A frequently used approach to
modelling the marketing mix involves decomposing sales into baseline
sales and incremental sales gains above the baseline due to
contemporaneous factors such as in-store promotions.
Sales Volume ≡ Baseline Volume + Incremental Volume
Baseline Sales or Base Volume is a function of
manufacturers’ marketing actions such as:
- Regular price (base price)
- Advertising (advertising stock)
- Distribution
- Competitor activity
A variety of techniques ranging from smoothing
functions to econometric methods are used for developing baselines such as the
one depicted in Exhibit 6.3.
Incremental Volume specifically means
contemporaneous, immediate gains (lifts) resulting from in-store causal factors
such as:
- Temporary price reductions (discounts)
- Displays
- Features
- Distribution fluctuations (stockouts)
- Seasonal factors
Note however that this two-stage approach, as outlined in Exhibit
6.4, assumes no interaction effects between manufacturer-to-consumer
initiatives driving the baseline and retailer-to-consumer (in-store)
influences.
