion $ 3.752.786,15 $ 4.291.416,28

Marketing Margin change from promotion$ 723.023,82 $ (511.039,95)

ROMI (Before CaNnibalzation) 19,27% -11,91%

Calculation After Cannibalization

Average Monthly Volume 2006-2006 Dinardo 32 (Unit) Dinardo 16 (Unit)
When the other D item in on Promotion 5.740.724 424.648
When nothing is on Promotion 6.816.235 3.798.942

Volume Change $ (1.075.510,89) $ (3.374.294,40)

Revenue Change $ (2.258.572,87) $ (8.098.306,56)
Variable cost $ 793.727,04 $ 2.808.123,32
Promotion Cost $ 8.080.521,07 $ (25.679.629,51)

Marketing Margin Change (11.132.820,98) 14.773.199,63

Total Brand Impact

Total Effect of D32 Promotion $ 4.642.455,71 $ (2.311.239,26)
Total Brand Impact $ (10.409.797,16) 14.262.159,68
ROMI (Before Cannibalzation) -128,83% -55,54%

Exhibit 2, Natural Meal ROMI Calculation

Natural Meals
Key Metric Natural Meals
Gross Revenue ($/lb) 2,9
Variable cost ($/lb) 0,9
Promo Cost/Promo Point 165016,6845

Average Monthly Incremental Volume (unit) 705.252

Average % Store Promoting for Natural 7,63
Average Monthly Incremental Volume / Promo Point 92.477
Incremental Volume from 25% 2.311.936

Revenue Change from Promotion 6.704.614

Variable Change from Promotion 2.080.742
Promotion Cost Change from Promotion 4.125.417
Marketing Margin Change from Promotion 498.455
ROMI 12,08%