Promotion Analysis

 Types and Effect

 Aggregate Models
 Individual Models
 Promotional Types and Targets

Manufacturer
Trade Promotions Trade
 Case allowances (Retailer)
 Advertising
allowances
 Display allowances
 Contests
 etc.

Consumer Promotions Retailer Promotions

Consumer
 Coupons  Refunds  Price cuts
 Samples  Contests  Displays
 Price packs  Tie-ins  Feature ads
 Value packs  etc.  Retailer coupons
 Free goods
 etc.

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Promotional Objectives and Types

Objective Promotional Type

Increase repeat buying In-pack coupons, continuity programs (eg, frequent
flyer, “N for” retail promotions
Increase market share among FSI coupons, coupons targeted to users of other
brand switchers brands, retail promotions.
Increase retailer’s promotion Trade deals, combination of consumer promotions
frequency and trade deals (big-bang theory)
Enhance the product’s image Co-op image advertising with image-oriented retailers
Increase category switching Retail promotions, FSI coupons, large rebates
Target deal-sensitive consumers Coupons, “N for” retail promotions
Increase category consumption Retailer promotions, promotions tied to events (eg,
back to school)
Increase trial among non-users Cross-couponing, free samples, trial packs, direct-
mail coupons
Liquidate short-term inventories Trade deals, rebates, inventory financing
Increase distribution FSI coupon, (increase demand), trade deals (increase
DPP)

“N for”= multiple unit promotion (6 for 99¢)

FSI=free standing insert in newspapers and magazines
DPP=dealer price promotion. ME Promotions 2006 -
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 Promotional Effects

10

6
Brand
5
Share
4

0
Prepromotion Promotion Immediate Long-run
Period Period Postpromotion Postpromotion
Period Period
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 Effects of Trade Promotions

Trade Manufacturer’s Other

Promotions Shipments Factors

Pipeline
Inventories

Retailer Consumer Other

Promotions Sales Factors

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 Promotional Effects Model

 Manufacturer’s Shipment Model:

Shipmentst =f1 (inventoryt–1, trade promotionst, other factorst)

 Retail Promotions model:

Retail
Promotionst = f1 (trade promotionst,trade promotionst–1, inventoriest–1)

 Consumer Sales model:

Consumer
Salest = f3 (retailer promotionst, other factorst)

 Inventory model:
Inventoryt = f4 (inventoriest–1, shipmentst, consumer salest)

 Note that the Inventory model is simply an accounting equation, as:

Inventoryt =Inventoryt–1 + Shipmentst – Consumer Salest
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 Consumer Sales vs
Factory Shipments

100,000 Promotion Period

Adjusted Unit Sales

80,000

60,000

40,000

20,000
1978 1979 1980 1981 1982
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 Evaluating the Effect
of a Promotion
2.0
Promotion
1.8 Ends Carryover
Effect
1.6
Trade
Deal
1.4
Begins
1.2 Consumer
Sales
1.0

0.8

0.6 Inventory
Effect
0.4

II III IV I II III IV I
1979 1980 1981
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Individual Response to Promotion

P (choosing = f (price, promotion,

brand/size) prior deal-buying
behavior, brand
loyalty)

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