Case Solution for

Giant Consumer
Products

Sales Promotion, Section B | Trimester VI

Exhibit 3 Average Monthly Volume Dinardo 32 Dinardo 16

Solution Template Part When the item is ON Promotion 1,04,60,942.67 62,10,220.36

1 - Considering When the item is Not ON 68,16,234.95 30,88,564.55

Promotion Impact on Promotion

the Promoted Item When nothing is on promotion 71,74,738.58 37,98,942.32

Incremental Vol from Promotion 32,86,204.09 24,11,278.04

Revenue Change from Promotion 69,01,028.59 57,87,067.30

Variable Cost change from Pr. 24,25,218.62 20,06,690.97

Promotion Cost change from Pr. 37,52,786.15 42,91,416.28

Marketing Margin change from 7,23,023.82 (5,11,039.95)

Pr.

ROMI 19.27 (11.91)

Exhibit 3 Average Monthly Volume Dinardo 32 Dinardo 16

Solution Template Part When the other Dinardo’s item is 57,40,724.06 4,24,647.92
ON Promotion
2 - Considering Within-
When NOTHING is ON promotion 71,74,738.58 37,98,942.32
Brand Cannibalization
Effects Volume change from promotion
of other item
(14,34,014.52) (33,74,294.40)

Revenue change from promotion (30,11,430.50) (80,98,306.56)

of other item
Variable cost change from (10,58,302.72) (28,08,123.32)
promotion of other item
Promotion cost change from 12,112.60 59,649.43
promotion of other item
Marketing Margin change from (19,65,240.38) (53,49,832.67)
promotion of other item
Exhibit 3 Total Brand Impact from Promotion on Top Line Revenue

Solution Template Part Total Effect of D32 Promotion (11,97,277.97)

2 - Considering Within- 27,75,636.80

Total Effect of D16 Promotion
Brand Cannibalization
Effects Total Brand Impact from Promotion on Marketing Margin

Total Effect of D32 Promotion (46,26,808.86)

Total Effect of D16 Promotion (24,76,280.33)

ROMI % (121.36) (57.54)

Exhibit 3 Average Monthly Incremental Volume for 7,05,251.95
Natural
Solution Template Part
2 - Considering Average % Store Promoting for Natural 7.63

Promotion Impact of Average Monthly Incremental Volume /Promo 92,477.44

Point
Natural
Incremental Volume from 25% Promo Points 23,11,935.97

Revenue change from promotion 67,04,614.32

Variable Cost change from promotion 20,80,742.38

Promotion Cost change from promotion 41,25,417.11

Marketing Margin Change from promotion 4,98,454.84

 Dinardo’s 32 Dinardo’s 16
Describe the Parameter/Brand
ounce ounce
Natural Meals

competition, key target

segments, consumer Competition
Daft, private label
brands
Daft, private label
brands
Daft

and shopper behavior

for the products Key Target Family of 4, seeking a
Family of 2, empty
nesters, busy
Health-conscious and
taste-conscious
(a) Dinardo’s 32-ounce Segments value meal professional couples
with kids
customers

packages, Select basis following:

(b) Dinardo’s 16-ounce Consumer Type of meal
(Italian/Mexican), Same as Dinardo’s 32
Demand for healthy
frozen food
packages, or Behavior Brand, Variety
(noodle, ravioli etc.)
(c) Natural Meals
Price conscious, looks Price conscious, looks Health-conscious,
Shopper Behavior for high product for high product willing to spend a
quality quality premium

Price Sensitivity Moderate High Low

How was GCP Dinardo:
● Use of Quality ingredients and seasoning for better taste
handling the marketing
than the competitors
of the three product ● Featured traditionally favourite products such as Lasagna,
lines? What were their Meatballs, Spaghetti etc.
motivations behind ● Packaging was convenient for the meal to be heated in a
microwave and also the product quality was sub par with the
their strategies?
private labels
Critically discuss Dinardo 32:
GCP’s approach. ● Positioned as a low-cost option to feed a family of four
● The packaging and the product quality offered was better
than the private label goods.
Dinardo 16:
● Addressed the requirements of emerging consumer niches
● Targeted “empty nesters” and busy professionals without
kids.
● Dinardo 8 and 6 were introduced to target the single
consumers and for eat alone consumers.
How was GCP The Natural Meals Brand
● Great tasting, Organic food, low in fat with no unnecessary
handling the marketing
additives or preservatives.
of the three product ● Packaging had a folksy color palette and imagery, appealing
lines? What were their to health conscious consumers (characterised as “
motivations behind california types”)
● Priced as a super premium product which in turn also
their strategies?
offered greater margin to the retailers
Critically discuss
GCP’s approach. Motivation Behind:
● As consumers have increasingly less time available for
preparing meals which led to the emergence of frozen foods
● Change in consumer preferences and the increasing
demand for the healthy and organic frozen food
● Launching entire product range for all types of consumers
● Price conscious consumers are not keen on buying the
private label goods due to their packaging and product
quality.
Improve upon Exhibit 2 White Board in Mike Sanchez’s Office
in the case and draw
up an exhaustive list of
typical costs incurred
in a sales promotion.
Marketing Margin = Revenue - Cost
Revenue = Incremental Volume Generated by Sales Promotion *
Price to Retailer (PTR)
Total Costs associated with Sales Promotion:
● Direct Expenses
○ Promotional Allowance
○ COGS
○ Distribution (Freight)
● Indirect Expenses
○ Cannibalization
○ Loss due to forward buying by retailers
○ Loss due to post promotional dip caused by
stockpiling
○ Loss due to brand switching away from GCP
Was Capps right in Allan Capps raised concerns regarding trade promotions but this
is what we believe as per our assumptions and the data:
raising his concerns ● Cannibalization: There seems to be a high possibility of Natural Food’s
regarding trade promotion causing a dent in D32’s consumption as it’s a better
promotions product. This is not true vice-versa as consumer base and value
proposition is different.
(cannibalization, brand ● Brand Equity Erosion: As per the Effort-Price cut matrix, a low effort
equity erosion, price promotion could lead to medium to high brand loyalty
deterioration. Dinardo’s is not a superior product, so it may not face
forward-buying, pass- much erosion, however Natural Meals being promoted might lead to
through, and consumer significant brand equity erosion.
● Forward Buying: This could be a problem for GCP as retailers might try
stockpiling)? How to purchase at discounted PTR and sell at normal PTC. But GCP could
much should this use innovative methods such as Serial Number tagging to check the
issue of forward buying.
affect the promotional ● Pass-through: GCP had clout with large supermarket chains and
decisions for GCP’s offered superior premiums to retailers. This could help them enforce

products? ●
the lowered PTRs to the PTC.
Stockpiling: Sanchez’s point about home freezers not being larger
enough for stockpiling invalidates this claim. Consumers would also
be cognizant of expiry dates.
Do you advise Sanchez GCP’s FFD division should run a national sales promotion to achieve its
profitability goals.
to run a national sales
promotion? If so, to FFD (Frozen Food Division) is the key contributor to Giant Consumer Product's
(GCP) profits which have successfully grown over the past 30 years. The vice
which one of the items president of sales Bryon Flatt suggests undertaking a sales promotion that
should the funds be features FFD brands on special retailer’s in-store weekly circular and on end-
aisle display is a tried-and-true mechanism for generating short-term sales lifts.
allocated: According to the CFO, the return on marketing investment (ROMI) should be
(a) Dinardo’s 32-ounce positive—anything less than 0 should not be deemed profitable. Sanchez needs
to evaluate the past national promotion performance for the two brands
packages, Dinardo’s and Natural Meals. Thus, according to General Manager of FFD Mary
(b) Dinardo’s 16-ounce Davidson’s suggestion, it is initially important to find out why national sales
packages, or promotion should be launched. The rationales can be explained in three
aspects: company’s performance, customer behavior and outsider threats.
(c) Natural Meals?
Also, For outsider threats, FFD must carry out promotions in order to compete
with other brands to gain market share. Meanwhile, restaurants have become a
formidable rival to supermarkets as they capture almost 50% of all consumer
dollars spent on food. It is quite competitive if a sales promotion is put into
practise for FFD’s brands.
Do you advise Sanchez Dinardo’s current pricing strategy is low/high pricing, while Natural Meals is line-
to run a national sales priced that never had a national sales promotion previously.

promotion? If so, to Looking at Exhibit 3, it is obvious that the previous national sales promotion on
which one of the items Dionard’s did not perform very well by the effect of cannibalization between D32
and D16. However, the prediction of running a national sales promotion on
should the funds be Natural Meals shows a positive financial impact associated with ROMI of 12%.
allocated: This is with assumption that 25% of the retailers would participate in the sales
promotion. Comparing to Dionard’s, Natural Meals will generate larger marketing
(a) Dinardo’s 32-ounce margin.
packages,
Our suggestion is to run a national sales promotion on Natural Meals instead of
(b) Dinardo’s 16-ounce Dinardo’s. However, under a national sales promotion by typically cutting the
packages, or price, the risk of eroding Natural Meals’s premium brand exists. Offering coupons
is more fit to Natural Meals, which discount the products without pricing low. It
(c) Natural Meals? not only protects the brand, but also gives out chances for increasing brand
awareness. Unlike GCP’s current marketing strategy, the company should put
more efforts to advertise the Natural Meals, which is the most profitable product
of FFD. To enhance brand awareness of Natural Meals, GCP has the opportunity
to create a culture of healthy eating and achieve its financial goals.
Thank You